example of legal form in business plan

How to write the structure and ownership section of your business plan?

Business planning is vital to the success of any entrepreneur because it helps them secure funding and find competent business partners. The document itself contains a variety of key sections, including the presentation of the legal structure and ownership of the business.

This section details the legal structure of your business and helps interested parties such as lenders and investors understand who they will be doing business with if they decide to go ahead and finance your company.

In this guide, we’ll look at the objective of the structure and ownership section, deepdive into the information you should include, and cover the ideal length. We’ll also assess the tools that can help you write your business plan.

Ready? Let’s get started!

In this guide:

What is the objective of the structure and ownership section of your business plan?

What information should i include when presenting the legal structure and ownership of my company in my business plan.

• How long should the structure and ownership section of your business plan be?
• Example of structure and ownership in a business plan

What tools should I use to write my business plan?

The objective of this section is to provide potential investors, lenders, and strategic partners with a clear and transparent view of your business's legal form, ownership distribution, and registration details. 

It aims to build credibility and trust by showcasing your commitment to openness and compliance with regulations. Let's take a look at some of the key objectives:

Communicate the legal form and registration details

• You should explicitly state your business's legal form. For example, your business might be corporation, sole proprietorship, or limited liability company (LLC). 
• Clearly explaining your chosen legal form helps stakeholders understand your entity's liability, taxation, and management implications.
• It is also essential to disclose where your company is registered. This information is vital as it provides clarity on the jurisdiction under which your business operates. 
• It also helps investors and lenders assess any legal and regulatory implications specific to the location of registration.

Identify shareholders

• Potential investors and lenders need to know who owns the company and the percentage of ownership each party holds. 
• By providing this information, you instill confidence in your business and help identify what needs to be verified as part of Know Your Customer (KYC) and Anti-Money Laundering (ALM) checks down the line.

Transparency is the cornerstone of credibility for businesses. By openly presenting the legal structure and ownership, you signal to potential investors that your business operates with integrity and adherence to regulations. 

Notably, anti-money laundering regulations require investors to verify the identity of all shareholders before committing funds. By providing a clear picture of the parties involved, you can facilitate this process and build trust with investors.

Venture capitalists (VC) firms and angel investors in particular, may have specific criteria such as location and ownership mandates governing the companies they can finance. Being transparent about your company's structure and ownership enables potential investors to assess whether your business aligns with their investment preferences and requirements.

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The structure and ownership subsection arrives quite early in your business plan as it is the first part of the company section which is the second section of the document (after the executive summary) if you are following a standard business plan outline .

At this stage, the reader is still in the process of getting familiar with your business, and this section serves as a crucial foundation for potential investors and partners and helps them understand the core aspects of your business’s structure.

Here's what you should include:

Company registration details and registered office address

Provide information about when and where your company was registered and its registration number. This enables readers to understand the jurisdiction under which your business is operating and helps verify its legal existence.

Also, mention the registration date to showcase the company's longevity or recent establishment.

Include the registered office address of your company. This is the official address where the company can be contacted, and legal notices can be served. Providing this address demonstrates your commitment to compliance and transparency.

The information above needs to repeated for each subsidiary or joint venture owned by your business in order to provide a clear map of the coporate structure.

Overview of ownership

Offer a concise overview of the ownership structure of the company. Identify the shareholders, and specify their ownership percentages or shares. 

If there are numerous shareholders, list individuals or entities owning 5% or more, and highlight those with a controlling interest in the company or on the board.

If the business is controlled by another business, such as a holding company for example, it is also useful to explain who controls that business as well.

Roles and responsibilities of shareholders

In case of multiple shareholders, explain their respective roles and responsibilities within the organization. 

Differentiate between passive investors, board members, and executive or non-executive directors. 

Shareholders' agreement (if applicable)

If the business plan is presented for investment purposes, it is useful to clarify if a shareholders' agreement is in place between the existing investors. 

This agreement outlines the rights and obligations of shareholders and adds an extra layer of legal protection for investors and shareholders.

Expertise of co-shareholders

Highlight any shareholders who contribute more than just financial capital to the company. 

If, for instance, a shareholder is an industry expert and brings valuable advice, contacts, and credibility, emphasize this aspect. 

Doing so demonstrates the added value these shareholders bring to the business.

Group or franchise structure

If your company operates as part of a group or franchise, provide this information for each individual company receiving funds. 

Clarify the relationship between the main company and the individual entities within the group and their respective legal structures.

Addressing geographical restrictions

If some investors have geographical restrictions on their investments, clearly indicate whether your company meets their eligibility criteria. 

This helps investors quickly assess whether your business aligns with their investment mandates or not.

How long should the structure and ownership section of your business plan be? 

The length of your business plan's structure and ownership section requires a delicate balance. 

While a general rule of thumb suggests that it should be about 2 to 3 paragraphs, the actual length depends on several factors, including the complexity of your corporate structure and the number of shareholders involved.

The complexity of your corporate structure 

• A concise presentation may be sufficient if your company's legal structure is relatively straightforward, with a single owner or a small number of co-founders. 
• In such cases, aim to provide the necessary information without overwhelming the reader with unnecessary details. A paragraph or two may convey the key points effectively, ensuring clarity and brevity. 
• However, if you have a complex business structure, aim to provide details about members who play a key role in business continuity and profitability. 

The number of shareholders involved

• If your business involves multiple shareholders, each with significant ownership percentages or unique roles, you may need to dedicate more space to this section. 
• Do this by providing a comprehensive breakdown of ownership distribution and outlining each shareholder's contributions. 
• This may take up more space as you need to add additional information. However, if you have a pretty straightforward ownership structure, a paragraph or two will be sufficient enough.

Regardless of the complexity, striking the right balance between providing sufficient detail and avoiding excessive technical jargon is crucial. The structure and ownership section should be reader-friendly, allowing potential investors and stakeholders to understand the core aspects of your company without feeling overwhelmed by intricate legalities.

Repetition can dilute the impact of your message and unnecessarily lengthen the section. Ensure that you don't reiterate information that has already been covered in other parts of the business plan. Instead, focus on providing unique insights and details that enhance the reader's understanding of your corporate structure and ownership.

When crafting this section, prioritize the most critical points that investors or partners need to know about your company's structure and ownership. 

Focus on aspects that directly impact decision-making, such as the majority shareholder's influence, board composition, different classes of shares in issue, or any unique arrangements that set your business apart.

Need inspiration for your business plan?

The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.

Example of structure and ownership section in a business plan 

Below is an example of what the structure and ownership section of your business plan might look like. As you can see, it is part of the overall company section and precedes the location and management team subsections.

The structure and ownership section of a business plan provides a detailed overview of how your company is organized and who holds ownership stakes in the business.

This example was taken from one of  our business plan templates .

In this section, we will review three solutions for creating a business plan for your business: using Word and Excel, hiring a consultant to write the business plan, and utilizing an online business plan software.

Create your business plan using Word and Excel

This is the old-fashioned way of creating a business plan (1990s style) and using Word and Excel has both pros and cons.

On the one hand, using either of these two programs is cheap and they are widely available. 

However, creating an error-free financial forecast with Excel is only possible if you have expertise in accounting and financial modeling.

Because of that investors and lenders might not trust the accuracy of your forecast unless you have a degree in finance or accounting.

Also, writing a business plan using Word means starting from scratch and formatting the document yourself once written - a process that can be quite tedious - especially when the numbers change and you need to manually update all the tables and text.

Ultimately, it's up to the business owner to decide which program is right for them and whether they have the expertise or resources needed to make Excel work. 

Hire a consultant to write your business plan

Outsourcing your business plan to a consultant can be a viable option, but it also presents certain drawbacks. 

On the plus side, consultants are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.

However, hiring consultants is expensive: budget at least £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the first meetings with lenders).

For these reasons, outsourcing the plan to a consultant or accountant should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their own business plan using an online software.

Use an online business plan software for your business plan

Another alternative is to use online business plan software .

There are several advantages to using specialized software:

• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can be inspired by already written business plan templates
• You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
• You get a professional document, formatted and ready to be sent to your bank
• The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by

If you're interested in using this type of solution, you can try our software for free by signing up here .

To sum it up, a well-written structure and ownership subsection is key to ensuring that the reader is clear on who controls the business, and whether or not it fits their investment criterias.

Also on The Business Plan Shop

• How to do a market analysis for a business plan
• How to present your management team in your business plan?
• Where to write the conclusion of your business plan?
• Executive Summary - The most crucial part of your business plan
• How to write the location section of your business plan?
• How to present the management team in your business plan?

Know someone who needs help writing-up their business plan? Share this article with them and help them out!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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How to Choose the Best Legal Structure for Your Business

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Table of Contents

Your business’s legal structure has many ramifications. It can determine how much liability your company faces during lawsuits. It can put up a barrier between your personal and business taxes – or ensure this barrier doesn’t exist. It can also determine how often your board of directors must file paperwork – or if you even need a board. [Related article: What to Do if Your Business Gets Sued ]

We’ll explore business legal structures and how to choose the right structure for your organization. 

What is a business legal structure?

A business legal structure, also known as a business entity, is a government classification that regulates certain aspects of your business. On a federal level, your business legal structure determines your tax burden. On a state level, it can have liability ramifications.

Why is a business legal structure important?

Choosing the right business structure from the start is among the most crucial decisions you can make. Here are some factors to consider:

• Taxes: Sole proprietors, partnership owners and S corporation owners categorize their business income as personal income. C corporation income is business income separate from an owner’s personal income. Given the different tax rates for business and personal incomes, your structure choice can significantly impact your tax burden.
• Liability: Limited liability company (LLC) structures can protect your personal assets in the event of a lawsuit. That said, the federal government does not recognize LLC structures; they exist only on a state level. C corporations are a federal business structure that includes the liability protection of LLCs.
• Paperwork: Each business legal structure has unique tax forms. Additionally, if you structure your company as a corporation, you’ll need to submit articles of incorporation and regularly file certain government reports. If you start a business partnership and do business under a fictitious name, you’ll need to file special paperwork for that as well.
• Hierarchy: Corporations must have a board of directors. In certain states, this board must meet a certain number of times per year. Corporate hierarchies also prevent business closure if an owner transfers shares or exits the company, or when a founder dies . Other structures lack this closure protection.
• Registration: A business legal structure is also a prerequisite for registering your business in your state. You can’t apply for an employer identification number (EIN) or all your necessary licenses and permits without a business structure.
• Fundraising: Your structure can also block you from raising funds in certain ways. For example, sole proprietorships generally can’t offer stocks. That right is primarily reserved for corporations.
• Potential consequences for choosing the wrong structure: Your initial choice of business structure is crucial, although you can change your business structure in the future. However, changing your business structure can be a disorganized, confusing process that can lead to tax consequences and the unintended dissolution of your business. 

If you have to expand your business to another state , you won’t have to create a new company or structure, but you may have to register it as a “foreign entity.”

Types of business structures

The most common business entity types are sole proprietorships, partnerships, limited liability companies, corporations and cooperatives. Here’s more about each type of legal structure.

Sole proprietorship

A sole proprietorship is the simplest business entity. When you set up a sole proprietorship , one person is responsible for all a company’s profits and debts.

“If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control,” said Deborah Sweeney, vice president and general manager of business acquisitions at Deluxe Corp. “This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.”

Proprietorship costs vary by market. Generally, early expenses will include state and federal fees, taxes, business equipment leases , office space, banking fees, and any professional services your business contracts. Some examples of these businesses are freelance writers, tutors, bookkeepers , cleaning service providers and babysitters.

A sole proprietorship business structure has several advantages.

• Easy setup: A sole proprietorship is the simplest legal structure to set up. If you – and only you – own your business, this might be the best structure. There is very little paperwork since you have no partners or executive boards.
• Low cost: Costs vary by state, but generally, license fees and business taxes are the only fees associated with a proprietorship.
• Tax deduction: Since you and your business are a single entity, you may be eligible for specific business sole proprietor tax deductions , such as a health insurance deduction.
• Easy exit: Forming a proprietorship is easy, and so is ending one. As a single owner, you can dissolve your business at any time with no formal paperwork required. For example, if you start a day care center and wish to fold the business, refrain from operating the day care and advertising your services.

The sole proprietorship is also one of the most common small business legal structures. Many famous companies started as sole proprietorships and eventually grew into multimillion-dollar businesses. These are a few examples:

• Marriott Hotels

Partnership 

A partnership is owned by two or more individuals. There are two types: a general partnership, where all is shared equally, and a limited partnership, where only one partner has control of operations and the other person (or persons) contributes to and receives part of the profits. Partnerships can operate as sole proprietorships, where there’s no separation between the partners and the business, or limited liability partnerships (LLPs), depending on the entity’s funding and liability structure.

“This entity is ideal for anyone who wants to go into business with a family member, friend or business partner – like running a restaurant or agency together,” Sweeney said. “A partnership allows the partners to share profits and losses and make decisions together within the business structure. Remember that you will be held liable for the decisions made as well as those actions made by your business partner.”

General partnership costs vary, but this structure is more expensive than a sole proprietorship because an attorney should review your partnership agreement. The attorney’s experience and location can affect the cost. 

A business partnership agreement must be a win-win for both sides to succeed. Google is an excellent example of this. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and turned it into the leading global search engine. The co-founders met at Stanford University while pursuing their doctorates and later left to develop a beta version of their search engine. Soon after, they raised $1 million in funding from investors, and Google began receiving thousands of visitors a day. Having a combined ownership of 11.4% of Google provides them with a total net worth of nearly $226.4 billion.

Business partnerships have many advantages. 

• Easy formation: As with a sole proprietorship, there is little paperwork to file for a business partnership. If your state requires you to operate under a fictitious name ( “doing business as,” or DBA ), you’ll need to file a Certificate of Conducting Business as Partners and draft an Articles of Partnership agreement, both of which have additional fees. You’ll usually need a business license as well.
• Growth potential: You’re more likely to obtain a business loan with more than one owner. Bankers can consider two credit histories rather than one, which can be helpful if you have a less-than-stellar credit score.
• Special taxation: General partnerships must file federal tax Form 1065 and state returns, but they do not usually pay income tax. Both partners report their shared income or loss on their individual income tax returns. For example, if you opened a bakery with a friend and structured the business as a general partnership, you and your friend are co-owners. Each owner brings a certain level of experience and working capital to the business, affecting each partner’s business share and contribution. If you brought the most seed capital for the business, you and your partner may agree that you’ll retain a higher share percentage, making you the majority owner.

Partnerships are one of the most common business structures. These are some examples of successful partnerships:

• Warner Bros.
• Hewlett-Packard
• Ben & Jerry’s

Limited liability company 

A limited liability company (LLC) is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying a partnership’s tax and flexibility benefits. Under an LLC, members are shielded from personal liability for the business’s debts if it can’t be proven that they acted in a negligent or wrongful manner that results in injury to another in carrying out the activities of the business.

“Limited liability companies were created to provide business owners with the liability protection that corporations enjoy while allowing earnings and losses to pass through to the owners as income on their personal tax returns,” said Brian Cairns, CEO of ProStrategix Consulting. “LLCs can have one or more members, and profits and losses do not have to be divided equally among members.”

According to Wolters Kluwer , the cost of forming an LLC comprises the state filing fee and can vary depending on your state. For example, if you file an LLC in New York, you must pay a $200 filing fee, a $9 biennial fee, and file a biennial statement with the New York Department of State .

Although small businesses can be LLCs, some large businesses choose this legal structure. The structure is typical among accounting, tax, and law firms, but other types of companies also file as LLCs. One example of an LLC is Anheuser-Busch, one of the leaders in the U.S. beer industry. Headquartered in St. Louis, Anheuser-Busch is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewing company based in Leuven, Belgium.

Here some other well-known examples of LLCs:

• Hertz Rent-a-Car

To learn more about LLCs, read our LLC tax guide , our comprehensive overview of starting an LLC , and our guide to creating an LLC operating agreement.

Corporation 

The law regards a corporation as separate from its owners, with legal rights independent of its owners. It can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks. Corporation filing fees vary by state and fee category. 

There are several types of corporations, including C corporations , S corporations, B corporations, closed corporations, and nonprofit corporations.

• C corporations: C corporations, owned by shareholders, are taxed as separate entities. JPMorgan Chase & Co. is a multinational investment bank and financial services holding company listed as a C corporation. Since C corporations allow an unlimited number of investors, many larger companies – including Apple, Bank of America and Amazon – file for this tax status.
• B corporations: B corporations, otherwise known as benefit corporations, are for-profit entities committed to corporate social responsibility and structured to positively impact society. For example, skincare and cosmetics company The Body Shop has proven its long-term commitment to supporting environmental and social movements, resulting in an awarded B corporation status. The Body Shop uses its presence to advocate for permanent change on issues like human trafficking, domestic violence, climate change, deforestation and animal testing in the cosmetic industry.
• Closed corporations: Closed corporations, typically run by a few shareholders, are not publicly traded and benefit from limited liability protection. Closed corporations, sometimes referred to as privately held companies, have more flexibility than publicly traded companies. For example, Hobby Lobby is a closed corporation – a privately held, family-owned business. Stocks associated with Hobby Lobby are not publicly traded; instead, the stocks have been allocated to family members.
• Open corporations: Open corporations are available for trade on a public market. Many well-known companies, including Microsoft and Ford Motor Co., are open corporations. Each corporation has taken ownership of the company and allows anyone to invest.
• Nonprofit corporations: Nonprofit corporations exist to help others in some way and are rewarded by tax exemption. Some examples of nonprofits are the Salvation Army, American Heart Association and American Red Cross. These organizations all focus on something other than turning a profit.

Corporations enjoy several advantages. 

• Limited liability: Stockholders are not personally liable for claims against your corporation; they are liable only for their personal investments.
• Continuity: Corporations are not affected by death or the transferring of shares by their owners. Your business continues to operate indefinitely, which investors, creditors and consumers prefer.
• Capital: It’s much easier to raise large amounts of capital from multiple investors when your business is incorporated.

This structure is ideal for businesses that are further along in their growth, rather than a startup based in a living room. For example, if you’ve started a shoe company and have already named your business, appointed directors and raised capital through shareholders, the next step is to become incorporated. You’re essentially conducting business at a riskier, yet more lucrative, rate. Additionally, your business could file as an S corporation for the tax benefits. Once your business grows to a certain level, it’s likely in your best interest to incorporate it.

These are some popular examples of corporations:

• General Motors
• Exxon Mobil Corp.
• Domino’s Pizza
• JPMorgan Chase

Learn more about how to become a corporation .

Cooperative 

A cooperative (co-op) is owned by the same people it serves. Its offerings benefit the company’s members, also called user-owners, who vote on the organization’s mission and direction and share profits.

Cooperatives offer a couple main advantages.

• Increased funding: Cooperatives may be eligible for federal grants to help them get started.
• Discounts and better service: Cooperatives can leverage their business size, thus obtaining discounts on products and services for their members.

Forming a cooperative is complex and requires you to choose a business name that indicates whether the co-op is a corporation (e.g., Inc. or Ltd.). The filing fee associated with a co-op agreement varies by state. 

An example of a co-op is CHS Inc., a Fortune 100 business owned by U.S. agricultural cooperatives. As the nation’s leading agribusiness cooperative, CHS reported a net income of $422.4 million for fiscal year 2020. These are some other notable examples of co-ops:

• Land O’Lakes
• Navy Federal Credit Union
• Ace Hardware

The five types of business structures are sole proprietorship, partnership, limited liability company, corporation and cooperative. The right structure depends mainly on your business type.

Factors to consider before choosing a business structure

For new businesses that could fall into two or more of these categories, it’s not always easy to decide which structure to choose. Consider your startup’s financial needs, risk and ability to grow. It can be challenging to switch your legal structure after registering your business, so give it careful analysis in the early stages of forming your business. 

Here are some crucial factors to consider as you choose your business’s legal structure. You should also consult a CPA for advice.

Flexibility 

Where is your company headed, and which type of legal structure allows for the growth you envision? Turn to your business plan to review your goals and see which structure best aligns with those objectives. Your entity should support the possibility for growth and change, not hold it back from its potential. [Learn how to write a business plan with this template .]

When it comes to startup and operational complexity, nothing is more straightforward than a sole proprietorship. Register your name, start doing business, report the profits and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define the roles and percentages of profits. Corporations and LLCs have various reporting requirements with state governments and the federal government.

A corporation carries the least amount of personal liability since the law holds that it is its own entity. This means creditors and customers can sue the corporation, but they can’t gain access to any personal assets of the officers or shareholders. An LLC offers the same protection but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement.

An owner of an LLC pays taxes just as a sole proprietor does: All profit is considered personal income and taxed accordingly at the end of the year.

“As a small business owner, you want to avoid double taxation in the early stages,” said Jennifer Friedman, principal at Rivetr. “The LLC structure prevents that and makes sure you’re not taxed as a company, but as an individual.”

Individuals in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the effect on your return. 

A corporation files its own tax returns each year, paying taxes on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes, such as those for Social Security and Medicare, on your personal return. 

To simplify payroll complexities and taxation issues, consider using a payroll service. Check out our reviews of the best payroll services to find a partner that fits your needs and budget.

If you want sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice. You can negotiate such control in a partnership agreement as well.

A corporation is constructed to have a board of directors that makes the major decisions that guide the company. A single person can control a corporation, especially at its inception, but as it grows, so does the need to operate it as a board-directed entity. Even for a small corporation, the rules intended for larger organizations – such as keeping notes of every major decision that affects the company – still apply.

Capital investment

If you need to obtain outside funding from an investor, venture capitalist or bank, you may be better off establishing a corporation. Corporations have an easier time obtaining outside funding than sole proprietorships.

Corporations can sell shares of stock and secure additional funding for growth, while sole proprietors can obtain funds only through their personal accounts, using their personal credit or taking on partners. An LLC can face similar struggles, although, as its own entity, it’s not always necessary for the owner to use their personal credit or assets.

Licenses, permits and regulations

In addition to legally registering your business entity, you may need specific licenses and permits to operate. Depending on the type of business and its activities, it may need to be licensed at the local, state and federal levels.

“States have different requirements for different business structures,” Friedman said. “Depending on where you set up, there could be different requirements at the municipal level as well. As you choose your structure, understand the state and industry you’re in. It’s not ‘one size fits all,’ and businesses may not be aware of what’s applicable to them.”

The structures discussed here apply only to for-profit businesses. If you’ve done your research and you’re still unsure which business structure is right for you, Friedman advises speaking with a specialist in business law.

Max Freedman and Matt D’Angelo contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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10.6 Legal Forms of Business

Making a profit is a key goal for the overwhelming majority of firms. How a firm’s owners benefit from profits and suffer from losses varies across different legal forms of business. Below we illustrate how profits and losses are treated within different business forms.

Choosing a Form of Business

The legal form a firm chooses to operate under is an important decision with implications for how a firm structures its resources and assets. Several legal forms of business are available to executives. Each involves a different approach to dealing with profits and losses (Table 10.9).

There are three primary considerations that firms should take into account when deciding which legal form of business should be chosen. These are:

• How taxes are handled
• How liability of the owners is handled
• How easy to set up and operate the entity

There are five basic forms of business entities:

• Sole Proprietorship
• Partnership
• Corporation
• S Corporation
• Limited Liability Company—LLC

A sole proprietorship is a firm that is owned by one person. From a legal perspective, the firm and its owner are considered one and the same. On the plus side, this means that all profits are the property of the owner (after taxes are paid, of course). On the minus side, however, the owner is personally responsible for the firm’s losses and debts. This presents a tremendous risk. If a sole proprietor is on the losing end of a significant lawsuit, for example, the owner could find his personal assets forfeited. Most sole proprietorships are small and many have no employees. In most towns, for example, there are a number of self-employed repair people, plumbers, and electricians who work alone on home repair jobs. Also, many sole proprietors run their businesses from their homes to avoid expenses associated with operating an office. Along with the disadvantage of personal liability for the owner, sole proprietorships enjoy two advantages. Taxes on profits are assessed at the owner’s personal tax rate. Also, this is the easiest form of business to set up and operate.

In a partnership , two or more partners share ownership of a firm. A partnership is similar to a sole proprietorship in that the partners are the only beneficiaries of the firm’s profits, but they are also responsible for any losses and debts. Partnerships can be especially attractive if each person’s expertise complements the others. For example, an accountant who specializes in preparing individual tax returns and another who has mastered business taxes might choose to join forces to offer customers a more complete set of tax services than either could offer alone.

From a practical standpoint, a partnership allows a person to take time off without closing down the business temporarily. Sander & Lawrence is a partnership of two home builders in Tallahassee, Florida. When Lawrence suffered a serious injury a few years ago, Sander was able to take over supervising his projects and see them through to completion. Had Lawrence been a sole proprietor, his customers would have suffered greatly. However, a person who chooses to be part of a partnership rather than operating alone as a sole proprietor also takes on some risk; your partner could make bad decisions that end up costing you a lot of money. Thus developing trust and confidence in one’s partner is very important. As with the sole proprietorship, the owners and the partnership are considered as one. Being personally liable for the debts and actions of the partnership and the partner(s) is certainly a downside, however setting up a partnership is relatively easy. Taxes are also paid at the partners individual rate, a tax advantage generally.

Most large firms, such as Southwest Airlines, are organized as corporations . A key difference between a corporation and a sole proprietorship or partnership is that corporations involve the separation of ownership and management. Corporations sell shares of ownership that are publicly traded in stock markets, and they are managed by professional executives. These executives may own a significant portion of the corporation’s stock, but this is not a legal requirement.

Another unique feature of corporations is how they deal with profits and losses. Unlike in sole proprietorships and partnerships, a corporation’s owners (i.e., shareholders) do not directly receive profits or absorb losses. Instead, profits and losses indirectly affect shareholders in two ways. First, profits and losses tend to be reflected in whether the firm’s stock price rises or falls. When a shareholder sells her stock, the firm’s performance while she has owned the stock will influence whether she makes a profit relative to her stock purchase. Shareholders can also benefit from profits if a firm’s executives decide to pay cash dividends to shareholders. Unfortunately, for shareholders, corporate profits and any dividends that these profits support are both taxed. This double taxation is a big disadvantage of corporations. Corporations (also called C corporations) are also the most difficult form of business to set up and have a number of regulations to comply with.

A specialized type of corporation called an S corporation is designed for smaller companies.. Much like in a partnership, the firm’s profits and losses are reported on owners’ personal tax returns in proportion with each owner’s share of the firm, so double taxation is avoided. Although this is an attractive feature, an S corporation would be impractical for most large firms because the number of shareholders in an S corporation is capped, usually at one hundred. In contrast, Southwest Airlines has more than ten thousand shareholders. For smaller firms, such as many real-estate agencies, the S corporation is an attractive form of business. S corporations also provide liability protection for their stockholders as C corporations do, and are easier to set up and operate than C corporations.

A final form of business is very popular, yet it is not actually recognized by the federal government as a form of business. Instead, the ability to create a limited liability company (LLC) is granted in state laws. LLCs mix attractive features of corporations and partnerships. The owners of an LLC are not personally liable for debts that the LLC accumulates (like in a corporation) and the LLC can be run in a flexible manner (like in a partnership). When paying federal taxes, however, an LLC must choose to be treated as a corporation, a partnership, or a sole proprietorship. Many home builders (including Sander & Lawrence), architectural businesses, and consulting firms are LLCs. The ease of setting up and operating an LLC is similar to a sole proprietorship or partnership.

Section Video

Finding the Right Business Structure [03:58]

The video for this lesson further explains the various forms of business ownership.

You can view this video here: https://youtu.be/A-Up-JUkaj0 .

Key Takeaway

• The five major forms of business in the United States are sole proprietorships, partnerships, LLCs, and C and S corporations. Each form has implications for how individuals are taxed, the personal liability of the owners, and how resources are managed and deployed in the set up and operations.
• Why are so many small firms sole proprietorships?
• Find an example of a firm that operates as an LLC. Why do you think the owners of this firm chose this form of business over others?
• Why might different forms of business be more likely to rely on a different organizational structure?

Video Credits

John Deere. (2016, May 26). Finding the right business structure [Video]. YouTube. https://youtu.be/A-Up-JUkaj0 .

The simplest form of business, with only one owner who is personally responsible for the liabilities of the business, whereby the owner and the business are considered one and the same

A business that is not incorporated with two or more owners/partners, personally responsible for the liabilities of the business

A legal business entity that separates the owners from the liabilities of the business. Owners are issued stock, and profits are taxed twice, at the corporate and individual owner levels

A special form of a corporation for smaller companies, with a limited number of owners/stock holders who are separated from the liabilities of the business. Profits are only taxed at the individual owners level.

A limited liability company with some of the ease of operation of a sole proprietorship or partnership but owners are separated from the liabilities of the business

Strategic Management Copyright © 2020 by Reed Kennedy is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Sole Proprietorship

Partnership, limited liability company (llc), corporation, templates and examples to download in word and pdf formats, how to choose the best legal structure for your business.

Deciding on a specific type of legal structure when you've just started your business journey can be complicated. It's hard to know exactly what the differences are, how the different structures can benefit you, and what any risks might be.

Luckily, it doesn't have to be so complicated! In fact, we've published this guide on everything you need to know about choosing the right legal structure for your business to help you along the way.

The most common business structures are sole proprietorships, partnerships, limited liability companies, and corporations. Here, you'll learn about each one in detail to help you choose the right fit for your business, as well as a non-profit, which you might consider for a new charitable business.

What type of structure you choose will make a big difference over the life of your business. It can have significant tax implications, as well as implications for your personal level of risk. It is not a decision that should be made lightly.

Below, we examine each common business structure in detail.

A sole proprietorship is the simplest type of business structure and the easiest to form and maintain. A sole proprietorship is basically a business that is you - and you are the business! For example, if you were a freelance writer on the internet and wanted to operate as a sole proprietorship, you wouldn't have to do anything at all to already be up and running, as long as you wanted to operate under your name.

In a sole proprietorship, no separate legal entity is created. If you'd like to operate under a special name, like a new business name or just a different name other than your own legal name, you would file what is called a "Doing Business As" (or DBA, as it is referred to) document with your state. All this document does is tell the state that you, as a legal person, are doing business under the name you've chosen for your business.

Because of the simplicity of the sole proprietorship, the way that your taxes are handled is also fairly simple. The taxes of the sole proprietorship would "pass through" to you, meaning you report any profit or loss on your own taxes and don't have to go through a separate process for the business.

One of the biggest drawbacks to a sole proprietorship is that you can be personally on the hook for any business liabilities - whether you make a big financial loss one year or whether your business gets sued. That's because in a sole proprietorship, there is no separation between you as a person and you as a business, so anything you own, in terms of assets, may be up-for-grabs by any creditors or the public to whom you are facing liability.

Another big drawback is that you may have a hard time raising any money. In a sole proprietorship, you can't issue stock in the company, so it could be hard to attract capital investors. You also may not have much success getting a bank loan, because banks generally don't favor lending to sole proprietorships.

How to form a sole proprietorship

To create a sole proprietorship, as mentioned above, you wouldn't have to file anything with your state other than a DBA, if you'd like. There can be fees associated with the DBA form, which vary per state. But keep in mind you might have separate documents to file, depending on your business. These could include special licenses or permits.

Why you might choose a sole proprietorship

A sole proprietorship is a good idea if you are a solopreneur with a small business and you are planning to keep it that way. It's very easy to form (you either have to file no documents or just one DBA) and you can get focused on starting your business right away. It's also very cheap to get started.

Especially if your business may not be facing a high level of risk, a sole proprietorship might be for you. A sole proprietorship wouldn't be recommended if, let's say, you ran a business that dealt with large amounts of other people's money on a regular business, or as a health professional, or really any area where the risk of being liable for something serious is high.

Final overview

Sole proprietorship benefits:.

1. It's cheap and easy to form.

2. Taxes are easy to keep track of.

3. You still have the option to have employees if you would like.

Sole proprietorship drawbacks:

1. There is a high level of personal risk for liabilities.

2. You may have difficulty raising funds.

If a sole proprietorship is the simplest business structure for an individual looking to operate their own small business, a partnership might be considered that for two or more people.

In a partnership, the two or more "partners," as they are called, each generally have a say in how the company runs (depending on the structure of the partnership) and each own a piece of the company, including its profits and losses.

In a partnership, you can also have different types of partners - general partners and limited partners - or you can have just a general partnership with all the same types of partners. General partners are equally responsible for everything: all the profits, any potential losses, any liabilities that might come up, and general responsibility for the company, including the amount of work done. Limited partners are those that are basically only partners for a financial reason, in that they invest but have not much else to do with how the company runs. Overall, partnerships with limited partners are a little rarer, as people like to go into partnerships with equal weight.

Imagine a situation where two people decide to open a yoga studio together. Their structure of choice may be a partnership.

A joint venture, formed with a Joint Venture Agreement , is a type of general partnership that only lasts for one specific project or a limited amount of time.

Joint venture is a generic term for any business relationship between two parties for a limited time. A joint venture could be for a brand new business, or just one marketing promotion, or even just a project between two already-formed businesses. In a joint venture, the parties could decide to form a temporary partnership, with a Partnership Agreement , but they don't have to: they can also retain their fully separate legal identities and just operate with a Joint Venture Agreement.

Taxes in a partnership can pass through, just like in a sole proprietorship.

The formation of a partnership, however, can be very complicated. Many states have adopted something called the Uniform Partnership Act, which makes the written Partnership Agreement very important. Partners will need to figure out everything from how they'll run the day-to-day business to what happens if the business folds or if someone wants to leave.

The Uniform Partnership Act is similar to a model statute or model law, in that it was drafted to be applicable uniformly, but states each had to individually adopt it. The Uniform Partnership Act, or UPA, gives guidance on how business partnerships should be formed, governed, and dissolved.

How to form a partnership

As mentioned above, the basis of partnership formation is the written Partnership Agreement, which sets out all of the details of the business relationship between the parties. Unless you also want to file a DBA, you won't need to file any partnership documents with your state.

Keep in mind, however, that as above, you may need specific licenses or permits for your particular business model.

Why you might choose a partnership

A partnership is a good idea if you are running a small business with another individual or a few individuals. As with a sole proprietorship, it's very easy to form (you either have to file no documents with the state or just one DBA) and you can get focused on starting your business right away. It's also very cheap to get started, just like a sole proprietorship.

If you're not sure of the trustworthiness of your potential partners, however, a partnership may not be the way to go for you, as you could be exposing yourself to a high level of risk just because of the actions of your partners. Either way, however, you should always have a well-written Partnership Agreement in place.

Partnership benefits:

1. It's relatively cheap to form.

2. Generally, unless you have a DBA, you won't need to file with the state.

3. Taxes pass through.

Partnership drawbacks:

1. The Partnership Agreement can be a complicated document.

2. It can be very risky if your partners are not trustworthy.

A Limited Liability Company, or LLC for short, has largely become the preferred form of structure for many small- to medium-sized businesses, and even for a lot of solo business owners. The reason for this is because it has a lot of benefits of other types of business structures, without as much of the risk.

In an LLC, there is a lot of customization available for how the business is run. LLCs can be used for small businesses or large ones. You can form an LLC just for yourself or have an LLC with many different members. The main benefit of an LLC is that your personal assets are shielded from liability - hence the name, "limited liability" company.

Taxes still pass through in LLCs. If you are a single-member LLC, the taxation is similar to a sole proprietorship. In a multi-member LLC, you are taxed on just your portion of the profits.

LLCs can, therefore, be formed for almost any purpose - for a single freelance artist or a group of people looking to open a bakery together, for example. LLCs can even be formed for professionals, like a legal or medical practice.

Since all business structures are formed according to the state, and not federal, government, the requirements to file and run the business, especially for the more complicated structures, can vary.

Forming an LLC is more complicated than either a sole proprietorship or partnership, as it involves filing specific documents in a specific form with the state.

How to form an LLC

An LLC is generally filed with your state by drafting Articles of Organization , the creation document for the company. Before this, you'll also have to ensure that you have a business name that will work by running a search on your proposed business name with your state's Secretary of State (usually this can be done easily on the Secretary of State website). An Operating Agreement is also a very good idea to have drafted (though it is not required), especially if you have more than one LLC member.

If you would like to operate under a special name for your LLC, you may also have to file a DBA.

Why you might choose an LLC

An LLC is a good idea when you want to have the maximum amount of liability protection for your business, either as a solo business owner or as part of a team and you don't want to build a corporation (more on that below). It's also a good idea if you still want the simplicity of taxation and the ability to organize your business as you like.

Whenever you file your LLC, make sure you keep all of the records separate to ensure your liability protection. Your organizational records, banking records, and, if applicable, personnel records all need to be records of the LLC specifically, not mixed in with your own personal records.

LLC benefits:

1. You are protected from personal liability.

2. Taxes pass through.

LLC drawbacks:

1. It's a little more expensive and complicated to form than a sole proprietorship or partnership.

2. Your liability is subject to the separateness of all of your records.

A corporation is generally the most complex legal structure , involving a lot of time and resources at its formation and then on through its life. A corporation is its own separate entity - often sometimes compared to a business version of a legal "person." In other words, the corporation is its own body separate and apart from you or any of the other owners, called "shareholders."

A corporation can take one of three main forms: the C corporation, the S corporation, or the lesser-known B corporation.

Most big companies in the United States, like Fortune 500 companies, are organized into a C corporation. It's the "traditional" corporate structure that people think of when they think of corporations. In a C corp, there are owners, called shareholders as noted above, who all put money into the business and receive shares, or stock, in return. The corporation gets taxed on its own - but so do any shareholder earnings, which means that with corporations, there is what's called "double taxation." All that means is that money into the corporation gets taxed as does money to the shareholders. In a C corp, there is almost no personal liability of the shareholders. Additionally, there is the possibility of the shareholders earning a lot of income if the corporation ever goes public.

The S corporation is a slightly different entity, similar to the C corp, but with the possibility of pass-through taxation. As discussed in the other business forms, what this means is that profits and losses can go straight to the owner or owners of the S corp, making it a good idea for small businesses. The S corp is a little more limited than the C corp in most states, however, as it can usually only be held by a certain limit of private individuals (for example, up to 25 owners that all have to be real people, rather than legal entities).

A B corporation is a lesser-known structure than the others and that's because it won't be applicable to most people. B Corps are designed for those that want to form essentially a C corporation but for some social good. The B stands for "benefit." A B Corp is very similar to a C Corp, except that sometimes the corporation receives certain tax breaks.

How to form a Corporation

Corporations are formed by filing a significant document covering the details of the corporation with the Secretary of State, called the Articles of Incorporation . Most corporations need to have a viable business name and go on to obtain a tax identification number from the Internal Revenue Service.

It's a good idea to also draft a document called the Corporate Bylaws , which set down the governing rules for the corporation.

Why you might choose a Corporation

You might decide to file a corporation if you are looking for a lot of growth potential for your business or if you knew you wanted to start bringing on shareholders right away. A corporation is a good idea if you plan to hire a lot of employees, as well.

It's probably not a good idea for very small business or individuals who don't plan to grow at a very high rate, as the expense of setting up and maintaining the structure, as well as the double taxation, would easily make it more cumbersome than its worth.

Corporation benefits:

2. Raising capital may be easier here than any other business form.

Corporation drawbacks:

1. It's more expensive and complicated to form than any other business form.

2. It's also complicated and expensive to maintain.

3. Double taxation may end up costing you more.

A non-profit is different than all of the other business structures - and the difference is in its name. Non-profits are created for a different reason than just generating profit; usually, the reason is some kind of social cause.

Non-profits are tax-exempt entities, and because of this, they need to have a specific purpose that is either charitable, religious, or educational.

How to form a Non-profit

Forming a non-profit requires Articles of Incorporation with the Secretary of State. You'll then need to file specifically to obtain tax-exempt status from both your state and the federal government.

If you plan to have multiple people in your non-profit, drafting Non-Profit Bylaws is a good idea.

Why you might choose a Non-profit

The option for a non-profit is really only there if you have a business that is for charitable, religious, or educational purposes. Once you decide that you do, then you must ensure you really aren't running a business for profit and that the primary purpose is for another reason. If those requirements are met, the non-profit is the best choice for you.

If you'd like to run a business for a social cause, but still want to have the main goal of earning a profit, a B corporation might be better suited to your needs. With a non-profit, one of the main activities will simply have to be fundraising to keep the business afloat. In a B corporation, however, you can do good and still turn a profit.

Non-profit benefits:

1. Tax-exempt status can be obtained.

2. It's the best structure for any primarily charitable business.

Non-profit drawbacks:

1. You must meet the requirements to open a non-profit.

2. Your business can't be run primarily to earn a profit.

When deciding what type of structure might be best for you, ask yourself the following questions:

1. How much time and effort am I willing to put in to set up the business at the beginning?

2. How much time and effort am I willing to put in to maintain the business over time?

3. Is pass-through taxation important to me?

4. What will be personal liabilities be?

5. Am I interested in easily raising capital?

Once you've asked yourself these questions, with the knowledge obtained from this guide, you'll be in a great place to decide what the best structure is for your needs.

About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.

• Partnership Agreement
• Articles Of Organization
• Non-Profit Bylaws
• Corporate Bylaws
• Articles Of Incorporation

12.3 Legal Forms of Organization for the Small Business

Learning objectives.

• Understand the different legal forms that a small business can take.
• Explain the factors that should be considered when choosing a legal form.
• Understand the advantages and disadvantages of each legal form.
• Explain why the limited liability company may be the best legal structure for many small businesses.

Every small business must select a legal form of ownership. The most common forms are sole proprietorship, partnership, and corporation. A limited liability company (LLC) is a relatively new business structure that is now allowed by all fifty states. Before a legal form is selected, however, several factors must be considered, not the least of which are legal and tax options.

Factors to Consider

The legal form of the business is one of the first decisions that a small business owner will have to make. Because this decision will have long-term implications, it is important to consult an attorney and an accountant to help make the right choice. The following are some factors the small business owner should consider before making the choice: [citation redacted per publisher request] ; “Small Business Planner: Choose a Structure,” US Small Business Association , accessed February 3, 2012, archive.sba.gov/smallbusinessplanner/start/chooseastructure/index.html .

• The owner’s vision. Where does the owner see the business in the future (size, nature, etc.)?
• The desired level of control. Does the owner want to own the business personally or share ownership with others? Does the owner want to share responsibility for operating the business with others?
• The level of structure. What is desired—a very structured organization or something more informal?
• The acceptable liability exposure. Is the owner willing to risk personal assets? Is the owner willing to accept liability for the actions of others?
• Tax implications. Does the owner want to pay business income taxes and then pay personal income taxes on the profits earned?
• Sharing profits. Does the owner want to share the profits with others or personally keep them?
• Financing needs. Can the owner provide all the financing needs or will outside investors be needed? If outside investors are needed, how easy will it be to get them?
• The need for cash. Does the owner want to be able to take cash out of the business?

The final selection of a legal form will require consideration of these factors and tradeoffs between the advantages and disadvantages of each form. No choice will be perfect. Even after a business structure is determined, the favorability of that choice over another will always be subject to changes in the laws. “Limited Liability Company,” Entrepreneur.com , July 9, 2007, accessed February 3, 2012, www.entrepreneur.com/article/24484 .

Sole Proprietorship

A sole proprietorship The most basic type of business organization in which there is only one owner. is a business that is owned and usually operated by one person. It is the oldest, simplest, and cheapest form of business ownership because there is no legal distinction made between the owner and the business (see Table 12.1 "Sole Proprietorships: A Summary of Characteristics" ). Sole proprietorships are very popular, comprising 72 percent of all businesses and nearly $1.3 trillion in total revenue. US Internal Revenue Service, “Selected Returns and Forms Filed or to Be Filed by Type During Specified Calendar Years 1980–2005,” SOI Bulletin, Historical Table, Fall 2004, as cited in John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 60. Sole proprietorships are common in a variety of industries, but the typical sole proprietorship owns a small service or retail operation, such as a dry cleaner, accounting services, insurance services, a roadside produce stand, a bakery, a repair shop, a gift shop, painters, plumbers, electricians, and landscaping services. John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 60; adapted from David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 163. Clearly, the sole proprietorship is the choice for most small businesses.

Table 12.1 Sole Proprietorships: A Summary of Characteristics

Source: John M. Ivancevich and Thomas N. Duening, Business: Principles, Practices, and Guidelines (Mason, OH: Atomic Dog Publishing, 2007), 60; David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 163; “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business , accessed February 3, 2012, http://bit.ly/KCvnaT ; William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 150–51.

Partnership

A partnership Two or more people voluntarily operating a business as co-owners for profit. is two or more people voluntarily operating a business as co-owners for profit. Partnerships make up more than 8 percent of all businesses in the United States and more than 11 percent of the total revenue. William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 150. Like the sole proprietorship, the partnership does not distinguish between the business and its owners (see Table 12.2 "Partnerships: A Summary of Characteristics" ). There should be a legal agreement that “sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when needed.” “Small Business Planner: Choose a Structure,” US Small Business Association , accessed February 3, 2012, archive.sba.gov/smallbusinessplanner/start/chooseastructure/index.html .

There are two types of partnerships. In the general partnership A business composed of two or more owners who contribute the initial capital of the business and share in the profits and the losses. , all the partners have unlimited liability, and each partner can enter into contracts on behalf of the other partners. A limited partnership A business format that may have several general partners and several more limited partners who do not have unlimited liability. has at least one general partner and one or more limited partners whose liability is limited to the cash or property invested in the partnership. Limited partnerships are usually found in professional firms, such as dentists, lawyers, and physicians, as well as in oil and gas, motion-picture, and real-estate companies. However, many medical and legal partnerships have switched to other forms to limit personal liability. John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 60; David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 163; William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 150.

Before creating a partnership, the partners should get to know each other. According to Michael Lee Stallard, cofounder and president of E Pluribis Partners, a consulting firm in Greenwich, Connecticut, “The biggest mistake business partners make is jumping into business before getting to know each other…You must be able to connect to feel comfortable expressing your opinions, ideas and expectations.” Shelley Banjo, “Before You Tie the Knot…,” Wall Street Journal , November 26, 2007, accessed February 3, 2012, online.wsj.com/article/SB119562612627400387.html .

Table 12.2 Partnerships: A Summary of Characteristics

Source: John M. Ivancevich and Thomas N. Duening, Business: Principles, Practices, and Guidelines (Mason, OH: Atomic Dog Publishing, 2007), 64–65; David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 163; “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business , accessed February 3, 2012, http://bit.ly/KCvnaT ; William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 154–55; “Small Business Planner—Choose a Structure,” US Small Business Administration , accessed February 3, 2012, http://archive.sba.gov/smallbusinessplanner/start/chooseastructure/index.html .

Corporation

A corporation An artificial person created by law, with most of the legal rights of a real person. “is an artificial person created by law, with most of the legal rights of a real person. These include the rights to start and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts” William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 157. (see Table 12.3 "Corporations: A Summary of Characteristics" ). Corporations make up 20 percent of all businesses in the United States, but they account for almost 90 percent of the revenue. Jeff Madura, Introduction to Business (St. Paul, MN: Paradigm Publishers International, 2010), 150. Although some small businesses are incorporated, many corporations are extremely large businesses—for example, Walmart, General Electric, Procter & Gamble, and Home Depot. Recent data show that only about one-half of the small business owners in the United States run incorporated businesses. Matthew Bandyk, “Turning Your Small Business into a Corporation,” US News & World Report , March 14, 2008, accessed February 3, 2012, money.usnews.com/money/business-economy/small-business/articles/2008/03/14/turning-your-small-business -into-a-corporation .

Scott Shane, author of The Illusions of Entrepreneurship (Yale University Press, 2010), argues that small businesses that are incorporated have a much higher rate of success than sole proprietorships, outperforming unincorporated small businesses in terms of profitability, employment growth, sales growth, and other measures. Matthew Bandyk, “Turning Your Small Business into a Corporation,” US News & World Report , March 14, 2008, accessed February 3, 2012, money.usnews.com/money/business-economy/small-business/articles/2008/03/14/turning-your-small-business -into-a-corporation . Shane maintains that being incorporated may not make sense for “tiny little businesses” because the small amount of risk may not be worth the complexity. However, Deborah Sweeney, incorporation expert for Intuit, disagrees, saying that “even the smallest eBay business has a risk of being sued” because shipping products around the country or the world can create legal problems if a shipment is lost. Matthew Bandyk, “Turning Your Small Business into a Corporation,” US News & World Report , March 14, 2008, accessed February 3, 2012, money.usnews.com/money/business-economy/small-business/articles/2008/03/14/turning-your-small-business -into-a-corporation . Ultimately, it is the small business being successful that may be the biggest factor for the owner to move from a sole proprietorship to a corporation.

Table 12.3 Corporations: A Summary of Characteristics

Source: “How—and Why—to Incorporate Your Business,” Entrepreneur , accessed February 3, 2012, http://www.entrepreneur.com/article/77730 ; John M. Ivancevich and Thomas N. Duening, Business: Principles, Practices, and Guidelines (Mason, OH: Atomic Dog Publishing, 2007), 64–65; “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business , accessed February 3, 2012, http://bit.ly/KCvnaT ; William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 154–55.

Limited Liability Company

The limited liability company An organizational form that can be limited to a single individual or several other owners or shareholders. is a relatively new form of business ownership that is now permitted in all fifty states, although the laws of each state may differ. The LLC is a blend of a sole proprietorship and a corporation: the owners of the LLC have limited liability and are taxed only once for the business. “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business , accessed February 3, 2012, www.nfib.com/tabid/56/?cmsid=49906 . The LLC provides all the benefits of a partnership but limits the liability of each investor to the amount of his or her investment (see Table 12.4 "Limited Liability Companies: A Summary of Characteristics" ). “LLCs were created to provide business owners with the liability protection that corporations enjoy without the double taxation.” “Limited Liability Company,” Entrepreneur.com , July 9, 2007, accessed February 3, 2012, www.entrepreneur.com/article/24484 .

According to Carter Bishop, a professor at Suffolk University Law School, who helped draft the uniform LLC laws for several states, “There’s virtually no reason why a small business should file as a corporation, unless the owners plan to take the business public in the near future.” Annalyn Censky, “Business Structures 101,” CNN Money , August 4, 2008, accessed February 3, 2012, http://cnnmon.ie/MDaxXN . In the final analysis, the LLC business structure is the best choice for most small businesses. The owners will have the greatest flexibility, and there is a liability shield that protects all owners. Annalyn Censky, “Business Structures 101,” CNN Money , August 4, 2008, accessed February 3, 2012, http://cnnmon.ie/MDaxXN .

Table 12.4 Limited Liability Companies: A Summary of Characteristics

Source: Annalyn Censky, “Business Structures 101,” CNN Money , August 4, 2008, accessed February 3, 2012, http://cnnmon.ie/MDaxXN ; “Limited Liability Company,” Entrepreneur.com , accessed February 3, 2012, http://www.entrepreneur.com/article/24484 ; John M. Ivancevich and Thomas N. Duening, Business: Principles, Practices, and Guidelines (Mason, OH: Atomic Dog Publishing, 2007), 64–65; “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business , accessed February 3, 2012, http://bit.ly/KCvnaT ; William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 159.

Key Takeaways

• Every small business must select a legal form of ownership. It is one of the first decisions that a small business owner must make.
• The most common forms of legal structure are the sole proprietorship, the partnership, and the corporation. An LLC is a relatively new business structure.
• When deciding on a legal structure, every small business owner must consider several important factors before making the choice.
• The sole proprietorship is the oldest, simplest, and cheapest form of business ownership. This business structure accounts for the largest number of businesses but the lowest amount of revenue. This is the choice for most small businesses.
• A partnership is two or more people voluntarily operating a business as co-owners for profit. There are general partnerships and limited partnerships.
• A corporation is an artificial person with most of the legal rights of a real person. Corporations make up about 20 percent of all businesses in the United States, but they account for almost 90 percent of the revenue.
• Small businesses that are incorporated outperform unincorporated small businesses in terms of profitability, employment growth, sales growth, and other measures.
• The LLC is a hybrid of a sole proprietorship and a corporation. It is the best choice for most small businesses.
• Select three small businesses of different sizes: small, medium, and large. Interview the owners, asking each about the legal structure that the owner chose and why. If any of the businesses are sole proprietorships, ask the owner if an LLC was considered. If not, try to find out why it was not considered.
• Frank’s BarBeQue is currently a sole proprietorship. Frank’s son, Robert, is trying to persuade his father to either incorporate or become an LLC. Assume that you are Robert. Make a case for each legal structure and then make a recommendation to Frank. It is expected that you will go beyond the textbook in researching your response to this assignment.

• Sources of Business Finance
• Small Business Loans
• Small Business Grants
• Crowdfunding Sites
• How to Get a Business Loan
• Small Business Insurance Providers
• Best Factoring Companies
• Types of Bank Accounts
• Best Banks for Small Business
• Best Business Bank Accounts
• Open a Business Bank Account
• Bank Accounts for Small Businesses
• Free Business Checking Accounts
• Best Business Credit Cards
• Get a Business Credit Card
• Business Credit Cards for Bad Credit
• Build Business Credit Fast
• Business Loan Eligibility Criteria
• Small-Business Bookkeeping Basics
• How to Set Financial Goals
• Business Loan Calculators
• How to Calculate ROI
• Calculate Net Income
• Calculate Working Capital
• Calculate Operating Income
• Calculate Net Present Value (NPV)
• Calculate Payroll Tax

How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

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

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

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Chapter 9: Executing Strategy through Organizational Design

Legal Forms of Business

Learning Objectives

• Know the three basic legal forms of business.
• Know the two specialized types of corporations.

Choosing a Form of Business

The legal form a firm chooses to operate under is an important decision with implications for how a firm structures its resources and assets. Several legal forms of business are available to entrepreneurial business owners. Each involves a different approach to dealing with profits and losses ( Figure 9.24 “Business Forms” ).

There are three basic forms of business. A sole proprietorship  is a firm that is owned by one person. From a legal perspective, the firm and its owner are considered one and the same. On the plus side, this means that all profits are the property of the owner (after taxes are paid, of course). On the minus side, however, the owner is personally responsible for the firm’s losses and debts. This presents a tremendous risk. If a sole proprietor is on the losing end of a significant lawsuit, for example, the owner could find his personal assets forfeited. Most sole proprietorships are small and many have no employees. In most towns, for example, there are a number of self-employed repair people, plumbers, and electricians who work alone on home repair jobs. Also, many sole proprietors run their businesses from their homes to avoid expenses associated with operating an office.

In a partnership ,   two or more partners share ownership of a firm. A partnership is similar to a sole proprietorship in that the partners are the only beneficiaries of the firm’s profits, but they are also responsible for any losses and debts. Partnerships can be especially attractive if each person’s expertise complements the others. For example, an accountant who specializes in preparing individual tax returns and another who has mastered business taxes might choose to join forces to offer customers a more complete set of tax services than either could offer alone.

From a practical standpoint, a partnership allows a person to take time off without closing down the business temporarily. In a partnership of two home builders, if one were to suffer a serious injury, the other partner could take over supervising his or her partner’s projects and see them through to completion. Had the builder been a sole proprietor, the customers and the business would have suffered greatly. However, a person who chooses to be part of a partnership rather than operating alone as a sole proprietor also takes on some risk; your partner could make bad decisions that end up costing you a lot of money. Thus developing trust and confidence in one’s partner is very important.

Most large firms, such as Canadian Tire, are organized as corporations. A key difference between a corporation  on the one hand and a sole proprietorship and a partnership on the other is that corporations involve the separation of ownership and management. Corporations sell shares of ownership that are publicly traded in stock markets, and they are managed by professional executives. These executives may own a significant portion of the corporation’s stock, but this is not a legal requirement.

In Canada, there are several types of corporations:  a Canadian-controlled private corporation (CCPC);  a public corporation ; a corporation controlled by a public corporation; and another corporation (you guessed it: the type of corporation that doesn’t fit into any of the other categories). Legally, the shareholders or owners of corporations cannot be held legally liable for the corporations actions, their financial risk is limited to the value of the stocks they own.

A unique feature of corporations is how they deal with profits and losses. Unlike in sole proprietorships and partnerships, a corporation’s owners (i.e., shareholders) do not directly receive profits or absorb losses. Instead, profits and losses indirectly affect shareholders in two ways. First, profits and losses tend to be reflected in whether the firm’s stock price rises or falls. When a shareholder sells his or her stock, the firm’s performance while that person has owned the stock will influence whether he or she makes a profit relative to the stock purchase. Shareholders can also benefit from profits if a firm’s executives decide to pay cash dividends to shareholders. Unfortunately, for shareholders, corporate profits and any dividends that these profits support are both taxed. This double taxation is a big disadvantage of share ownership in corporations.

A final form of business is a limited liability company (LLC) . The Canada Revenue Agency (CRA) continues to treat the LLC as a corporation rather than a partnership, which results in classic double taxation to Canadian investors. Canadians should be aware that U.S. limited liability companies may be hazardous to their (tax) health.

Key Takeaways

• The three major forms of business in Canada are sole proprietorships, partnerships, and corporations. Each form has implications for how individuals are taxed and resources are managed and deployed.
• Why are so many small firms sole proprietorships?
• Find an example of a firm that operates as an LLC. Why do you think the owners of this firm chose this form of business over others?
• Why might different forms of business be more likely to rely on a different organizational structure?

Moody, K.G.C.  (2013, February 7).  Canadians beware! United States limited liability companies may be hazardous to your (tax) health.   2014 Moodys Gartner Tax Law LLP.  Retrieved from http://www.moodysgartner.com/canadians-beware-united-states-limited-liability-companies-may-be-hazardous-to-your-tax-health/

Industry Canada. (2013, September 13). SME Research and Statistics , Key Small Business Statistics – August 2013 . Retrieved from http://www.ic.gc.ca/eic/site/061.nsf/eng/02812.html

Ward, S.  (2014).  Types of Corporations in Canada and Corporate Tax .  About.com.   Retrieved from  http://sbinfocanada.about.com/od/corporatetax/a/corporationtype.htm

Image descriptions

Figure 9.24 image description: Business Forms

Making a profit is a key goal for the overwhelming majority Of firms. How a firm’s owners benefit from profits and suffer from losses varies across different legal forms of business. Below we illustrate how profits and losses are treated within different business forms.

• A sole proprietorship is owned by one person. The firm and its owner are treated interchangeably – the owner is the only beneficiary of any profits and is personally responsible for any losses and debts. Most sole proprietorships are small, but entrepreneur Jim Pattison has operated Jim Pattison Group for over 60 years.
• In a partnership, two or more partners jointly own the firm. A successful partnership requires trust because profits and losses are shared and because each partner is accountable for the actions of others. Partnerships are a common business form for dental practices and law offices.
• A corporation such as WestJet Airlines separates ownership and management by issuing ownership shares that are publicly traded in stock markets. Shareholders do not directly receive profits or absorb losses, but profits and losses tend to be reflected in whether the firm’s stock price rises Or falls. Shareholders can also benefit from profits in the form of dividends. A disadvantage of this business form is double taxation: taxes are paid on corporate profits and on any dividends that corporate income fuels.
• A limited liability company (LLC) can be thought of as a hybrid of a corporation and a partnership. Like in a corporation, owners are not accountable for the firms debts. A winner of a legal judgment against an LLC, for example, cannot claim the personal assets of the LLC’s owners. LLCs also enjoy the management flexibility of partnerships. For federal tax purposes, an LLC must choose to be treated as a corporation, a partnership, or a sole proprietorship. Most sole proprietorships are small businesses, often with no employees at the beginning. Small businesses (up to 99 employees) contribute approximately 30% of Canada’s GDP. Source: Industry Canada. (2013, Sept. 13). SME Research and Statistics, Key Small Business Statistics – August 2013. Retrieved from : http://www.ic.gc.ca/eic/site/061.nsf/eng/02812.html

Return to Figure 9.24

Media Attributions

• Figure 9.24: Attribution information for all included images is in the chapter conclusion.

A firm that is owned by one person.

A legal form of business wherein two or more partners share ownership of a firm.

A legal form of ownership wherein shares of ownership are publicly traded in stock markets, and management is performed by professional executives.

A form of ownership that is granted wherein owners are not personally responsible for debts that the LLC accumulates (as in a corporation) and the LLC can be run in a flexible manner (as in a partnership).

Mastering Strategic Management - 1st Canadian Edition Copyright © 2014 by Janice Edwards is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Resources and Knowledge for the Small Business CEO

5 types of legal forms of business.

One of the things that every entrepreneur struggles with is choosing from the several legal forms of business. Each of these legal forms of business has its own set of advantages.

Read this post to learn more about the five different business structures and their key characteristics. This will help you identify the right fit for your business.

Let’s get started.

Table of Contents

The Five Legal Forms of Business That You Can Choose From

Here are the five basic legal forms of business, also known as business structures , that you can form to get started:

1. Sole Proprietorship

A Sole Proprietorship is a legal form of business or legal structure that is owned and run by a single person referred to as the sole proprietor.

What are the key features of a Sole Proprietorship?

Here is a quick list, for your reference:

• It can have only one owner.
• The financial liabilities of the business fall on the sole proprietor, making them personally responsible for their company.
• All of the firm’s profits and losses go directly to the owner.
• It is fairly easy and comparatively cheaper to start Sole Proprietorships.
• The small business owner has complete control over the business administration.
• The owner can file the tax returns as part of their personal tax returns.
• It is difficult to secure funding for Sole Proprietorships so the owner needs to have enough capital to get the business started.

Overall, it is a good option for you to start a Sole Proprietorship if you have enough capital and want complete business ownership.

2. Partnership

This is one of the legal forms of business that can have more than one owner. If you want to start a business with two or more partners, then this is a good option.

Here are some of the key features of a Partnership firm:

• All corporate profits and losses are shared between the partners as per previously agreed-upon terms.
• Partners share ownership of the firm.
• All of the partners have a say in business decisions and administration.
• The business is considered as a separate entity and its tax returns are filed as such.
• It requires forming a detailed partnership agreement, which the firm’s executives decide, before starting the business.

General Partnership firms do not provide personal liability protection and each partner is responsible for paying off their share of company debts. Use our business formation services to establish a Partnership firm quickly and efficiently.

3. Limited Liability Company (LLC)

This is the most preferred organizational structure, legal form of business, or business structure as it can give you the best of both worlds. It provides limited liability protection while also giving you the flexibility of a Sole Proprietorship or a Partnership.

Here are the key features of an LLC (Limited Liability Company):

• It can have a single member or multiple members.
• These members can be individuals as well as other business entities. However, banks and insurance companies can’t be members of an LLC.
• Members can choose to be active or inactive partners.
• Members are not personally responsible for the company’s financial liabilities and their personal assets are protected.
• LLCs are pass-through entities and can be taxed as a Sole Proprietorship (only a single-member LLC), Partnership (a multi-member LLC), and even a Corporation.

It is slightly more complicated to form an LLC than a Sole Proprietorship but it is still comparatively easier than incorporating a Corporation.

4. C-Corporation

This is one of the legal forms of business where the business entity is taxed separately from the owners.

Here are the key features of a C-Corporation:

• Owners have limited liability
• Double taxation (Corporation and shareholder earnings)
• Easy to raise capital
• Transferable ownership (in the form of shares)

This is one of the preferred legal forms of business for big companies as it protects the personal assets of its owners by separating them from business assets. We can help you form a Corporation to get all of these benefits and reduce risk.

5. S-Corporation

This is a form of a Corporation where the owners choose to be taxed only on their personal incomes, thus avoiding double taxation.

It has most of the features of a C-Corporation and mainly differs in how the business taxes are filed. Find out the requirements of starting an S-Corporation in your state or fill out our S-Corporation registration application to get started.

1. Which is the best among the legal forms of business?

All legal forms of business have their own advantages and disadvantages, and the best is subjective.

However, most new business owners prefer forming an LLC (Limited Liability Company) over other legal forms of business. It is a hybrid between Corporations and Sole Proprietorships/Partnerships and offers the best of these legal forms of business.

2. Which legal forms of business provide the most flexibility?

LLCs are the most flexible legal business structures.

They allow you to choose how you want the company income to be taxed while also providing you with personal liability protection. LLCs can have a single member or multiple members. It is fairly easy to register an LLC.

3. Which are the best states in the U.S. for tax purposes?

Wyoming and South Dakota do not levy any tax and are the most tax-friendly states. By far they are one of the best states to form an LLC .”

4. How do I choose from the basic legal forms of business organization?

That completely depends on your priorities in terms of how you want to be taxed, whether or not you want full control over the company, and if you have enough funds.

Overall, LLCs strike a good balance between Sole Proprietorships and Corporations and are usually the best option for small business owners.

5. Which legal forms of business are the easiest to set up?

A Sole Proprietorship is one of the easiest legal forms of business to set up and get running.

Use our business formation services to register your business regardless of which legal form of business or business structure you choose.

These are five of the most common legal forms of business that you can choose to start your new business. A Corporation is a preferred business form for large companies while most small businesses choose to form a Limited Liability Company (LLC).

Registering a new business involves a lot of steps and can be quite overwhelming for a first-time entrepreneur. We can help you take care of that by completing all of the documentation and legal formalities on your behalf.

Use our services to start your business in a quick and flexible manner.

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Business Ownership Structures & Legal Implications

When forming a business, its legal structure is one of the owner’s most important practical decisions. Each type of structure has its own benefits and considerations that are affected by the business' size, the number of owners and employees, the industry, and other variables. Each state passes its own business formation laws, and not all states allow for every type of business structure. This means that the requirements for forming a particular type of business vary from state to state.

Sole Proprietorships

A sole proprietorship is the simplest kind of business. Most sole proprietorships are small businesses that have one employee — the owner. Forming a sole proprietorship is usually easy. In fact, in many states it requires no special action. Doing freelance or independent work under your own name is usually enough to form a sole proprietorship.

Two major benefits of structuring your business as a sole proprietorship are simplicity of formation and taxes. Since there usually are no formal steps required to form a sole proprietorship, there is no cost involved. Also, owners of sole proprietorships count the business’ income on their personal income tax returns. One drawback is that sole proprietorships do not offer any legal protection to their owners.

Partnerships

When two or more people start a business together, they can form a partnership. There are several types of partnerships, including general partnerships, limited partnerships, and limited liability partnerships. In addition, joint ventures have some aspects of partnerships. The amount of money contributed, control exerted over the business, and legal liability vary depending on which type of partnership is formed.

To form a partnership, most states require partners to register the business with the secretary of state. It is also important for the partners to formalize their relationship in a partnership agreement, which is a contract that addresses the major aspects of the business, including how it will be run, how profits are split, and what to do in the case of dissolution.

Consulting a lawyer experienced in business formation will give a business owner or potential owner a better understanding of each business structure in the context of their unique business situation. Justia offers a lawyer directory to simplify researching, comparing, and contacting attorneys who fit your legal needs.

Corporations

There are generally two types of corporations: C corporations and S corporations. Larger businesses with multiple employees are often structured as C corporations, whereas many smaller businesses choose to organize as S corporations. The primary difference between an S and C corporation is how taxes are paid. C corporations are taxed as independent entities. The income of an S corporation “passes through” to the individual tax returns of its owners. An LLC may choose to treat itself as an S corporation for tax purposes.

Non-Profit Organizations

The basic definition of a non-profit organization is a business that does not pass on excess revenue to owners, shareholders, or other investors. Instead, a non-profit uses this money to further its mission, which includes paying the salary of its owners and other employees.

Many non-profit organizations choose to incorporate to obtain federal and state tax exemptions, grants, and other benefits. One of the most common types of non-profit organizations is a 501(c)(3), named after a section of the IRS code, but there are other types.

Discover answers to frequently asked questions about business operations and formation.

Franchises are not a traditional business structure like the ones described above. A franchise is a business that licenses the name, logo, trade secrets, or other aspects of an existing business. For example, most fast food restaurants are franchises. In many cases, a person starting a franchise forms an LLC, partnership, or S corporation, and that company becomes the entity that pays the larger company for the right to use the name.

Last reviewed October 2023

Small Business Legal Center Contents   

• Small Business Legal Center
• First Steps in Starting a Business & Legal Formation
• Sole Proprietorships Under the Law
• General Partnerships Under the Law
• Limited Partnerships Under the Law
• Limited Liability Partnerships (LLPs) Under the Law
• Limited Liability Companies (LLCs) Under the Law
• Non-Profit Corporations Under the Law
• Franchises Under the Law
• Cooperatives Under the Law
• Benefit Corporations & Hybrid Entities Under the Law
• C Corporations Under the Law
• Close Corporations Under the Law
• Joint Ventures Under the Law
• S Corporations Under the Law
• Hiring and Managing Employees & Relevant Legal Considerations
• Business Management, Growth, and Related Legal Concerns
• Business Disputes & Related Lawsuits
• Social Media Influencer Marketing & Related Legal Issues
• Making a Business Contract
• Commercial Real Estate & the Law
• Small Business Law FAQs
• Find a Business Law Lawyer

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How to write a business plan

This advice from the pros will make the process of writing a business plan easier and less stressful.

Ready to start your business? Plans start at $0 + filing fees.

by   Sandra Beckwith

Sandra Beckwith has been writing for traditional and online publications since she sold her first magazine article wh...

Read more...

Updated on: January 6, 2023 · 4 min read

1. Begin with the easy sections

2. create a target audience persona, 3. get smart about your industry and market, 4. know, understand, and analyze your competition, 5. dig into the numbers.

Writing a business plan can seem intimidating, especially when you don't know how to get started. It helps to know that it doesn't need to be long—we aren't talking about high school term papers here, particularly if it's just for internal purposes. And the writing process is also a lot easier when you know where to find some of the information you need.

Here's advice that will help you write a thorough, accurate document.

The  typical business plan  includes these elements:

• Executive summary
• Company description with the mission statement
• Products and services
• Target audience
• Market analysis
• Competitive analysis
• Operations and management
• Sales and marketing strategy
• Financial plan

You probably know some of this off the top of your head, so warm up by starting with those pieces.

Also known as an "avatar," the process of creating a target audience persona helps give you clarity about who will buy your product or service. It starts with research. This is important because target audience specifics will influence and guide your sales and marketing strategy.

Dave Lavinsky, president of  Growthink , recommends getting demographic information about potential customers by generating reports for competitor website URLs at  SimilarWeb  and  Alexa .

"If you operate a brick-and-mortar business serving local customers, go to the  U.S. Census Quick Facts page  and enter your ZIP code to find the demographic profiles of the areas you are serving," he adds.

Audience Insights data from your Facebook business page will provide valuable intelligence, as will customer insights tools  SparkToro  and  Audiense .

Use the demographic information you find about potential customers at these sites, along with other research such as surveys, one-on-one conversations, and focus groups, to create that single person—your customer persona—that best represents your target customer.

"What's the market value, how does it operate, what are the needs, and who are your direct and indirect competitors? You need to understand the ins and outs of how the market works, and how the profit is made," says Zohar Gilad, CEO and co-founder of  InstantSearch+ .

Start with the local library reference desk, advises Linda Murray Bullard, chief business strategist at  LSMB Business Solutions . "The local Small Business Administration office or small business development center has a wealth of information that can help, too, and some will even do the market analysis for you," she says.

Lavinsky also recommends looking for market information on industry association websites and in research reports available online. In addition, check trade journals as well as the Bureau of Labor Statistics and the Census Bureau.

Your research into competitive products or services and pricing, combined with knowledge of how customers perceive them, will help shape your product and positioning.

Reuben Yonatan, founder and CEO of  GetVoIP , recommends categorizing competitors as primary and secondary. Learn as much as you can about your primary competitors because they often represent your end goal, but don't overlook the others. "With secondary competitors, extract as much insight as possible. For example, try to determine why they are not at the top of the food chain. Could it be their pricing?" he says.

Talk to their vendors and customers, and study their website, marketing materials, and press releases. How are their offerings different from yours? How are they the same? This information will help you explain your differentiation in the business plan.

The primary purpose of the financial plan, says Phil Santoro, co-founder of startup studio  Wilbur Labs , is to document how much money you need to start the business, and how or when the business will generate revenue and profit.

When creating the financial plan, he determines where the company wants to be in three to five years, then builds a roadmap to get there. "Working backwards like this allows you to look at the different workstreams required for each phase of the business," he says. "Most importantly, working backwards lets you create projections based on achievable assumptions. A plan is only as good as the assumptions that go into it."

This is not a situation where you  want to guess . In addition to working with an accountant, base your financial projections on verified data from Dun & Bradstreet Business Ratios reports, says marketing consultant Marsha Kelly of  Best4Businesses.com . "This verifiable information is dependable to make business projections and to assure banker investors of the trustworthiness of the business plan," she says.

Other resources include  LivePlan  and  Bizminer .

Additionally, consider getting help from professionals, especially regarding  regulatory or legal issues  and financial planning. You want to get it right, especially if you will use your business plan to secure bank or investor funding.

After you've written the plan, don't tuck it away. Think of it as an organic document that grows with the business. For this reason, you'll want to update and refine it as you learn and succeed.

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Legal Templates

Home Business Business Plan

Business Plan Templates

Use our template to make an investment-worthy business plan.

Updated December 8, 2023 Written by Sara Hostelley | Reviewed by Brooke Davis

A business plan is a document outlining a company’s operations, strategies, goals, and objectives. It’s crucial to guide you through each stage of starting and growing your business.

Templates (8)

What is a business plan, why is a business plan essential, components of a business plan, how to write a business plan, business plan sample.

Below, you can find free business plan templates for specific business types. You can also find more in-depth information on writing a plan for your business, whether it’s a food truck, restaurant, real estate business, or another entity:

Create a detailed plan that lays out the details of how your business will achieve it's objectives.

Traditional Business Plan

Create a simplified version of a traditional business plan.

One-Page Business Plan

Create a Non-Profit Business Plan and learn how to write one.

Create a Daycare Business Plan and learn how to write one.

Create a Restaurant Business Plan and learn how to write one.

Create a Real Estate Business Plan and learn how to write one.

Real Estate

Create a Food Truck Business Plan and learn how to write one.

A business plan is a document detailing how a business, whether it’s a new or existing company, will achieve its goals and objectives. It guides you through every step of starting and running a company.

A business plan can be the foundation of your business, serving as a written roadmap that covers all aspects of how to structure, run, and grow your business. You can also refer back to it as your business progresses to track its growth and success.

In addition to being a helpful document internally, a business plan is also vital for a company to communicate its success to external parties that may influence its future success.

Consider some of the main reasons why large and small business owners alike use business plans:

1. Use As a Roadmap

A business plan sets specific, measurable, and time-bound goals. Having these goals helps you track progress, evaluate performance, and adjust as necessary.

By laying out goals, you have a clear and attainable plan of action with the ability to see and monitor your progress.

2. Plan Strategies For Potential Challenges

A business plan can help you think objectively about your business’s key elements and inform your decision-making as you move forward.

A detailed plan can provide a semblance of control over a potentially cumbersome process. Formulating a plan can improve your ability to make choices and decisions for yourself and the business. This approach is much better than suddenly making a critical decision without time to evaluate or haphazardly letting others decide for you.

3. Get Funding or Bring on New Business Partners

An accurate business plan is essential whether or not you need to secure a business loan. Investors and lenders often require a business plan before they commit capital. A solid plan demonstrates your commitment, viability, and potential return on investment.

Create a business plan that grabs the attention of potential investors and provides them with enough structure and confidence that they will move forward and grant funding and support to your business.

You can use your business plan to highlight how the proposed business will be successful and profitable.

4. Discover Any Weaknesses

A business plan includes a strengths, weaknesses, opportunities, and threats (SWOT) analysis that helps identify potential risks and challenges. It is essential to allocate resources and demonstrate monthly profit or loss. By recognizing these elements early, you can develop strategies to mitigate or address them.

5. Analyze the Market and Competition

Market research within the plan helps you better understand your target audience, competition, and industry trends. This knowledge is crucial for making informed business decisions.

By learning about your competition, you can help make your goods or services stand out and help validate your business idea.

You should update a business plan as you go, altering your goals as necessary and being mindful of any changes of direction in your business.

A typical business plan includes the following sections:

• Executive Summary
• Management Team
• Products and Services
• Customers and Marketing
• SWOT Analysis

Our business plan template includes all of the above, so you won’t have to worry about missing out on essential sections.

Step 1 – Create an Executive Summary

An executive summary is the first section of a traditional business plan, serving as the first impression of your business. Please give a brief overview of your company, including its mission, key goals, and a snapshot of your financial projections.

You can skip this step if you’re writing a lean business plan for a startup. Instead, replace it with a few sentences outlining the problem your startup aims to solve and the solution you will provide.

Executive Summary Example:

Market research indicates there are a growing number of dog owners in Tallahassee who want to train their animals. Consumer surveys indicate that most consumers don’t have the time or resources to train their animals themselves.

Consumers have also expressed a desire for combined dog walking and training services to help discipline their animals.

Pawsitive Strides Canine Coaching & Walks provides a convenient service for customers with furry friends and disposable incomes.

Tips for Writing an Executive Summary

• Define a problem in your market and state how your business will solve it.
• Limit your executive summary to one page.
• Use a tone appropriate for your audience.

Step 2 – Describe Your Company’s Team

A professional business plan will include a statement about your company’s team and management.

Describe your startup’s legal structure. After that, you can insert a chart to show the hierarchical structure of your company. Show and name your C-suite executives, management team, and key employees. Include short biographies and links to their resumes and LinkedIn profiles to give the reader a complete picture of your staff’s qualifications.

If you have a smaller staff, you can highlight the founder and CEO and your staff members who perform the services or create your business’s products.

Example for Company’s Team Statement:

Jamie Clayton, Founder and CEO

• Board-certified veterinarian.

Pawsitive Strides Canine Coaching & Walks’s dog walkers and trainers

• 14 full-time staff members.
• 26 part-time staff members.
• All staff members have the Certified Professional Dog Trainer-Knowledge and Skills Assessed (CPDT-KSA) credential from the Certification Council for Professional Dog Trainers.

Tips for Writing about Your Company Management and Team

• Include any roles you’d like to hire to grow your company, if applicable.
• Highlight expertise and awards one to show your staff’s capabilities.

Step 3 – Summarize Market Analysis and Potential

Your business plan must also thoroughly analyze your target market and customer base. The goal here is to show that you understand your market and target audience and that there is a viable market for your business.

Market Analysis Example:

Pawsitive Strides Canine Coaching & Walks’s ideal customer is a dog owner between the ages of 25 and 65 with a high disposable income. They’re ideally a working professional or have recently retired from the workplace. They love their dog (or dogs) and want them to be well-behaved and have an outlet for all their energy.

Market research shows that Pawsitive Strides Canine Coaching & Walks has ample opportunities in the Tallahassee area:

• The total revenue for dog walking services in the U.S. increased from $900 million in 2019 to $1.1 billion in 2023.
• Dog ownership has increased by 20% over the last five years.
• Online search volume for “dog walkers in Tallahassee” is up by 10% since last year.
• 19% of Tallahassee’s residents have a household income of $125,000 or more (compared to the average of 5% across the U.S.).

Tips for Writing a Market Analysis

• Use reliable sources for acquiring data.
• Conduct consumer surveys to hear from people in your target area.
• Focus on the demand in your area and the growth potential.
• Include revenue and expense projections based on market data.

Step 4 – Describe Your Product or Service

Describe the products and services you offer. Pinpoint the value they provide to current and future customers and share your plans for research and development.

The main goal of this section is to convince the reader and yourself that your business is viable and that you have enough resources, time, and energy to achieve your goals.

Product Description Example:

Pawsitive Strides Canine Coaching & Walks isn’t an ordinary dog walking service. When a customer signs up for our monthly subscription plan, we have one of our certified dog walkers go to their house 12 times a month on a schedule that works for them.

Our dog walker takes their dog on a 30-minute walk and corrects their behavior. Their dog learns how to walk on a leash calmly and be around cars and people. Not only does the dog get some exercise and fresh air, but they also learn discipline, meaning the customer doesn’t have to worry about training their dog in this sense.

Tips for Writing a Product/Service Description

• Highlight cross-sell and upsell opportunities, if applicable.
• Emphasize what distinguishes you from other companies providing similar services/products.
• Include details for updating your offerings in the future.

Step 5 – Plan Your Marketing Strategy

Discuss the brand vision you want to cultivate, the metrics you’ll track, and the channels you’ll use to reach your target audience. Outlining how you plan to collect and retain customers will help you experience growth in the long term.

Marketing Strategy Example:

Pawsitive Strides Canine Coaching & Walks will focus on social media and direct mail marketing as its two main forms of advertising. We’ll track customer referrals to determine how many current customers are satisfied with our services.

On our social media platforms, including Instagram and Facebook, we’ll track our audience growth rate, bounce rate, and click-through rate.

Tips for Writing a Marketing Strategy

• Add the budget/resources you have, if applicable.
• Create strategies for marketing to different segments within your main target audience.

Step 6 – Conduct SWOT Analysis

Organizations use SWOT analyses to determine how closely a business will adhere to its growth trajectories. This analysis involves looking at a company’s SWOTs, which are:

• Strengths: Strengths are things your company does well. Examples include having a unique selling proposition, standout brandings, or human resources, like your employees and C-class executives.
• Weaknesses:  These barriers prevent your project or company from reaching certain milestones. Examples include financial limitations, a shortage of skilled professionals, and unclear selling propositions.
• Opportunities:  These positive external factors could give you a competitive edge. For instance, if you’re a manufacturer and the federal government cuts tariffs, you can export your products into a new market to boost market share and sales.
• Threats:  These are events, competitors, and situations that pose a risk to your company and the goals you’ve set for it. Typical threats include negative media coverage, changing customer demands, emerging competitors, and new rules and regulations.

SWOT Analysis Example:

• Appeals to people who don’t have the time or resources to train their pets.
• Low startup costs.
• Finding enough certified employees to meet the anticipated demand.
• Dealing with aggressive animals may be challenging for newer employees.

Opportunities

• Offering multiple subscription packages for customers who want more frequent training sessions for their pets.
• BehaviorBuddies is a dog walking service in Bradfordville that may take away customers.

Tips for Writing a SWOT Analysis

• Be honest with your business’s weaknesses and threats.
• Capitalize on opportunities you find through market analysis.

Step 7 – Develop a Strategy for Operations

Your business plan needs to include a thorough operations plan. This section reveals your manufacturing, fulfillment, managing, staffing, hiring strategies, and all the other processes you go through when running your business daily.

Operations Strategy Example:

Jamie Clayton will oversee the hiring of all employees, and the team lead will train all employees for at least one month to ensure they have the knowledge necessary to deal with animals of all temperaments.

The team lead will also organize the dog walking schedule to ensure all team members have enough time to arrive at customers’ houses and complete the dog walking/training sessions thoroughly.

Tips for Writing a Business Strategy

• Consider what your business needs to thrive on a daily basis.
• Account for inventory and supplies, even if your business is service-based.

Step 8 – Compile Your Business Financials

Create financial projections, including income statements, balance sheets, and cash flow statements for the first few years of operation. If you need funding, specify the amount and how you plan to use it.

Financial Statement Example:

Income Statement for the Year Ended December 31, 2023

• Revenue: $150,000
• Cost of Goods Sold: $30,000
• Gross Profit: $120,000
• Operating Expenses: $80,000
• Net Operating Income: $40,000
• Other Income/Expenses: -$2,000
• Net Income: $38,000

Tips for Writing a Financial Section

• Double-check the accuracy of financial information.
• Demonstrate how the proposed funding aligns with your company’s goals.
• Forecast future financial performance.

Step 9 – Explain Your Funding Request

If you’re seeking funding or investment for your business, explain the amount you need and how you intend to use it. Be transparent about the terms you’re offering to investors or lenders.

Funding Request Example:

Pawsitive Strides Canine Coaching & Walks has already hired a team to serve our existing customers. Once we scale to $500,000 in annual revenue over the next two years and at a 10% profit margin, our primary ongoing annual expenses (not including taxes) will total $350,000.

While already profitable, we are requesting $200,000 in the form of a business loan to buy two additional company vehicles. These vehicles will improve our employees’ ability to get to customers’ homes, and the remaining money will go toward maintaining current company vehicles.

Tips for Writing a Funding Request

• Add a timeline so investors know your goals and how you plan to use the money.
• If you seek funding in the form of an exchange for equity, an investor may expect to gain decision-making powers in your company. Plan for this situation accordingly.

Step 10 – Compile an Appendix for Official Documents

Include relevant documents, such as resumes of key team members, legal agreements, market research data, product design mock-ups, and your business’s legal structure documents.

Remember that each business plan is unique, so tailor your content to your venture and audience. Your business plan should effectively communicate your vision, strategy, and financial viability to potential investors, partners, and stakeholders.

Combine the appendix with a table of contents and footnotes section so you can reference it throughout your document.

You can download a free business plan template below in PDF or Word format:

Related Documents

• Business Continuity Plan : Outline how your business will run in the event of a range of disaster scenarios with a business continuity plan.
• One-Page Business Plan : A simplified version of a traditional business plan that outlines the basics of your business.
• LLC Operating Agreement : An internal written document among members of a Limited Liability Company (“LLC”).
• Business Proposal : Use this document to form new relationships with other businesses and organizations.
• Request for Proposal : Download this form to allow you to collect offers from various vendors who can provide goods or services your business needs.
• Legal Resources
• Partner With Us
• Terms of Use
• Privacy Policy
• Do Not Sell My Personal Information

The document above is a sample. Please note that the language you see here may change depending on your answers to the document questionnaire.

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How to Write a Business Plan (Plus Examples & Templates)

May 24, 2021

Have you ever wondered how to write a business plan step by step? Mike Andes, told us: 

This guide will help you write a business plan to impress investors.

Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses.  He knows a thing or two about writing  business plans!

We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!

What Is a Business Plan?

A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including: 

• Finding customers
• Plans for developing a team
•  Competition
• Legal structures
• Key milestones you are pursuing

If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .

Get a Business Idea

Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills. 

Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:

• What am I good at?
• What would I enjoy doing?
• What can I get paid for?”

If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it. 

As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”

If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video

Conduct Market Analysis

Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.

Product and Service Demand

A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.

With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services. 

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

 I ran a quick test of how many people between 18-65  you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

• Other Interests
• Marital Status
• Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,  

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan. 

Each of the following should be a section of your business plan:

• Business Plan Cover Page
• Table of Contents
• Executive Summary
• Company Description
• Description of Products and Services

SWOT Analysis

• Competitor Data
• Competitive Analysis
• Marketing Expenses Strategy 

Pricing Strategy

• Distribution Channel Assessment
• Operational Plan
• Management and Organizational Strategy
• Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go. 

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

• Professionally designed logo
• Company name
• Mission or Vision Statement
• Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a  table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

An executive summary is where your business plan should catch the readers interest.  It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches .  This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

• An introduction to you and your business.
• What your business is about.
• A call to action

Example of an informal executive summary 

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

• Introduction of yourself and company.
• An origin story (Recognition of a problem and how you came to solution)
• An introduction to your products or services.
• Your unique value proposition. Make sure to include intellectual property.
• Where you are in the business life cycle
• Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

• Marketing and sales processes
• Financial statements
• Organizational structure
• Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

• Mission statement
• Philosophy and vision
• Company goals

Target market

• Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements. 

Company Philosophy and Vision

The company philosophy is what drives your company. You’ll normally hear them called core values.  These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity. 

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

•  Prioritize communication.
•  Never stop learning.
•  Be transparent.
•  Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team  understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources. 

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

• What is the industry outlook long-term and short-term?
• How will your business take advantage of projected industry changes and trends?
• What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

• Trade Associations
• Federal Reserve
• Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

• Sole proprietorships
• Limited Liability Companies (LLC)

Partnerships

Corporations.

• Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a  Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

• Unique features that differentiate your business products from competitors
• Intellectual property
• Your supply chain
• Cost and pricing structure 

Questions to answer about your products and services

Mike gave us a list  of the most important questions to answer about your product and services:

• How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
• How do you let them know they need a product?
• How do you communicate the message?
• How will you do transactions?
• How much will you be selling it for?
• How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer.  It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

• Adding offerings that fit with your current small business
• Increase sales to current customers
• Reducing costs through bulk ordering
• Finding ways to reduce inventory
•  And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing. 

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market .  The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

• Online: Facebook and Google are the big names to work with here.
• Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
• Radio : iHeartMedia is one of the best ways to advertise on the radio
• Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
• Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

• Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
• Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
• Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
• Freemium services –  Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies  would need to cover aspects such as:

• Suppliers for lawn care equipment and tools
• Any chemicals or treatments needed
• Repair parts for sprinkler systems
• Vehicles to transport equipment and employees
• Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

• Raw materials
• Shipping of raw materials
• Converting of raw materials to thread
• Shipping thread to produce garments
• Garment producer
• Shipping to company
• Company storage
• Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers.  The business plan should provide an overview of  how the team will manage the following aspects:

Quality Control

• Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

• International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
• AICPA – Standard defined for accounting.
• The Joint Commission – Healthcare
• ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

• The size of your location
• The type of building (retail, industrial, commercial, etc.)
• Zoning restrictions – Urban Wire has a good map on how zoning works in each state
• Accessibility – Does it meet ADA requirements?
• Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
• Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

• Any licenses and/or permits that are needed and whether you’ve obtained them
• Any trademarks, copyrights, or patents that you have or are in the process of applying for
• The insurance coverage your business requires and how much it costs
• Any environmental, health, or workplace regulations affecting your business
• Any special regulations affecting your industry
• Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

• What is the current leadership structure and what will it look like in the future?
• What types of employees will you have? Are there any licensing or educational requirements?
• How many employees will you need?
• Will you ever hire freelancers or independent contractors?
• What is each position’s job description?
• What is the pay structure (hourly, salaried, base plus commission, etc.)?
• How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements 

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

• Higher Revenue if expanding business
• Lower Cost of Goods Sold if purchasing inventory with bulk discounts
• Adding interest if utilizing financing (not equity deal)
• Changes in expenses
• Addition of financing information to the cash flow statement
• Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data,  you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

• Bootstrapping – Using your savings without external funding.
• Taking out debt – loans, credit cards
• Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
• Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

• How much to get started?
• What is the minimum viable product and how soon can you make money?
• How will the money be spent?

Mike emphasized two aspects that should be included in every plan, 

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline. 

• Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

• Wise Plans –  Shares a lot of information on starting businesses and is a business plan writing company.
• Optimus Business Plans –  Another business plan writing company.
• Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

• The definition of a business plan
• Coming up with a business idea
• Performing market research
• The critical components of a business plan
• An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

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Brandon Boushy

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How to Resell Shoes (And Make $350K/Month)

Get to Know the Sneaker Resale Market

Where to get cheap sneakers to resell, how to know if shoes are fake, what is the sneaker resale value.

• How Much to Pay For Used Shoes

Step 2. How to Clean Shoes

Step 3: photograph your sneakers, step 4. where can i sell shoes, step 5. shipping services are crucial, how to grow a sneaker flipping company, get started selling high quality sneakers.

• Retailers and Ecommerce Stores: A sneaker business using this model will buy shoes in bulk and sell them in their stores.
• Used Sneaker Resellers: These companies focus on used rare sneakers that they can cheaply buy and sell for more on the sneaker resale market.

How Much Money Do I Need to Start Reselling Sneakers?

What Are the Best Shoes to Resell?

• Limited Edition Sneakers
• Nike Air Jordan
• Original Air Jordans
• Yeezy’s (Kanye West Shoes)
• Nike Air Mag
• Hey Dude Shoes
• Golden Goose Shoes
• Mephisto Shoes

What Are the Most Expensive Shoes in the World?

About sneak city: from $50 to $350k/month selling sneakers, how to start reselling shoes.

• Buying Shoes
• Repairing and Cleaning Shoes
• Photographing Sneakers
• Adding Products to Instagram And Website Through Automation

Step 1. How to Buy Shoes for Resale

• Where to buy shoes
• How to tell if shoes are fake
• How much to price used shoes
• How much to pay for used sneakers

• Wholesalers/Distributors : You can buy new Nike shoes and other brands that have limited releases from wholesalers and distributors. Flipping items this way creates profit from the difference between the wholesale price and the manufacturer’s suggested retail price (MSRP).
• Reselling Apps : You can find shoes on online services like Offerup, eBay, and Facebook Marketplace. You’ll be responsible for meeting the person, assessing the shoes’ value, identifying fake ones, and negotiating price, 
• Thrift Stores : Many people get into making money reselling shoes by starting at thrift stores.
• Facebook Groups : There are multiple sneaker reselling Facebook groups with more than 1,000 people in them. You’ll be able to find some there. You can check for ones in your area as well by adding your city to the search.
• Sneaker Con : Many locations have shoe conferences and trade shows where sneaker reselling occurs. Find niche market conferences .
• Nike does not use stitch guides. If you can see the holes of a stitch guide under a black light, the shoes are fake Nikes.
• Check for a chemical smell. If it smells like chemicals, they are fake. If it smells like dirty feet, it’s harder to tell.
• Check the box. If you know what a Nike box looks like, a fake box will often be “too bright.”
• Shoes are too soft. Fake Nikes don’t use real leather, but instead use low grade materials.

How Much to Pay for Used Shoes 

• How to clean leather shoes
• Clean white shoes
• How to clean suede shoes
• How to remove odor from shoes

• Amazon : Main image should be jpeg, png, tiff, or gif with a 1600 pixel long side. The product should fill 85% of the image and the file name should be identical to the title of the listing. Learn more .
• StockX : Reselling sneakers on StockX does not require pictures because they already have the pictures, and they only allow sneaker reselling of a brand new pair. You’ll have to send the shoes to StockX for them to inspect them before you get paid.
• GOAT : Sneaker reselling on GOAT requires pictures if you have less than a 100% seller rating, the pair sold is used, or the new shoes have defects. The photos will be rejected if you can’t see both shoes clearly.
• Facebook, Instagram, Pinterest, and other social media
• Wholesale Channels

• The importance of a job when starting out
• How to set Up a sneaker store 
• How to grow the business
• How to increase your social media following

Start Sneaker Reselling as an Employee

How to Set Up Your Sneaker Reseller Locations

• Choose a location.
• Buy security cameras and a roll-down gate, and consider hiring an overnight security guard.
• Separate shoes between one-offs, bulk shoes, and high-value shoes.  
• Keep one-offs on one side, bulk shoes on the other side, and high-value shoes behind the counter.
• Wrap the high-value sneakers to keep them in good condition. 
• Keep each shoe brand together and sort them by size with the largest size at the top and the lowest size at the bottom. 

Importance of Growth

Social media for sneaker resellers.

Frequently Asked Questions About Selling Shoes

What is the biggest expense for shoe resellers.

How to Sell on Stock X

• Sign up for StockX
• Select a payout method and currency 
• Create a listing 
• Print a shipping label
• Ship shoes to StockX within two business days
• StockX verifies your shoes

How to Sell Shoes on GOAT

• Apply to sell on GOAT (They don’t give a timeline for approval because they only allow enough sellers to verify all transactions.)
• Wait for approval
• List items using SKU
• Take pictures of the shoes
• GOAT inspects shoes

How to Run a Successful Small Business (2024)

Why Do Businesses Fail?

• Poor financial decisions
• Failure to grow sales
• Inability to manage inventory and growth
• Lack of Experience

How to Run a Business Well

#1. use a business plan.

• Purpose of the company
• Business goals
• Mission statement and values
• Industry outlook including major and local competitors
• Identify the target audience
• Identify ways to reach your ideal customers
• Identify the customer acquisition costs
• Marketing plan 
• Financial projections for one year, three years, five years, and ten years
• Funding needed and how the company will get it
• Necessary roles
• Employee benefits
• How to build company culture

#2. Use Profit Goals as Benchmarks for Success

• Look up the net income ratio for your industry on NYUs Margins by Sectors chart.
• Divide your profit target by the net income ratio.
• That’s how much revenue you’ll need unless you can figure out ways to get a higher profit margin.

#3. Mission Statement

#5. key performance indicators (kpis).

#6. Show an Interest in Your Customers’ Problems (and a Desire to Solve Them)

#7. providing a reliable service is crucial, #8. deliver more than is promised to every customer.

• Providing worst-case time and price estimates and delivering for less.
• Throw in a small gift like a sticker, a coupon, or pieces of candy.
• Provide free bread or chips & salsa at restaurants.
• Fix something small that you can do quickly without charging.

#9. Reward Customer Loyalty

#10. handle customer complaints immediately.

• Hear them out.
• Apologize for the inconvenience.
• Ask what you can do to make it right.
• Do what they ask (within reason).

#11. Operate Lean

• Limiting the amount of inventory and equipment you buy to what is currently needed
• Finding ways to remove waste
• Focusing on continuous improvement
• Making everything easier for employees and the business owner

#12. Avoid Unnecessary Loans 

#13. manage your margins.

#14. Cut Underperforming Lines

#15. outsource as many functions as possible.

• Bookkeeping
• Administrative work

#16. Offer Industry-Leading Pay and Benefits

#17. hire passionate employees , #18. maintain a marketing budget.

#19. Hire an Agency 

• High-quality content marketing specialists.
• Social media management specialists.
• Graphic designers create content such as infographics, videos, and memes.
• People who specialize in optimizing search engines.
• Paid ads experts.
• Google My Business Experts.

#20. A Successful Business Tells a Story

#21. stop wasting time and money on marketing that doesn’t work.

Closing Thoughts on How to Run a Business 

Standard Operating Procedures (SOP): The Complete Guide

Why do some companies scale while others grow, burn out, and collapse? Why do some small business owners barely work and make millions, while others become a slave to their business? 

Over the last two years, we have gotten inside looks into some amazing businesses, and the owners all share similar insights. Their secret? You need standard operating procedures.

Remarkably, the largest companies in the world make up to $2 million per employee (excluding the energy industry) while solo entrepreneurs make an average of $50k per year . SOPs, or standard operating procedures, are the basis for these gains because they are the stepping stone to automating a business.

[su_note note_color="#dbeafc"]

We’ll look at how to implement standard operating procedures to help your company run more smoothly. We’ll also provide SOP templates and examples to get you started. Click on a link below to jump ahead to the part that interests you.

Industries That Use Standard Operating Procedures

• Why are SOPs Important?

Standard Operating Procedure (SOP) Templates

5 elements of sops, step 1. identify pain points, step 2. establish solution, step 3. implement a solution, step 4. write the sop document, step 5. implement the sop, step 6. training employees, step 7. refine and update.

• What are the three types of SOP format?
• What is a Standard Operating Procedure (SOP) Plan?

Sample Standard Operating Procedure Checklist

Sop frequently asked questions, what are sops (standard operating procedures) in business.

A standard operating procedure (SOP) defines the step-by-step process to complete a routine task. SOPs are created to help companies:

• Perform more effectively
• Maintain quality
• Maintain consistency
• Reduce rework
• Comply with regulations
• Delegate tasks

Even small businesses and startups benefit from SOPs. For example, entrepreneur Christopher Mondragon told us:

[su_quote]Exceptional customer service will help cleaning companies start making money in days. Two things I do that others don’t is my phone support is available from 7 a.m. -11 p.m., seven days a week. I also have an online system where people can go online, put in their information, and book it without talking to anyone. Customers love it![/su_quote]

These are the kind of SOPs Chris used to grow his cleaning business to $1.5 million in record time. Would you like to achieve more in your business? 

Find out how Chris did it below.

[su_youtube url="https://youtu.be/d4Iip7BHXwg"]

Then sign up for our 7-figure cleaning blueprint where we provide all the tools Chris uses to succeed.

If cleaning doesn’t sound like the right business for you, get ready to dig deeper into what makes a good standard operating procedure.

Every industry has standard operating procedures. Some industries have more government regulation and therefore more stringent SOP documents. Some of the most regulated industries include:

• Manufacturing 
• Transportation
• Health care
• Financial institutions
• Energy production
• Professional services
• Business administration services

In fact, there are over three million regulations governing businesses in the United States.

I can’t imagine running a business that has employees without a clearly defined SOP document. We have dozens of them just to get this blog out to you. We have a keyword research SOP, a blog writing SOP, an editing SOP, a graphic design SOP, a WordPress SOP, not to mention all the accounting, payroll, and other SOP documents that businesses like ours need to follow.

Why Are SOPs Important?

Standard operating procedures are important because they:

• Reduce training time
• Increase quality 
• Improve brand loyalty
• Reduce regulatory penalties
• Prevent knowledge loss

Our mission at UpFlip is to provide the best tools to help you succeed in business. That’s why we've created a template for SOP creation and other helpful resources. Check out some of the standard operating procedure documents we’ve created for you:

• Standard Operating Procedure pdf
• Step-by-Step Standard Operating Procedure template word
• Stample Standard Operating Procedure Checklist for Hiring and Onboarding
• Sample SOP Document

A standard operating procedure (SOP) should include at a bare minimum:

• Roles and Responsibilities
• Quality Requirements

If you want a more formal SOP document, you might also want to include a header, scope, appendix, revision history, and signatures.

How to Create SOPs

Creating Standard operating procedures follows a simple process:

• Identify Pain Points
• Establish Solution
• Implement Solution
• Write the SOP Document
• Implement SOP
• Train Employees
• Refine and Update

Entrepreneur Adam Hill also uses SOPs in his vending machine business. He uses them for standardizing machines, determining his route, and deciding how much to pay for a vending route. Check out our interview with him below.

You can also pre-enroll for our free vending machine training course .

Let’s look at each step in the process so you can start creating your own effective SOPs.

Pain points are routine tasks that impact your company on a regular basis. Your pain points may be challenges like:

• Training new employees to do a specific job
• Complying with industry regulations
• Reducing the time a business process consumes
• Improving quality control
• Reviewing employee performance

Make sure to identify why these are pain points, how much time or money they consume, and what solutions you could use to solve them. This step will be the basis for the purpose section for your SOP forms when you create them. 

Next, we’ll provide an example of a pain point.

SOP Example Pain Point:

We’re going to provide standard operating procedure examples throughout the article.

Given one of the main pain points companies have today is the ability to find employees, I’m going to tackle this concern in many of the SOP examples. You might describe the pain point in one of the following manners:

• Hiring new employees costs the company $10,000 in lost productivity every time we hire. The goal of this SOP is to improve the company’s retention of employees.
• Our business is growing so fast that we can’t hire enough employees. We aim to attract more candidates so we can fill positions faster.

Once you’ve identified a problem, you’ll want to identify the solution.

Business processes will vary from company to company, but you want to consider solutions that solve the problem as easily as possible. Using the hiring example, some solutions might include:

• Adopt an SOP to offer current employees up to 5% more pay than competing job offers to reduce turnover.
• Increase employee referral bonuses.
• Increase pay packages for new hires.
• Partner with a staffing agency to offer temp-to-hire positions.
• Run paid ads for job openings.
• Include salaries in job descriptions.
• Remove or reduce educational or experience requirements from job descriptions.
• Do keyword research for job descriptions.

Numerous solutions can be implemented to solve any problem with business processes. Hopefully, you’re starting to get some ideas about what standard operating procedure we’re going to create to solve the problem of not finding enough employees.

Next, you’ll want to implement the solution to your problem. When you’re in the process of SOP creation, you may not get it right the first time, but make sure to write step-by-step instructions of what you did. This will be the basis for the SOP format. 

Many of the suggestions to solve employers’ hiring problems employers centered around the job description, which means you might want to adopt standard operating procedures that work like this:

• Perform keyword research for job descriptions.
• Analyze pay for a position on the local level and set your salaries on the high end. (Yes, I know it costs more, but better pay means better candidates and happier employees. If the pay is higher than that of current employees, give your entire team a raise so they don’t get upset.)
• Write the job description. Make sure to include the keywords and salary information. 
• Reduce or remove educational or experience requirements from existing job descriptions.
• Share the posting with employees. Remind them about your referral program. Add a perk and ask them to share.
• Share the posting on job boards. You don’t have to do paid promotion at first, but it might help if you need an employee fast.
• Contact a staffing agency . Discuss your needs and budget with them.
• Run paid ads. If the above steps haven’t been successful, paying for preferential treatment in the job listings is worthwhile.

Now that you have a process, you’ll want to write the SOP document. You want to make it foolproof. Personally, I like to give the document to someone who has no understanding of the subject and ask them to follow the directions in the standard operating procedure. 

Let’s look at how to write SOPs.

How to Write a Standard Operating Procedure

Writing SOPs shouldn’t be difficult. The point is to make them easy to follow. You’ll want to:

• Consider your target audience
• Create a cover page 

Add a Table of Contents

Include the purpose .

• Include Roles and Responsibilities
• Include Quality Requirements
• Write the Standard Operating Procedure (SOP)

Provide References

• Include the Revision History
• Include Document Authorization

Consider Your Target Audience 

Before you begin developing SOPs, you should identify the relevant employees, their prior knowledge, and the SOP format most likely to communicate the SOPs properly. Do they need technical SOPs, step-by-step instructions, or hierarchical SOPs? 

Make sure to write in an active voice and use language employees understand. Once you’ve considered these factors, you can begin writing.

Create a Cover Page 

The first page you’ll create is a cover page. It should be obvious what the standard operating procedure is about. The best way to do that is to create a title page with the:

• Name of the company
• Name of the standard operating procedure
• Unique SOP identification number 
• Most recent revision date

We'll provide you with an SOP cover page template. Get your copy and more helpful documents in our free SOP template download below.

If your standard operating procedures don’t fit on a single page, include a table of contents. This is especially true if you have a three-inch-thick notebook with all the standard operating procedures. No one wants to read an entire rule book to find a single policy.

The purpose or scope tells people what the SOP is about. You should have already defined this in the previous steps. Now it’s just a matter of communicating what the SOP covers, what it doesn’t cover, and why employees perform the new SOP as directed. 

If you provide digital (not printed) standard operating procedures, provide links to other SOPs mentioned in the purpose.

Roles and Responsibilities 

You’ll want to define who will implement the standard operating procedure, who will check the procedure, and anyone who may need to be aware of the SOP.

Quality Requirements 

Depending on the standard operating procedure, you may have quality control measures in place to make sure you achieve a positive outcome. 

For instance, a t-shirt design SOP might specify that an acceptable design is only 1/16” off-center and that the measurements are taken by a machine. You might also want a human to check every 10 pieces to verify there is no equipment failure.

Write the Standard Operating Procedure 

SOP writing should be as concise as possible and should include images for a better understanding of the intent. Make sure to give examples of the key steps. Digital SOPs can have videos so people can watch the SOP in action.

If there are additional resources that a team member needs to understand, make sure to include them in the resources. This might include customer complaints, organizational knowledge, internal processes, relevant laws, and more.

Include Revision History

As you grow, your standard operating procedure will evolve to be more effective. You’ll want to document changes. This can be helpful for helping employees understand how the SOP format has changed over time and why.

Document Who Authorized The SOP

Large organizations might need authorizations from specific people before they implement standard operating procedures. Make sure to include a space for these. 

At this point, you’ve defined the SOP and written out the documentation, but you still need to implement it. Implementation could mean:

• Adopting and integrating software into your business
• Buying new tools or equipment (This is common in fields that require personal protective equipment.)
• Training employees

During this stage, your main goal is preparing your business to implement clearly defined SOPs. If your new SOP impacts other SOPs, edit them as well. For instance, new compliance standards would impact both the onboarding process and ongoing employee training SOPs.

Creating SOP templates for your employees to work with can help you achieve more with fewer resources, but you’ll need to train your employees on the new SOP to reach maximum efficiency. Common ways of training employees on the company policies include:

• Providing written SOPs upon hire.
• Top employees training new employees.
• Sending an email about policy changes.
• Having a team meeting or training. These can be virtual or in-person, but allowing employees to perform the step-by-step SOP to see it in action normally works best. It helps them see the SOP’s impact on their workflow and provides useful feedback.

No matter how effective SOP writing is, you’ll always find better ways to complete a process as technology changes, your skill sets increase, and your business grows. 

After you create standard operating procedures, make sure to go back to them occasionally and make sure that they still adhere to regulatory compliance and best practices.

What Are the Three Types of SOP Format?

A standard operating procedure will normally use one of three SOP formats:

• Step-by-step SOP
• Hierarchical SOP

Flow Chart SOP

Let’s look at each SOP format to understand how to create standard operating procedure documents.

Step-by-Step SOP

A step-by-step SOP shows how to complete a task by completing a series of steps from a sequentially ordered list. How-to guides and recipes are good examples, but there are many other uses as well.

In fact, every blog we write on how to start a business follows a standard operating procedure (SOP) template. We just alter them based on the requirements to start each business.

These SOPs follow the sequence:

These are the most common SOPs and are sometimes referred to as step-by-step instructions or workflows. These can be automated in many scenarios to create a quality output faster.

Hierarchical Format SOP

When written instructions would be too complex for employees to follow, you may need to break them down into a hierarchical SOP where the knowledge for one part of the task is covered in one SOP document, and the next part of the process is separate. 

For example, hiring employees is a huge task. If you try to include the entire process in one step-by-step guide, it will be overwhelmingly long.

Developing standard operating procedures using the hierarchical format might follow an SOP template that looks like this:

• SOP: Hiring Employees (SOP1) a. Notifying HR of Hiring Needs (link to SOP2)         i.   Submit termination paperwork         ii.  Submit form to create job description         iii. Other associated tasks (List all) b. Researching Hiring Market (Link to SOP3) c. Creating Job Descriptions (Link to SOP4) d. Sharing Job Descriptions (Link to SOP5) e. Interviewing Applicants (Link to SOP6) f. Confirming New Hire Job Acceptance (Link to SOP7) g. Preparing New Hire Paperwork (Link to SOP8) h. Procuring Tools (Link to SOP9) I. Granting Software Access (Link to SOP10) j. Setting Up Workspace (Link to SOP11) k. First Day Tasks (Link to SOP12) l. Orientation Tasks (Link to SOP13) m. Probationary Meetings (Link to SOP14)

Each of the letters in this list would serve a specific purpose that has hierarchical steps. The full process to complete the fourteen tasks listed could require hundreds or thousands of steps, and the people involved could span across different teams of employees. 

When processes depend on changing variables. use flow charts like the one below. To create an SOP template for a flow chart, you need to determine what the relevant decisions are. 

As an example, we created this flow chart to help you decide what type of standard operating procedure templates to use. There are 3 relevant decisions that impact which template you should create:

• Is there a process to follow?
• Is the process difficult to follow?
• Do decisions change the process?

Based on the answers, you get a different result that shows you how to make SOPs easier to follow. Using this strategy maintains organizational knowledge and can be the basis for an SOP plan, which we’ll discuss next.

What Is a Standard Operating Procedure (SOP) Plan?

An SOP plan is a document you may need to create when you grow from being a single person running a small business to hiring employees.

You have certain ways you like things done, and the best way to get employees to follow your hierarchical steps is to create an SOP for anything that is important to you. You’ll then train the employees using the SOP and provide them documents and work tools that make it easier to follow the SOP.

You might include the following elements in an SOP plan:

• What SOPs you need
• Templates for standard operating procedures
• SOP naming conventions
• When and how to edit each standard operating procedures template

We’ve created a sample standard operating procedure checklist for hiring and onboarding employees. Download the checklist along with the standard operating procedure guidelines and other templates we created to help you get started with SOPs.

What is an SOP? 

The SOP meaning in business stands for standard operating procedure. The definition of standard operating procedure is a written process that is followed every time the process needs to be repeated. 

Why SOPS Are Important

SOPs are important because the majority of tasks are repeated consistently during the course of business. Documenting and following standard operating procedures helps businesses:

• Reduce decision making
• Increase efficiency
• Increase quality
• Comply with government regulations
• Train new employees
• Maintain the body of knowledge 

Technical vs. Management SOPs

Technical SOPs explain how to perform and complete tasks while management SOPs explain how to create, update, distribute, and oversee other SOPs. As an example, Technical SOPs are used for routine tasks like payroll, work orders, and inspections, while management SOPs are used to maintain consistency in the SOP full form creation.

How Businesses Use SOPs to Improve Efficiency 

Every time you make a decision, you have to think about the factors that go into the decision. When businesses create standard operating procedures, they eliminate the decision-making process for that procedure, which increases efficiency.

This also makes training easier because everyone has the same method of performing a task. This standardization also decreases defects and errors, which leads to greater efficiency. 

What is a Standard Operating Procedures Manual?

A standard operating procedure manual is a list of all standard operating procedures gathered in one place.

Today, an SOP manual is best kept in the cloud where all employees can access it, but for brick and mortar businesses, the standard operating guidelines may also need to be printed and stored in a readily accessible location.

What Are SOPs Doing for Your Business?

As you can see, there are many benefits to implementing SOPs in a business. No matter the size of your company, you can benefit from defining your standard operating procedures. 

What are some ways that you have defined your business operations?

• Complying with Government Regulations
• Automating Processes
• Training Employees
• Other - Tell us in the comments!

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My Name is PRETTY NGOMANE. A south African female. Aspiring to do farming. And finding a home away from home for the differently abled persons in their daily needs.

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What is a Form of Ownership Business Plan?

A single person owns and runs a sole proprietorship, and this sole proprietor has the rights to profits and assets of the business. 3 min read updated on February 01, 2023

Many small businesses begin as sole proprietorships. A single person owns and runs a sole proprietorship, and this sole proprietor has the rights to profits and assets of the business. Debts and liabilities are also the responsibility of the owner. Sole proprietorships are a great way to begin a business since they require very little money.

When you own a business , you are only taxed once. A sole proprietorship is not taxed as much as other business types. One person is the owner, so disagreements with other owners don't happen. It's also easy to end this type of business.

Sole Proprietorship Advantages

There are many advantages to having a sole proprietorship. For example:

• This type of business costs the least and is simple to begin.
• The sole proprietor has total control over the business and can make decisions that are best for the enterprise.
• The sole proprietor owns all the income from the business and can reinvest or retain it.
• The money that the business makes goes directly to the owner's personal tax return.
• It's easy to end the business.

Sole Proprietorship Disadvantages

Disadvantages to having a sole proprietorship include:

• Any debts that form are the responsibility of the sole proprietor. All personal and business assets are at risk.
• They can only use money from consumer loans or personal funds to advance the business.
• It might be difficult to attract high-quality employees.
• Not all employee benefits are available in a sole proprietorship.

Sole Proprietorship tax forms are:

• Schedule SE: Self-employment tax
• Form 1040: Individual Income Tax Return
• Employment Tax Forms
• Schedule C: Profit or Loss from Business (also called Schedule C-EZ)
• Form 8829: Expenses for Business Use of Your Home
• Form 1040-ES: Estimated Tax for Individuals
• Form 4562: Depreciation and Amortization

To run a business of this type takes a special kind of person who can handle all the ins and outs of owning a business . The sole proprietor is completely responsible for all business decisions and raising money. Certain employee benefits cannot be completely deducted from the business's income. Sole proprietors need to be aware that some of the costs can be partially deducted later on taxes as an adjustment.

Partnerships

Another form of business ownership is a partnership. Two or more people can share the ownership of a business in a partnership. The law does not set apart partners and owners, just like proprietorships. With a partnership, there should be some kind of agreement so that both parties know what they are responsible for, as well as what each gets if the business were to end. The legal agreement should include who will make decisions, how profits will be distributed, how disagreements will be handled, how partners in the future will enter the business, and what the process is for partners being bought out.

Partners need to figure out how much each will spend on the business and the amount of time they will spend on the business. Partnerships can be formed with other individuals and businesses. It does not cost much to form a partnership, although tax and liability rules are different for partnerships. Think very carefully who to partner up with, since the entire company can be jeopardized if one partner makes a legal or financial mistake.

Partnership Advantages

Partnership advantages include:

• Partnerships are simple to start but take time to properly grow.
• The likelihood of successfully raising funds increases with partners.
• The money made from the business goes directly to the personal tax returns of all partners.
• Potential employees might be more interested in the business if they know they can become a partner in the future.
• Partners who have compatible skills can help a business grow.

Partnership Disadvantages

Partnership disadvantages include:

• Partners are responsible for each other.
• Partners must equally share all profits.
• Disagreements are likely because decisions are made together.
• Employee benefits are not all deductible on business-related tax returns
• The partnership is not guaranteed to last due to one of the partners leaving or dying.

There are several kinds of partnerships that can be chosen. One is a general partnership where everything is divided, which includes responsibility of management and reliability and loss or profit shared, unless otherwise noted in the initial agreement.

If you need help with a form of ownership business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• What Is the Most Common Type of Partnership?
• Difference Between Sole Proprietorship and Partnership
• Advantages and Disadvantages of Sole Proprietorship
• What is a Sole Proprietorship
• Sole Proprietorship vs Partnership
• Partnership Advantages and Disadvantages
• Define the Term Business Ownership: What You Need to Know
• Can Sole Proprietorship Have 2 Owners: What You Need to Know
• Proprietor Check
• Different Types of Companies and Their Advantages

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How To Write the Company Summary in a Business Plan

Company Overviews Show How the Pieces of a Business Work

What To Include in Your Company Summary

Getting started on your company summary, examples of a company summary, tips for writing a company summary, frequently asked questions (faqs).

Image by Theresa Chiechi © The Balance 2019

The company summary in a business plan —also known as the company description or overview—is a high-level look at what you are as a company and how all the elements of the business fit together.

An effective company summary should give readers, such as potential investors, a quick and easy way to understand your business, its products and services, its mission and goals, how it meets the needs of its target market, and how it stands out from competitors.

Before you begin writing your company summary, remember to stick to the big picture. Other sections of your business plan will provide the specific details of your business. The summary synthesizes all of that information into one page.

Key Takeaways

• The company summary in a business plan provides an overview containing a description of your company at a high level.
• A company summary might include your mission statement, goals, target market, products, and services, as well as how it stands out from competitors.
• The company summary can also be customized for a specific objective or audience, such as to secure financing from investors or banks.

The company summary section of a business plan should include:

• Business name
• Legal structure (i.e., sole proprietorship ,  LLC ,  S Corporation , or  partnership )
• Management team
• Mission statement
• Company history (when it started and important milestones)
• Description of products and services and how they meet the needs of the marketplace
• Target market (who will buy your product or services)
• Competitive advantage (what sets you apart in the marketplace to allow you to succeed)
• Objectives and goals (plans for growth)

The U.S. Small Business Administration (SBA) website has a lot of information available if you've never written a business plan before. The SBA provides examples of business plans for different types of companies.

Before you begin, you should decide whether you want to go with a traditional business plan format or a lean startup format. The traditional format is appropriate if you want to have a comprehensive, detail-oriented plan or if you are requesting financing. The lean startup format is best for those who have a relatively simple business and want to start it quickly or as a starting point for those who plan to refine and change the plan regularly.

No matter which type of business plan you choose, you'll need to include a company summary.

Although there are many blueprints for writing a company summary, below are a couple of examples to get you started.

Consulting Firm

You can opt for a concise opening paragraph such as this one:

XYZ Consulting is a new company that provides expertise in search marketing solutions for businesses worldwide, including website promotion, online advertising, and search engine optimization techniques to improve its clients' positioning in search engines. We cater to the higher education market, including colleges, universities, and professional educational institutions.

Several elements of the company summary are covered here, including the name (XYZ Consulting), history (new company), description of services (web promotion, SEO, advertising) and why it's needed (improve positioning in search engines), and the target market (higher education).

Starbucks Coffee Company Overview

Starbucks breaks down the company overview on their website into the following sections:

"Our Heritage"

Here the company describes how long the company has been in business, citing its roots, the founder, Howard Schultz, and how he was inspired to open the first Starbucks in Seattle after visiting Italy. It briefly mentions the growth of millions of customers and how the company's heritage remains important to its long-term success.

"Coffee & Craft"

The overview describes the high-quality products and services being offered and why they stand out from the competition by describing the detailed process of choosing and growing coffee beans. You'll notice they don't suggest their product is a low-cost product but instead provide a high level of "experiences to savor."

"Our Partners"

Starbucks describes its employees as partners that work together in an inclusive manner to achieve success. It highlights how they are at the center of the experience.

"Pursuit of Doing Good"

The company describes its values and how it gives back to the community.

Tesla Inc. Business Overview

Below are excerpts of the business overview pages from the annual 10-K filing on Dec. 31, 2021, for Tesla Inc.

"We design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer services related to our products. We generally sell our products directly to customers, including through our website and retail locations.

We also continue to grow our customer-facing infrastructure through a global network of vehicle service centers, mobile service technicians, body shops, supercharger stations and destination chargers to accelerate the widespread adoption of our products.

We emphasize performance, attractive styling and the safety of our users and workforce in the design and manufacture of our products and are continuing to develop full self-driving technology for improved safety.

Our mission to accelerate the world’s transition to sustainable energy, engineering expertise, vertically integrated business model and focus on user experience differentiate us from other companies."

Competition

Tesla highlights the competitive automotive market and how the company differentiates itself from the larger, more established competitors.

"The worldwide automotive market is highly competitive and we expect it will become even more competitive in the future as we introduce additional vehicles in a broader cross-section of the passenger and commercial vehicle market and expand our vehicles’ capabilities. We believe that our vehicles compete in the market both based on their traditional segment classification as well as based on their propulsion technology.

Competing products typically include internal combustion vehicles from more established automobile manufacturers; however, many established and new automobile manufacturers have entered or have announced plans to enter the market for electric and other alternative fuel vehicles."

Intellectual Property

The company highlights its intellectual property, including trademarks and patents.

"We place a strong emphasis on our innovative approach and proprietary designs which bring intrinsic value and uniqueness to our product portfolio. As part of our business, we seek to protect the underlying intellectual property rights of these innovations and designs such as with respect to patents, trademarks, copyrights, trade secrets and other measures, including through employee and third-party nondisclosure agreements and other contractual arrangements."

Mission Statement

The company highlights its mission statement and its sustainability goals using environmental, social, and governance (ESG) and human capital resources.

"The very purpose of Tesla's existence is to accelerate the world's transition to sustainable energy. We believe the world cannot reduce carbon emissions without addressing both energy generation and consumption, and we are designing and manufacturing a complete energy and transportation ecosystem to achieve this goal. As we expand, we are building each new factory to be more efficient and sustainably designed than the previous one, including with respect to waste reduction and water usage, and we are focused on reducing the carbon footprint of our supply chain."

There are other items you can include in your company summary to expand on the areas that you'd like people to focus on, depending on your objective.

You might provide more information about the company's location, legal structure, and management team. You can also include more information about the:

• Company's history, such as a family business that's been in operation for multiple generations
• Business objectives, including short-term and long-term goals
• Business strengths, highlighting anything that might give your company a competitive advantage in the field

You can also customize the summary if you have a specific objective or a targeted audience. For example, if the goal of your business plan is to secure funding, you might focus on areas that appeal to investors and lending institutions, including:

• Why you're the best person to manage the business
• Your experience in your field, as well as the total years of experience of your management team
• Expertise or special talents of your team, including training, licenses, certifications
• How you plan to make the business a success
• Financial information, such as a high-level discussion of your track record of revenue growth and the financial opportunities that can be realized as a result of securing financing

You may also want to address any areas of perceived weakness by explaining how you'll overcome them or compensate.

How do you write a company overview?

You might provide a description of the company, its location, legal structure, and management team. You can also highlight the company's business objectives, goals, and strengths. You can also customize the summary to a specific audience, such as a bank or lender, focusing on your competitive advantages and highlights of recent financial success.

What should an organizational overview include?

Some of the discussion points to include in a company overview might be:

• Company name and location
• Legal structure such as a sole proprietorship, LLC, or partnership
• Mission statement and management team
• Description of your products and services and how they are needed
• Target market or who are your customers
• Competitive advantage or what makes your company different

The Clute Institute. " Using Business Plans for Teaching Entrepreneurship ," Page 734.

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

Starbucks Coffee Company. " Our Company ."

United States Securities and Exchange Commission. " Form 10-K, Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2021, Tesla, Inc., " Pages 3-12.

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How to Draft a Law Firm Business Plan

Law firms are something more than a business. Law firms and the lawyers within them are engaged in a profession, with obligations that go beyond purely commercial concerns.

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This truth can obscure the need for lawyers to pay attention to the business management side of their practices: their finances, marketing plans, business development efforts, IT purchases, lease terms and capital needs. For the highly trained lawyer, such concerns may feel at best like an afterthought, or at worst a nuisance that steals time from their true occupation: the “practice of law.”

And yet, those annoying business details are responsible for keeping the lights on. While law firms may be more than a business, there is, in fact, a large and necessary business element to them. For solo practices and small firms in particular, investing time into the business management side of legal practice can make a major difference in the financial rewards they derive from it—or even their survival. Firms that have failed to do so in the past (and even those that haven’t) can get a handle on their law practice business management by taking the step of drafting a business plan.

THE POINT OF A BUSINESS PLAN

We’ll discuss the components of a business plan in a moment, but first, let’s talk about why this exercise is valuable. For another type of business, a business plan may be useful in attracting investors or securing financing. Law firms should not think of their business plans as utilitarian documents in that sense (although someday one could prove helpful in obtaining a line of credit, say, or attracting lateral partners). Instead, the primary value of the business plan, particularly for the solo practice or small firm drafting one for the first time, lies in the fact that it forces the firm to think about business issues that it otherwise would not have considered.

As the D.C. Bar says in its advice to startup law offices : “The act of planning helps you think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.”

Of course, a business plan does little for anyone if it is quickly forgotten. But the mere act of generating a business plan gives a firm a direction to head in and goals to point toward. If the firm makes it a practice to revisit the business plan on an annual basis (if not more regularly), its business considerations will stay top-of-mind and the firm will continually refine them in ways that improve its performance.

THE CONTENTS OF A BUSINESS PLAN

Creating a strong business plan will require an investment of time and energy. At the same time, no one wants to write, or read, a massive document. To improve the chances that the project gets done, and gets read, it is best to keep a business plan to a reasonable length. Anything over 20 pages may stretch attention spans to the breaking point, and there’s no harm in going shorter if you have covered all the territory you need to by that point.

So, what, exactly, is the territory that you should cover? Most authorities agree that a sound business plan for a law firm should address the following broad areas:

• Overview of the Firm

This section should include basic information about the firm: its name, legal structure, practice areas and leadership positions. It should also contain some deeper information about the firm's identity and aspirations.

This would include:

A mission statement about the firm’s purpose

A vision statement or recitation of medium- and long-term goals for the firm

Important aspects of the firm’s history

Any important philosophies that the firm brings to legal practice

• Market Analysis

This section should discuss the business trends affecting the firm’s important practice areas and clients. It should evaluate any technologies that are affecting your practice area and consider how the firm may leverage or keep up with them. This section should also devote substantial energy to identifying the firm’s major competitors in each of its important practice areas and comparing their services to the firm’s.

In this section, identify the firm’s major clients, breaking them down by important characteristics like size, location, industry and practice groups used. Go through a similar exercise for major client prospects and targets. It’s worth examining how the firm can improve its relationships with both of these groups.

Important financial information includes the firm’s fixed and variable costs, backward- and forward-looking revenue, realization rate, collection rate, monthly overhead, assets and liabilities. A 12-month profit and loss projection should be included and could be considered the heart of the business plan.

There is a great amount of detail that any firm could get into on this front. Don’t get overwhelmed by it; at the same time, this is some of the most important information in the business plan, so it’s not advisable to gloss over it.

This section will address key operational issues like the office lease, equipment purchases and technology plans. You may assign roles to various staff members for operational issues.

Think about what marketing the firm currently performs, how it obtains clients and what marketing goals it wants to set for the future.

After completing these and any other sections the firm might want to address, then go back and draft an executive summary to be included at the beginning of the business plan document. The summary should be professional, but don’t be afraid to give it some optimistic energy. After all, with your eyes on the business management fundamentals of your firm, things should be looking up for the future.

• Growing Your Business
• Law Practice Management

7 Steps to Form an LLC

1. check what requirements your state has, 2. name your business, 3. pick a registered agent, 4. file your articles of organization, 5. create an operating agreement, 6. plan for the future, 7. consider using a professional, 7 steps to start an llc for your small business.

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• The exact steps for forming an LLC vary by state, but it's a similar process in most states.
• You'll need a business name, a registered agent, articles of organization, and an operating agreement in certain states.
• Save $25 when using Block Advisors to form your LLC today. Discount applied in cart.

If you're working on setting up your own business, there's a good chance you're looking to open a limited liability company, or LLC. This business structure gives you limited liability protection similar to a corporation, plus the flexibility of a sole proprietorship or partnership, making it a popular choice for small business owners.

The main perk of an LLC is that it generally can protect your personal assets (like the money you're saving up to buy a home or retire) from certain liabilities or debt that come with owning your business. In other words, in many cases, a creditor you owe money to through your business usually won't be able to come for the money in your personal accounts. Having an LLC can also legitimize your business, which may be a benefit to many small business owners.

If that sounds good, follow these steps to open your LLC.

• Check what requirements your state has
• Name your business
• Pick a registered agent
• File your articles of organization
• Create an operating agreement
• Plan for the future
• Consider a professional service 

LLCs are regulated by states, which means that you'll have to meet the specific requirements outlined by the state where you're registering the LLC. You'll find this information easily on your Secretary of State's website.

While most steps necessary to establish an LLC will need to be done no matter which state you live in, the specific guidance for how to do each step — like naming your business and picking a registered agent — can vary.

Now that you have a business, it's time to choose a name for it. While you'll want something catchy and easy to market, it's also important to make sure that the name you choose meets your specific state's requirements.

First, you'll need to ensure that the name you choose isn't being used by another LLC in your state. You can typically do a name search on the Secretary of State's website ( here's Illinois' search tool , for example).

In general, you'll need to have certain words in the name that make it clear your business is an LLC, such as "Limited Liability Company," "LLC," or "L.L.C." Many states will also prohibit you from including certain words in the name. In New York, for instance, you can't include the words "academy," "bank," "finance," "union" and many more .

Every LLC has to have a registered agent who acts as the point person for any legal matters that may come up and for the Secretary of State to send any official paperwork to. Generally, that person (or business) must have a physical address in the state where your LLC is registered and be available to receive mail there during working hours. They also have to be at least 18 years old.

You can name yourself as the registered agent, but it may not be the best idea. If you're worried you might not be available to serve as the point person or might not be able to keep up with important mail, it might be best to outsource this role. There are registered agent services you can use, though they'll come at a cost.

Next, head back to the Secretary of State's website to find the articles of organization that you'll need to file. You can also meet with someone in the department in person or by phone if you prefer.

The exact information you'll have to fill out for the articles of organization will vary by state. Still, you can expect to be asked for basic information like your LLC's name, address, services, and how you expect it to be managed. You'll also need to pay a filing fee.

Keep in mind that the articles of an organization may be called something different, depending on the state. Alabama and Texas, for example, call it a "certificate of formation." Some states also have publication requirements, which means you need to publish an announcement of your new business in a newspaper.

While you'll likely divvy up responsibilities for anyone in your business on your own, you may also be required to do so via an operating agreement. These agreements outline how your business will be run and delegate roles and power to different members. That may include voting procedures, rules around daily operations, and ownership rights within the company.

Only some states require you to create this type of agreement, but it is a good idea to do so even if you don't technically have to.

Opening an LLC may be your first priority, but there are other tasks to take care of during the process, like getting your employer identification number (EIN). An EIN is an identifying number that the IRS will use for tax reasons, but it's not always required for opening an LLC.

You may also want to open a business bank account to ensure you keep your personal and business assets separate for bookkeeping and tax purposes. Plus, look into what exactly you need to keep your LLC active in your state, which may include filing an annual report.

A lot goes into opening and operating your own business, but you don't have to take care of everything on your own. Block Advisors , part of H&R Block, can help you decide which type of business structure is best for you, such as an LLC, and help you open that business. Using an online service to incorporate your business will help ensure that you submit all of the necessary paperwork required in your state of incorporation. This could save you time now and headaches later.

With Block Advisors, you're not on your own once your business is up and running. The service provides tax help, including filing your taxes with a professional or on your own with help from a live expert. You can also opt for one of its bookkeeping services , which range from a step-by-step guide to doing your own bookkeeping to working with your own dedicated accountant.

If you're looking to scale, Block Advisors also offers payroll services, which help you pay your employees each pay cycle and can make sure you stay compliant. There are three tiers to choose from — the basic service comes with a dedicated accountant, up to the premium service, which includes timekeeping, human resources assistance, and more.

*This article is for informational purposes only and should not be construed as legal advice. You may want to seek the advice of an attorney to evaluate all relevant considerations in forming a business entity. 

**Block Advisors discount may not be combined with any other offer or promotion. Void if transferred and where prohibited. Discount will appear in your cart automatically when you use the link. No cash value. Expires June 30, 2024.

Watch: AI expert explains how to incorporate generative AI into your business strategy

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