Business Planning: Process, Principles, Importance, and Scope for Startups

ABSTRACT: 

A well-designed business plan is the first step to starting and growing a business efficiently. A business plan collates the strategies for achieving the goals of the business. With a high probability of new businesses failing, it is critical for every business to indulge in a good business plan that can help them keep track of the developments and financial conditions of their businesses. 

Irrespective of the size of the business or industry, a business plan is a significant document for the growth and development of the brand. However, it is important for small businesses and startups to attract funding from investors and lenders and have a systematic approach towards business growth and sustainability. 

Interestingly, the advent of business planning software can help stakeholders create a robust business plan to achieve their short-term and long-term goals.

GoodFirms’ survey titled ‘Business Planning: Process, Principles, Importance, and Scope for Startups’ aims to study the process and elements of a business plan. The survey attempts to gain insights into the principles of a good business plan and their importance for a startup.

A business plan is a roadmap that mentions the objectives of a business and the path to achieve its goals. It is curated by considering all the aspects related to marketing, finance, human resources, operations, and other pillars of a business.

With the growing competition and the existence of well-established brands in every sector, startups, and small businesses have to deal with a number of day-to-day issues in running their business and staying ahead of the competition. Every strategy needs a well-planned approach. Tracking the progress of the business and keeping the stakeholders informed about the progress is necessary for taking future steps to help the business grow further.  Attracting investors is one of the key factors to help a business grow. All this requires a thoughtfully curated document that details a business, its strategies, its mission, its vision, and all future goals in one place.

Bringing the financial details and other organizational data on the same page can help a business keep its employees and investors informed about the current performance of the business and have a clear picture of the future steps. Here comes the role of a business plan.

A systematic business plan can help brands keep their efforts aligned with the goals and scope. 

Business planning is a proven approach to operating excellence. The benefits are profound. Business planning helps businesses in multiple ways, irrespective of their type and scope. 

With tremendous competition in almost every sector, a business plan that clearly defines the objective and goals is an initiative to help brands have the upper hand over their competitors. 

Whether a startup or any size and type of business that strives to be a game changer, and to defy outdated practices for the purpose of becoming the next-generation enterprise, the best way is to have business planning in place that will help get in front of the competitors and move with the transformation. A business plan is a documented strategy to define goals and objectives, a roadmap to achieve them, a clear indication of past results, and a vision for the future.  Business planning is a process that involves the participation of various stakeholders to detail the strategies. This way, there is transparency in the approach.

Business planning for small businesses is the first step towards progressing from a mere idea, and to scale, and get funded to see future growth. It is an essential tool to secure funding from investors. Moreover, they are also beneficial for forecasting future growth and being prepared for any risks. 

Although business planning can be a tough job, there are several business planning software solutions that ease the process and create efficient business plans for a business.

The business plans of two businesses can never be the same. Although business planning is done with the common intent of creating a roadmap for the business, the approach to doing it varies.  

Creating a business plan can get overwhelming for startups. However, clarity of vision, reliable business planning tools, and determination can help businesses create an efficient business plan.

Irrespective of the way a business plan is created, there are some core elements of a business plan that are discussed here:

Executive Summary

Executive summary is the brief introduction of a business plan that summarizes the details of a business and its processes inside out. When presented to potential investors, an executive summary can create a first impression and give critical information to them. 

The executive summary is often used for deciding to continue reading a business plan. An executive summary is the most important section of a business plan if it is being used for external use.

It is recommended that the executive summary be kept as short as possible. It is necessary to include the business overview, the problems of the business, the solutions to the problems, the target market, competition of the business, financial summary, investment requirements, and milestones of the business.(1)

Company Overview

A Company overview provides details about the business along with its mission, location, ownership, and business structure. Businesses must try to display the potential of the company to grow in the coming times and have a competitive edge in the market. This section of the business plan features the legal structure of the organization and the stakeholders of the business. 

The company overview is also the section that explains the value that the business can create for the consumers. It must define the factor that makes the company stand out from the crowd.

Target Market Research and Analysis

The target market research and analysis section presents the target audience segment, the demand of the business, and the competition in the sector. The section must address the statistical data of the target market, the growth potential of the market, profitability, and competitor analysis. 

With the advancement of artificial intelligence and advanced algorithms like machine learning, performing market research is seeing a transformational change as these technologies help in market filtering, forecasting future trends, analyzing user behaviors, big data analytics, etc., that can help in service/product development, strategies, and other decisions. Market research analytics can help businesses with the best move forward.

Startups should prioritize the target market and the profitability of the segment over competitors’ target market to ensure higher market penetration at the beginning.

Products and Services Offered

A crucial section of the business plan that elaborates on the products or services offered by the company is included in this section. It is a detailed explanation of the working of the product or the uniqueness of the services offered by the company.

This section must include the key features of the product, various services offered, and technical specifications of the product, if any. Businesses must also include any copyright details or patent information regarding the product in this section.

Team Structure

The Team structure of a business plan is made to represent the ownership and organization structure of the business. This section must include the hierarchy of the organization and the roles performed by key members of the organization. It is also good to include the reasons for having certain people for particular roles.

This section of the business plan can be improved by mentioning the plans for any future recruitments for the betterment of the brand.(2)

Marketing and Sales

A robust business plan must have a well-described marketing and sales element. The marketing and sales section of a business plan is meant to describe the marketing strategies of a business in detail. It presents the ways that business owners adopt to attract and retain customers.

The section must be detailed enough to mention the various media used for marketing and helping predict financial projections. 

Financial Plan

Financial planning is a crucial step in completing the business plan for any organization. A financial plan consists of critical financial elements, including accounting integration,  financial reporting, investment management, revenue recognition, risk management, budgeting, expenditure management, tax management, and others.

A financial plan is necessary to collate all the financial information of a company to ensure the smooth functioning of a business and project financials to be prepared for any risks in the future.(3)

The business plan software market is expected to grow at a CAGR of 7% between the years 2020 to 2027 and will account for USD 137.87 million by the year 2027.(4)

The business plan software market is gaining prominence across the globe owing to the growing awareness regarding the benefits of business planning among businesses. 

Factors like the growing industrialization globally, inflating digitization of business processes, and the ample benefits that business planning can offer to businesses are some of the driving factors for the business plan software market.

GoodFirms’ survey titled “Business Planning: Process, Principles, Importance, and Scope for Startups,” conducted in September 2023, attempts to gain insights into the importance and process of business planning for businesses. The survey also highlights the challenges faced by startups when writing a business plan.

The survey queried 570 small and large businesses to understand their views on the importance of business planning and the benefits they have leveraged.

There has been a consistent rise in the adoption of business planning post-digitization. The survey conducted by GoodFirms reveals that around 70.4% of businesses already have a business plan in place, while 12.8% of businesses are planning to have one in the near future.

But surprisingly, nearly  16.8% of the surveyed businesses do not have a business plan yet.

Business planning is a process of defining the goals of a business and strategizing for achieving those goals while keeping a holistic approach. It is a systematic approach to charting a clear course of activities for the year ahead. 

A business plan, when prepared by following a standard process with the help of the best business planning software, has more chances of surviving in the long run. Following are the steps that can help in building an efficient business plan:

Thorough Research: Businesses are supposed to conduct thorough research to ensure the feasibility of their business idea, the condition of the market, the competition in the market, and the business goals for the long term. The research must be followed by finalizing the goals or objectives of the business.(5)

This phase of business planning may also include a SWOT analysis to learn the strengths and weaknesses of a business and find ways to overcome the shortcomings.

Building a Business Model: Based on the insights gained in the previous step, businesses need to build a strategy that can help them identify their target customer, customer preferences, and ways to add value to what is served to them. Businesses must build strategies for production, marketing, organizational planning, and financial planning.(6)

Forecasting: This phase of the planning process involves forecasting the future of the business. With proper forecasting and identifying weaknesses, a business can focus on improving the services or products that are provided to the consumers.

Drafting the plan: Once the business is sure about the goals and objectives and has all the financial projections in place, the plan can be drafted. It is also necessary for businesses to assess the need to seek help from professional business planning service companies to draft a plan. Typically, business planning software solutions can help new business owners in drafting their business plans systematically.

GoodFirms’ survey reveals that 32.6% of business owners believe business planning software to be an easy-to-create method to draft a perfect business plan cost-effectively while saving time.

Reviewing and Evaluating a business plan: A business plan is necessary to be reviewed at specific intervals or after any major change to keep it updated. A business plan is a live document that needs to be reviewed and updated to ensure that it resonates with the current market and business conditions. 

A business plan might not seem very significant for small businesses or startups. However, business plans can prove to be a game-changer for startups as well.  

While most small businesses tend to overlook the importance of a business plan, entrepreneurs who have a formal business plan on paper are 16% more likely to be successful.(7)

Business plans for startups can boost confidence and help them achieve their targets. While existing businesses require business plans for adjusting their processes to align with the market shifts, startups require business plans for predicting the future requirements of their business. 

Interestingly, around 68.4% of survey respondents believe that business plans are equally crucial for a startup’s success.

A business plan can be useful for a startup in the following ways:

• Put the business idea and the owners’ vision on paper.
• Understanding competition and market scenarios.
• Promotes research and assesses the feasibility of the business idea and the factors that can add to the probability of the success of the startup.
• Provide guidance for achieving the set targets.
• Address and prepare for problems that may arise in the future
• Assess the requirement of talent, resources, and tools required to achieve the milestones.

Writing a business plan is essential for all businesses to function smoothly and efficiently on a determined path.

Billy Parker, Director of Gift Delivery, says, “Having an integrated business planning process is essential for any business, especially startups. This process helps to ensure that the business is able to identify and capitalize on opportunities, while also mitigating any risks that may arise.”

Around 81.5% of survey respondents find a business plan beneficial in focussing on specific goals.

A business plan details all the small-term and long-term goals of a business. With a well-crafted business plan, businesses can have clarity about the goals they are working to achieve. 

A business plan helps all the stakeholders be on the same page, keeping them informed about the future milestones that are expected to be achieved. Following a business plan makes it possible for the employees to keep the business processes aligned with the short-term and long-term goals of the company.

Nearly 73.7% of businesses believe that a business plan improves their marketing strategy.

The marketing strategy of a brand largely depends on market trends and consumer preferences. Having a business plan can help a brand stay aligned with its goals while considering the market shifts and appropriate sales and demand forecasts. 

Abhishek Shah, Founder of Testlify, mentioned, “Strategic planning encourages innovative thinking and adaptability, allowing us to respond to market shifts and emerging trends.”

Leveraging the data from market analysis and exploring consumer demand, brands can improve their marketing strategy, keeping their consumers in mind. An effective marketing strategy is in all ways responsible for elevated sales and business growth.

For 63.2% of survey respondents, a business plan assists them in making financial projections.

Financial projection is an essential part of a business plan. With the availability of historical data and thorough market research, it is possible for businesses to forecast the sales forecast and have an idea about the cash flow. 

With proper detailing and considering the market conditions, businesses can always be sure about the cash flow and cash flow risks in the future to make decisions accordingly.

Around 61.8% of surveyed businesses said that a business plan can ease funding or investment planning.

Apart from the benefits that a business plan can have in performing the day-to-day business processes, it is a critical document for investors and financial institutions. 

A business plan serves as a communication tool that conveys the potential of a business idea to investors to secure funding at any stage of the business. It serves to predict the profitability and growth of the business, leading to securing funding to promote business processes. Moreover, for most investors, a business plan is a mandatory document for providing funds for businesses. 

According to Howard Tillerman, Chief Marketing Officer of Making That Sale, “A well-executed business plan is essential to garner the attention of serious investors,  regardless of how brilliant the startup idea may be.”

A business plan helps them prioritize business processes, according to 59.1% of businesses.

Although every business process has its significance. Some are more crucial than others. Based on the available resources and budget, decision-makers have to prioritize some tasks. 

“On the tactical side, a business plan helps to organize and prioritize tasks, develop budgets, and assess the competition,” says Christopher William, Founder of Balanced News Summary.

With well-defined goals, prioritizing business processes becomes easy. Prioritizing business processes is necessary for maximum efficiency and cost-effectivity in times of crisis. 

57.9% of businesses find a business plan beneficial in allocating resources wisely.

With all the financial details and targets that are to be achieved on one page, business owners can be sure about their future steps. With a detailed and well-researched business plan, one can have all cash flow details and projections in one place. It also helps in analyzing the business process and prioritizing the business processes to improve efficiency. 

Tony Mariotti, CEO of Ruby Homes, says, “Tactical planning helps organizations allocate resources strategically. It ensures that budgets, personnel, and assets are directed toward initiatives that align with the organization's goals and priorities, enhancing efficiency and effectiveness.”

A business plan, thus, helps in investing judiciously in the process based on their prioritization and identifying their profitability and potential to help the business grow. With realistic and achievable goals, business owners can allocate resources efficiently, elevating business growth.

Nearly 52.6% of survey respondents said that a business plan is beneficial in tracking achievements and milestones.

Tracking achievements and milestones is very important for deciding the future path of a business. Defining the goals of the business gives clarity about the benchmarks for the company’s achievements.

Yuval Eizik, Owner of yuvaleizikblog.com says, “ Integrated business planning allows for the development of a clear strategy that can be communicated to all stakeholders, as well as a framework for decision-making. Furthermore, it provides the ability to track progress and identify areas for improvement.”

Properly documented goals and milestones of a business give one a reference to the achievements of the company. The ability to self-assess the achievements can help a business to identify its weaknesses and improve those areas.

42.7% of surveyed businesses think that a business plan assists them in making more informed decisions.

A well-documented business plan enables access to valuable insights into the business. Having clarity about the current situation of the business and the market gives an advantage in making decisions aligned with business goals. 

Having the details of all the business operations gives an overview of the business as a whole and not departments. Giving a clear picture enables business owners to make more informed decisions owing to the availability of real-time data and market situations. 

With market research and analysis, business owners get reliable data about the market conditions that help them strategize future steps aligned with business objectives. This is responsible for setting long-term and short-term goals and tracking progress.

“Tactically, a business plan allows for data-driven decisions, enabling the startup to adapt to market changes quickly. Tactical planning relies on data analysis and market research to make informed decisions,” mentioned Grant Aldrich, Founder and CEO of Preppy.

About 36.8% of surveyees said that business planning helps them to be prepared for adverse conditions.

A business plan is an essential tool in managing and projecting the finances of a company. With data insights and shifting market trends, businesses can analyze and project the future cash crunches that may arise.

Having an idea of any risks in the future can help business owners plan alternative solutions and maintain cash flow. Having an efficient contingency plan is a necessity for the smooth functioning of a business. 

“Tactical planning provides a structured approach to assessing and addressing mid-term risks. It allows organizations to proactively identify potential obstacles and develop contingency plans, reducing the impact of unexpected challenges,” said Lisa Rehurek, CEO and Founder of The RFP Success Company.

A well-thought and researched business plan can serve as an effective tool to predict any risks and prepare for adverse conditions. 

A business plan helps in meeting legal and regulatory compliance, according to 18.5% of surveyees.

Business plans are often mandatory for raising funds and attracting investors for a business. Not only for others, but business plans can serve as an essential tool for business owners to detail all their legalities in a document.

A business plan can be drafted in a way that clearly indicates the legal and regulatory compliance of a business to a third party. With all the legal structures detailed in the business plan, it can serve to meet the legal and regulatory requirements.

Although business planning is recommended for all businesses, businesses can find writing a plan challenging. Especially startups and small businesses may find writing a business plan overwhelming. 

GoodFirms’ survey on business planning enlists a few major challenges that businesses face during the process of business planning.

For 78.4% of survey participants, accurate market analysis is a challenge while drafting a business plan.

A few sections of a business plan are all about predicting the future of a business. Be it the cash flow projection or other financial projections, all of them require accurate market analytics.

Although the expenses of a business can be predicted as business owners know the areas of expenditure, revenue forecasting can be intimidating. With the number of uncertainties that can fluctuate the market trends, accurate market analysis is nearly impossible. 

Small businesses often do not have a dedicated analytics team to help with market analysis that can help them project the financials required for a well-informed business plan.

Getting the financial details on paper is challenging for 63.2% of businesses while curating a business plan.

Financial transactions are the most influential factors for the growth of a business. However, knowing all the financial details of a company and getting them on paper is a daunting task. Projecting all the numbers and ensuring that they are aligned with the business’s strategy is critical for an ideal business plan.

Managing the assets of the business and writing the figures down on paper is not always possible, which helps in accurate forecasting and forming strategies for the success of the business. 

For startups, it is even more difficult as projecting the figures for a new idea is tough without any references. Having proper guidance is a way for startups to curate a business plan.

Around 57.9% of survey participants mentioned having realistic goals as a prime challenge with business planning.

The purpose of a business plan is to enlist the goals and vision of a business and measure the achievements at any stage of the business. It helps business owners to plan strategies for accomplishing their goals. 

However, startups often fail to aim for realistic goals. The excitement of a new business idea leads to writing a business plan without evaluating the possibility of potential risks and obstacles, which leads to unrealistic expectations of the outcomes.

Business owners can refer to the working of similar businesses and plan with realistic and workable goals.

According to 55.8% of businesses, drafting a business plan becomes difficult due to complexities in projecting cash flow.

The cash flow of a business needs to be maintained for the smooth running of a business. Cash flow projection is an essential component of a business plan. It plays a critical role in planning the future of the business. 

Projecting the cash flow of a business can be challenging since it often depends on the funds raised by the business and the sales of the business. The fluctuating sales figures hinder a consistent cash flow, leading to complications for a business.

With uncertainties and factors responsible for fluctuating market trends, projecting a cash flow becomes difficult for companies.

Starting to write a business plan is a major challenge for startups, according to 53.7% of surveyees.

For small businesses or startups, a business plan can be a new concept. Writing a business plan can get overwhelming without knowing the basics of it. 

Also, the significance of a business plan is neglected many times by new businesses, which leads to a delay in creating a business plan. 

Reliable business plan software can be an aid for startups to get a detailed business plan ready for their business.

It is a challenge to keep the business plan interesting, said 31.5% of business owners.

A business plan is generally created keeping in mind the business, the investors, and the market. It serves as an essential document for investors when raising funds for the business. 

Max Shak, Founder and CEO of nerdigital.com, pointed out, “An integrated approach ensures that tactical and operational actions align with these strategic objectives. This holistic perspective helps startups secure funding, build investor confidence, and achieve long-term success.”

A business plan can be the first impression of an organization for potential investors. It is, therefore, it is necessary for businesses to create a business plan that is interesting enough to attract an investor's attention. 

Around 26.3% of business owners said that keeping the business plan flexible is a major challenge when curating a business plan.

Business plans are to be updated regularly based on the nature of the business. While a well-established business requires updating its plan less frequently, startups need to review their plan more frequently.(8)

The need to review and update the business plan with changing market conditions and stay aligned with the goals of the business. The business plan must be kept flexible enough to accommodate the changes without impacting the business objectives. 

While forecasting the financial figures, keeping the business plan flexible can be a little challenging due to the market research and analysis involved while forecasting numbers.

21.6% of businesses believe that having an efficient contingency plan is a key challenge while preparing a business plan.

Running a small business involves several risks. Mitigating these risks highly depends on the finances of the company and a steady cash flow. Meticulously planned financial strategies can help businesses be unaffected by VUCA - volatility, uncertainty, complexity, and ambiguity.(9)

Staying resistant to market shifts and other uncertainties can be achieved by a well-curated business plan that includes clear-cut financial planning. Standing by a well-thought-out contingency plan can be of great help for business growth.

Business planning is an important part of a business. It is a process that requires the involvement of various departments and the detailing of all the business activities. A meticulous business plan requires minute detailing and also needs revision after certain time intervals. 

With the growing awareness of benefits that can be leveraged through a business plan, many businesses are opting for dedicated business plan software that can ease the task of curating a business plan. With the growing popularity of business plan software solutions, several brands are offering business plan software solutions. 

 

According to GoodFirms’ survey, around 31.6% of businesses have already explored the application of business planning software for creating their business plan, whereas 42.1% of business owners have yet to use business planning software. 

Around 26.3% of the surveyed businesses are still not sure of the benefits that they can leverage using business planning software, and thus, they feel they may use the tool in the future. 

Business planning software solutions have emerged to be a great help for small businesses in terms of customization and ease of use.

Business plan software is a tool that can help business owners create a business plan even if they lack experience and time. With templates provided by the software, businesses can customize their business plan as per their requirements. 

Among the businesses that have already adopted business plan software solutions, 52.6% of the businesses have found the software to be pretty fast in creating an investor-ready business plan, while 47.4% of survey respondents said that it took time for them to understand and design a plan.

Business planning software solutions are still in their infancy, and with technological advancements and more options, business planning software is expected to become a reliable and trustworthy tool for startups and small business owners.

• A business plan is a roadmap that mentions the goals of the business and the path to achieve them.
• Along with serving as a roadmap to achieve the goals, a business plan is an essential tool to attract investors.
• The introduction of dedicated software for business planning has made the process of business planning easy for small businesses and startups.
• The major elements of a business plan include an Executive summary, Company overview, target market research, products and services, team structure, marketing and sales, and financial plan.
• The business plan software market is expected to grow at a CAGR of 7% between the years 2020 and 2027.
• Around 70.4% of survey respondents already have a valid business plan in place, while 12.8% are planning to have one soon.
• Thorough market research and accurate market forecasting can help create an efficient business plan.
• Nearly 81.5% of surveyed businesses find business planning beneficial in focusing on specific goals, while 73.7% of businesses find it beneficial for improving marketing strategies.
• A well-thought-out business plan also helps in making more informed decisions.
• Accurate market analysis is a major challenge while curating a business plan for 78.4% of businesses, while 63.2% of businesses find getting the financial details of the business on paper a challenge.
• 31.6% of surveyed businesses have already leveraged the business plan software to create a business plan.

Staying focused, growing quickly, and adapting to the changing demands are the prime necessities for any business to survive. To carry out this in a sustained manner, it is critical to indulge in a systematic business planning process. A business plan has proved to be an essential tool for any business to set milestones, track the results, and review and revise the business functions.  Having an efficient and robust business plan can help any business -  existing, or established, startup or planning stage, to forecast sales, expenses, and funds, manage results, and be prepared for any tough times.  

While a business plan is a live document that needs to be reviewed and updated, it is always better to focus on having accurate market research to maintain cash flow for the business. An impressive business plan is a must for seeing growth in a business. 

Although curating a business plan from scratch can be overwhelming for new business owners, the emergence of dedicated business plan software solutions has proved to be an efficient tool for startups.

We sincerely thank our Research Partners for their valuable insights.

1. https://www.bplans.com/business-planning/how-to-write/executive-summary/#tips-for-writing-an-effective-executive-summary 

2. https://www.truist.com/resources/small-business/online-banking/9-elements-of-an-effective-business-plan 

3. https://www.goodfirms.co/resources/financial-planning-top-tips-from-business-experts 

4. https://www.theinsightpartners.com/reports/business-plan-software-market 

5. https://smallbusiness.chron.com/business-planning-process-1080.html 

6. https://www.lkouniv.ac.in/site/writereaddata/siteContent/202003281457067636madhurima_Business_Planning.pdf 

7. https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed 

8. https://www.investopedia.com/terms/b/business-plan.asp#toc-how-often-should-a-business-plan-be-updated 

9. https://www.goodfirms.co/resources/financial-planning-top-tips-from-business-experts