criteria for evaluating business plan

Can You Accurately Evaluate a Business Plan?

• Business plan evaluation involves scrutinizing every aspect, from market analysis to financial projections, ensuring internal robustness and investor appeal.
• Market viability analysis separates viable ideas from pipe dreams, emphasizing the importance of understanding customer needs and competitive landscape.
• Realistic financial projections are crucial for convincing stakeholders of investment worthiness, while management team assessment highlights the significance of a competent and experienced team.
• Assessing market potential involves understanding customer needs, market size, and trends, while evaluating competitive advantage and scalability is essential for standing out in the market and ensuring long-term growth.
• Financial feasibility and risk assessment are crucial aspects of evaluating a business plan, involving understanding costs, revenue projections, funding options, and proactive risk mitigation strategies.

Ever stared at a business plan and wondered if it's a blueprint for success or a fancy work of fiction? You're not alone. Entrepreneurs and marketers like you grapple with the challenge of separating viable business blueprints from wishful thinking. This blog post is your lifeline, offering savvy insights into how to evaluate a business plan effectively. We'll navigate through the essentials, from dissecting the executive summary to crunching the numbers in financial projections. Get ready to transform your analysis skills and ensure that your business idea isn't just another castle built on sand!

Table of Contents

Understanding the Basics of Business Plan Evaluation

When you're diving into the world of startups, it's like embarking on an adventure in uncharted territories. Your compass? A well-crafted business plan. But even the most detailed map won't guarantee treasure unless you know how to read it. That's where business plan evaluation comes in, a crucial step not just for securing that coveted chest of gold (read: funding) but also for setting sail in the right direction.

What is Business Plan Evaluation?

Imagine you've baked a cake. It looks great on the outside, but how do you know if it's just as good on the inside? You need to taste it, right? Similarly, evaluating a business plan is about digging deep and tasting every layer to ensure your startup idea isn't just all icing and no cake.

A thorough business plan assessment criteria involves scrutinizing every aspect of your plan, from market analysis and organizational structure to financial projections and marketing strategies. It’s not just about having all the sections filled out; it’s about making sure they make sense and paint a clear picture of where your business is headed.

Why is Evaluating a Business Plan Important?

Here's a little secret: investors are like hawks with laser vision when it comes to spotting potential in business plans. They can sniff out weaknesses from miles away! So, if you want to get funding with a business idea loan , your plan needs to be bulletproof.

But beyond impressing investors, evaluating your business plan serves another vital purpose – steering your startup ship away from iceberg-infested waters. Think about it; if part of your plan doesn’t hold water (pun intended), wouldn’t you want to know before you hit open seas?

"A goal without a plan is just a wish."

This timeless piece of wisdom highlights why rigorous evaluation matters. Without validating each component of your business strategy through meticulous analysis, what you have isn't a roadmap to success – it’s merely wishful thinking dressed up as a game plan.

Evaluating helps identify gaps or unrealistic assumptions early on so that they can be addressed before they become costly mistakes. It gives clarity on whether your idea has legs strong enough to outrun competitors or if it’ll trip at the first hurdle.

By regularly reviewing and updating your business strategy based on feedback and changing market conditions, you're not only showing adaptability but also laying down strong foundations for growth and sustainability.

Now that we've got our bearings let’s dive deeper into how to evaluate a business plan effectively so that when someone asks if your startup will succeed, you'll have more than crossed fingers – you'll have concrete data backing up that confident 'Yes!'

Evaluating Business Ideas: The Key

Evaluating an AI-based venture requires an extra layer of tech-savviness mixed with traditional analysis methods. As AI reshapes industries, understanding its implications within your specific context becomes paramount. Exploring Opportunities in AI Business Ideas can provide insights into how AI impacts different sectors and what this means for emerging businesses.

Analyzing Market Viability

No matter how groundbreaking your idea might seem, if there's no demand or too much competition already dominating the space, even AI might not save the day. Assessing the Viability of a Business Idea should be one of your first stops in this journey – ensuring there's fertile ground for planting the seeds of innovation.

Financial Projections: Friend or Foe?

The numbers game can be intimidating but getting them right could mean the difference between thriving and barely surviving. Diving into AI Business Plan Generator Revolutionizes Startups , we see how leveraging technology can create realistic financial models that stand up under scrutiny – essential for convincing stakeholders of their investment worthiness.

Operational Strategies: The Blueprint

Your operational strategy outlines day-to-day activities needed for running smoothly while scaling efficiently. Take cues from 2024 MVP Workspace Trends To Watch which emphasizes creating flexible yet robust operational systems – something increasingly relevant as remote work continues shaping our work environments.

Marketing Magic: Telling Your Story

How will people learn about this awesome new product or service? That’s where marketing steps in. Delving into AI Transforming Business Analyst Roles , understand how analytics powered by AI provides targeted insights allowing for personalized customer experiences – because today’s consumer doesn’t want generic; they crave personalization!

• Validating every aspect ensures both internal robustness and investor appeal.
• Market viability analysis separates viable ideas from pipe dreams.

Key Components to Assess in a Business Plan

Hey there, future moguls! If you're on the brink of launching your startup or pitching to investors, you know that a robust business plan is your golden ticket. It's not just about having a killer idea; it's about presenting it in a way that's as irresistible as grandma's apple pie. So let's break down how to evaluate a business plan like a pro.

Executive Summary and Market Analysis

Imagine you're speed dating with investors – the executive summary is your first impression. You've got to be snappy, persuasive, and leave them wanting more. Start with an elevator pitch that sings louder than a Broadway star. Nail this part, and you might just find your startup soulmate.

Now, onto market analysis – think of it as your business plan’s dating profile. You need to show off how well you know your audience and why they'll love what you’re bringing to the table. It's all about showcasing the depth of your market understanding.

If this sparks your interest, check out our deep dive into evaluating startup plans for even more insights.

Financial Projections

Ah, the numbers game – it can be as tricky as calculus at midnight without coffee. But here’s the scoop: investors dig data like kids in a sandbox looking for buried treasure. They want realistic financial projections that prove profitability isn’t just some distant mirage but rather an oasis within reach.

Get into the nitty-gritty of cash flow statements, income projections, and balance sheets. Unsure where to start? We’ve got resources on steps to evaluate a business plan that will turn those intimidating digits into music to an investor’s ears.

Management Team Assessment

Who’s driving this entrepreneurial bus? Your management team is crucial because even the shiniest Lamborghini won’t go far without an ace driver (or drivers). Highlight their experience, skills, and unique qualities that make them the dream team for steering this venture toward success.

Investors are betting on jockeys as much as they are on horses; make sure yours look good on and off paper. Need some inspiration? Swing by our post on business plan review techniques!

"A rockstar team can take an average idea and turn it into gold."

Remember that quote when assembling your squad – chemistry and competence can elevate any project from 'meh' to 'wow'!

• An engaging executive summary sets the stage for investment potential.
• Detailed market analysis demonstrates awareness of customer needs and competitive landscape.

Analyzing Market Potential and Competitive Advantage

When you're knee-deep in the throes of startup enthusiasm, it's easy to get swept up by the thrill of your big idea. But here's a nugget of wisdom: not all that glitters is gold, and not every business plan has legs. So, how do you sift through the sparkle to find true startup treasure? Well, my entrepreneurial friends, it boils down to two key concepts: assessing market potential and evaluating competitive advantage and scalability .

Assessing Market Potential

Imagine this: you've got a business plan that's as tight as jeans after Thanksgiving dinner. But hold your horses! Before you charge ahead, ask yourself—does anyone actually want what I'm selling? Enter market assessment , the unsung hero of startup success.

"Market potential isn't just about numbers; it's about understanding hearts and minds."

To gauge market potential, start with good ol' research. Who are your customers? What are their pain points? And most importantly, can you convince them to part with their hard-earned cash for your solution?

Then there's market size. If your target market is as small as a mouse's shopping list, you might need to pivot. But if it's more like Santa's list—long and ever-growing—you could be onto something big.

Don't forget about trends! If you're riding a wave that’s heading for shore (think Blockbuster at the dawn of Netflix), reassess pronto. Use resources like AI business trend analysis to stay ahead.

Evaluating Competitive Advantage and Scalability

Now let’s talk about standing out in a crowded room—or market, in this case. Your competitive advantage is what makes your offering special. It could be an innovative product feature or an unbeatable customer service mantra.

But don’t just stop at being different; consider scalability too. Can your business grow without collapsing under its own weight? For instance, if hand-knitting bespoke socks is your thing (bravo!), can you ramp up production when orders flood in?

Scalability also means thinking long-term—can your business model adapt over time? Check out insights on scalable AI startups for inspiration.

A Peek into Porter’s Strategic Analysis

You might have heard of Michael Porter—the grandmaster strategist whose frameworks turn so-so plans into strategic masterpieces. His principles still hold water today when evaluating competitive landscapes ( Porter’s Strategic Analysis PDF ). They'll help you understand industry forces and where you fit in or stand out.

The Role of AI in Business Evaluation

In our digital age, AI has become the entrepreneur’s best pal for analyzing complex data patterns that mere mortals might miss ( AI Business Analyst Insights ). From forecasting market growth to identifying new opportunities through data mining—AI tools are reshaping how we evaluate business plans for better precision and insight.

Takeaways from MVP Workspace Trends

Creating a Minimum Viable Product (MVP) is like dipping your toes before plunging into the pool—it tests whether people will swim towards you or away from piranhas (figuratively speaking). Today’s MVP workspace trends show us that less can indeed be more ( MVP Workspace Trends 2024 ).

• Evaluate market demand meticulously; even brilliant ideas need real-world appeal.
• Differentiate with gusto but ensure scalability isn’t an afterthought.
• Leverage AI tools for deeper insights into market dynamics and future-proof strategies.

Remember folks, evaluating a business plan isn’t rocket science—but it does require smart tools, clear-eyed analysis, and maybe a touch of stardust luck! Keep dreaming big but ground those dreams in reality checks because at the end of the day, businesses thrive on solid ground—not just in starry skies. 🚀✨

Financial Feasibility and Risk Assessment: Navigating the Startup Waters

Starting a business is an exhilarating journey, but it's not all about the eureka moments and coffee-fueled late nights. It's also about crunching numbers, analyzing markets, and preparing for risks. When evaluating startup plans, two crucial aspects you need to consider are financial feasibility and risk assessment.

Evaluating the Financial Feasibility of Your Startup

Alright, let's talk turkey—or rather, let's talk finances. If you're knee-deep in drafting your business plan or just tossing around a potential goldmine idea for a startup, you've got to get down with the dollars and cents of it all.

"Profit is not an event. It's a habit."

Now that’s something every entrepreneur should have stitched on a pillow somewhere. But before we start counting hypothetical chickens before they hatch, let’s break down what financial feasibility really means for your business plan.

Understanding Costs and Projections

First off, can we take a moment to appreciate spreadsheets ? Those grids are going to be your best friends. You'll want to lay out all your expected costs—rental space (virtual or physical), equipment, salaries (don’t forget about paying yourself), marketing expenses…you get the picture.

Once you've got those numbers staring back at you (hopefully not too menacingly), it’s time to project your revenue. How many units of your world-changing product do you need to sell to break even? And when do you expect those sales to happen? Getting this right is more art than science sometimes, but aim for educated guesses over wild shots in the dark.

Funding: Fuel for Your Business Engine

Unless you’ve found a money tree (in which case, congrats!), chances are you’ll need some sort of funding to get things rolling. This could mean bootstrapping with savings, wooing investors with an irresistible pitch ( here’s how ), or exploring small business loans.

Remember that each funding avenue comes with its own set of pros and cons. Investors might give you more money upfront but will likely want a say in how things are run. Loans keep control firmly in your hands—at the cost of interest payments down the line.

Risk Assessment and Mitigation Strategies

Ah risks—the uninvited plus-one at every business party. Identifying potential pitfalls isn't just about being pessimistic; it's smart strategizing.

Identifying What Could Go Wrong

Start by asking yourself: What could possibly torpedo my startup dream? Is it fierce competition? A shift in market trends? Regulatory changes? Once identified, these risks shouldn’t be ignored like awkward conversations at networking events—they should be addressed head-on ( like so ).

Developing Mitigation Tactics

For each risk factor identified earlier on this entrepreneurial safari through treacherous territory, think up countermeasures. For instance:

• Competition : Stand out by honing in on what makes your offering unique.
• Market Changes : Keep flexible so that pivoting doesn’t feel like trying to turn around an ocean liner.
• Regulatory Risks : Stay informed and compliant—it’s less exciting than product development but just as critical.

And remember—insurance isn't just for cars and cavities; businesses need protection too!

'Take Away'

• Nail down financials early; use projections and spreadsheets as guides.
• Explore funding options thoroughly; choose one that matches your comfort level with control versus debt.

Tools and Methods for Effective Business Plan Evaluation

Starting a new venture is exhilarating, but let's face it – the real challenge lies in ensuring that your business plan isn't just another document gathering digital dust. As an aspiring entrepreneur or product developer, you know that how to evaluate a business plan is not just about checking off boxes. It's about diving deep into the feasibility, viability, and potential of your startup idea.

SWOT Analysis for Business Plans

Ah, the good ol' SWOT analysis – it’s like the compass for navigating the treacherous waters of business planning. Standing for Strengths, Weaknesses, Opportunities, and Threats, this tool is your first mate when evaluating a business plan. By breaking down these elements, you can get a clear picture of where your startup stands.

"A thorough SWOT analysis is more than an exercise; it's a profound insight that could be the difference between success and failure."

Let’s say you’re eyeing up the AI sector – smart move! You'll want to look at strengths like innovative technology or expertise in machine learning. Weaknesses? Perhaps it's a lack of established brand presence or limited financial resources. Opportunities could include emerging markets or advancements in AI tech. And threats might be competitors with deeper pockets or rapid changes in tech regulation.

But don't just take my word for it; dive into this comprehensive guide on evaluating business ideas to sharpen your skills further.

Financial Ratio Analysis and Scenario Planning Techniques

Now onto the numbers game – financial ratio analysis. This isn't just about crunching numbers; it’s like reading tea leaves if those leaves were spreadsheets forecasting your company's future health. Key ratios such as profitability margins, liquidity ratios, and leverage ratios offer insights into financial stability and performance.

Scenario planning also plays a crucial role here. It’s all about asking "what if?" What if market conditions change? What if there's an economic downturn? This technique helps you prepare multiple strategies tailored to different possible futures – because who doesn’t want a plan B…C…D?

And when we talk scenario planning in today’s world, we can't ignore AI's transformative impact on startups. For more juice on this topic, check out AI transforming businesses .

Integrating AI into Your Business Plan Evaluation

Incorporating AI into your evaluation process can take things from zero to hero real quick. Think about using an AI business analyst tool to dissect complex data patterns and provide actionable insights that might otherwise slip through human analysis.

But hey, don’t get carried away with all the techy goodness without ensuring its alignment with your core objectives! Remember: technology is only as powerful as its relevance to your goals.

The Role of Internal Linking in SEO Optimization

As you're getting savvy with how to evaluate a business plan effectively using these tools and methods, let's not forget about enhancing online visibility through internal linking within our content strategy.

By strategically placing links like this gem on SWOT analysis , we're not only providing additional value but also boosting our SEO game significantly!

'Take Away' Points

• Employ SWOT analysis to identify key aspects of your business plan including strengths that differentiate you from competitors.
• Use financial ratio analysis for an objective assessment of fiscal health; scenario planning prepares you for various market conditions.
• Leverage AI tools effectively but ensure they align with strategic goals for maximum benefit in evaluating your business plans.

Frequently Asked Questions

How do you evaluate a business plan? To evaluate a business plan, consider factors such as the market analysis , competitive landscape, financial projections, management team, and the feasibility of the business model .

What are the key components to consider when evaluating a business plan? Key components to consider when evaluating a business plan include the executive summary, market analysis , marketing and sales strategy, organizational structure, and financial projections.

What are some common evaluation criteria for a business plan? Common evaluation criteria for a business plan include market potential, competitive advantage, scalability, financial feasibility, management team expertise, and risk assessment .

Why is it important to evaluate a business plan thoroughly? Thorough evaluation of a business plan is crucial as it helps in assessing the viability and potential success of the startup company , identifying potential risks, and making informed investment or partnership decisions.

Are there any specific tools or methods for evaluating a business plan? There are various tools and methods for evaluating a business plan, including SWOT analysis, financial ratio analysis, risk assessment matrices, and scenario planning.

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How to Measure Your Business Strategy's Success

• 04 Jan 2024

Measuring your business strategy’s success is vital to strategy execution .

Despite its importance, research by SurveyMonkey shows that only 35 percent of business owners set benchmarks or goals. Among those who set them, 90 percent consider themselves successful. Of those who don't, only 71 percent report the same.

If you want to achieve organizational objectives and avoid common strategic planning pitfalls , here’s why it’s important to evaluate your strategy.

Access your free e-book today.

Why Is It Important to Evaluate Your Strategy?

Evaluating your strategy can help your organization achieve its goals and objectives while highlighting necessary adjustments for long-term success.

Its benefits include:

• Ensuring organizational alignment
• Establishing accountability
• Optimizing operations

Assessing your business strategy is an ongoing process. To ensure it’s set up to succeed, you must evaluate it pre-, during, and post-implementation. Here’s how to do so.

How to Measure Your Strategy’s Success

1. revisit goals and objectives.

Every business strategy needs clearly defined performance goals. Without them, it can be difficult to identify harmful deviations, streamline the execution process, and recognize achievements.

After establishing goals and objectives, plan to revisit them during and after implementing your strategy. According to Harvard Business School Professor Robert Simons in the online course Strategy Execution , the best way to do so is by comparing them to critical performance variables —the factors you must achieve or implement to make your strategy succeed.

For example, if your company’s value comes from customer loyalty, one of your critical performance variables could be customer satisfaction. When customers no longer receive value from your products or services, that could impact your company’s bottom line.

The best way to verify critical performance variables is by analyzing them against your strategy map —a visual tool outlining the cause-and-effect relationships underpinning your strategy. Those variables should also receive high importance on your balanced scorecard , which translates your strategy into goals and objectives.

By taking these steps, you can identify performance measures worth reviewing.

2. Review Measures

Evaluating business performance requires measures —quantitative values you can scale and use for comparison—and they must tell the right story.

According to Strategy Execution , you should ask three questions when reviewing measures:

• Do they align with my strategy?
• Are they objective, complete, and responsive?
• Do they link to economic value?

For example, if you want to improve your company’s brand loyalty, metrics worth monitoring include the number of new customers, average purchases per customer, and the number of social media followers.

A balanced scorecard can provide a holistic view of your business performance measures—ensuring all your employees are on the same page.

“You can have the best strategy in the world,” Simons says in Strategy Execution . “But at the end of the day, what everyone pays attention to is what they're measured on. So, you need to be sure that measures throughout the business reflect your strategy, so that every employee will devote their efforts to implementing that strategy.”

3. Supervise Monitoring Systems

While balanced scorecards are powerful diagnostic control systems —formal information systems used to monitor organizational outcomes—they don’t provide visibility into all measures of success. That’s why you need additional systems to streamline strategic plans’ evaluation.

For example, you can use customer relationship management systems’ analytics tools to generate reports that align with business goals and objectives. To boost customer loyalty, you can automate reports on:

• Purchasing patterns
• Purchase frequency
• Customer survey scores

“But to ensure that these systems are effective, you need to invest considerable time and attention in their design,” Simons says in Strategy Execution . “You must not only spend time negotiating and setting goals—as we've discussed—you must also design measures for these goals and then align performance incentives.”

4. Talk to Employees

Employee feedback and buy-in are other useful tools for measuring success.

For example, creative software company Adobe is known for its loyal employee base. That was put to the test when the company shifted to a subscription-based model, launching Adobe Creative Cloud .

Company leaders briefed employees on strategic changes and how they provided value to customers. They also encouraged employees to contribute ideas and feedback throughout the transition. With minimal internal pushback and a boost in collaboration, Adobe knew its strategy would succeed and ensure relevance in a constantly evolving market.

“The best businesses motivate their employees to be creative, entrepreneurial, and willing to work with others to find customer solutions,” Simons says in Strategy Execution .

Related: How to Create a Culture of Strategy Execution

5. Reach Out to Customers

Customer feedback is a key measure of your strategy’s success. According to a recent report by Zendesk , 73 percent of business leaders believe customer service directly links with business performance—with 64 percent attributing customer service to positive business growth.

Feedback can also reflect how well initiatives align with customer needs and expectations when it comes to value creation , making it important to consistently seek out ways to monitor attitudes toward your company and its strategy.

In Strategy Execution , Tom Siebel, CEO of C3 AI, shares his thoughts on customer satisfaction when measuring success.

“Everything that's important to the business, we have a KPI and we measure it,” Siebel says. “And what could be more important than customer satisfaction?”

Unlike your company’s reputation, measuring customer satisfaction has a more personal touch in identifying what they love and how to capitalize on it.

“We do anonymous customer satisfaction surveys every quarter to see how we're measuring up to our customer expectations,” Siebel says in the course.

Your customer satisfaction measures should reflect your desired market position and focus on creating additional value. When customers are happy, profit margins tend to rise, highlighting why this should be the final step in measuring your strategy’s success.

Success Is within Reach

Measuring your strategy’s success is a continuous process that requires understanding your company’s goals and objectives.

By taking an online strategy course , you can develop strategy execution skills to measure performance effectively. Strategy Execution provides an interactive learning experience featuring organizational leaders who share their successes and failures to help you apply course concepts and excel in your career.

Want to learn how to measure your strategy’s success? Explore Strategy Execution —one of our online strategy courses —and download our free strategy e-book to begin your journey toward implementing strategy successfully.

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5 Essential Steps To Evaluating Your Business Idea

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

There's no doubt that America and other industrialized countries are small-business-friendly right now. In a year where elections around the world will play a key role in how economies continue to recover, there is at least one subject that most people agree on and that's small businesses. Politicians believe that small business is the key to economic growth and countries like the United States are passing legislation to make it easier for small businesses to thrive.

Robert Litan, economist from the Kauffman Foundation, the largest foundation in the world dedicated to the growth of small businesses, estimates that in order to add one percentage point to the United States' gross domestic product, or GDP, it would take 30 to 60 "home run" $1 billion companies.

Your business idea a home run idea? Being a successful small business owner doesn't require your company to be a $1 billion company, but entrepreneurs like to think big. National Federation of Independent Business Education Foundation (NFIB) estimates that only 40% of all small businesses are profitable and another 30% merely break even. These statistics prove that even with all of the incentives, it's difficult to turn your business in to one of those home run companies. Experts agree that you can improve your odds of success with careful preparation.

Identify the Need

What is the mission of your business? What is the need in the marketplace that you're filling and is it something that will appeal to a large portion of the population? Have you ever received a survey from a company asking you what you think of a product and if you would be likely to purchase the product and for how much?

This is the first step in market analysis . Don't just conduct an Internet survey. Go to a mall or other place where there are a lot of people and ask them to evaluate your idea.

How is your business different than others in the marketplace ? If you have competitors, what will make somebody come to your business instead of your competitor? Successful businesses have a USP or unique selling point that is used as the cornerstone of the business. The more you blend in the more you directly compete with others.

Avoiding the head to head competition, especially for a brand new business, is well advised.

Specifically, how big is your market? Does it include both males and females and people of all races and religions? How fast is the market growing or contracting?

If you design a product or service that only appeals to a small niche market, it will be difficult to gain enough market share to sustain a profitable business. It will also take a significant amount of advertising funds to find the people that comprise the niche market.

Based on your market analysis, how much of a market share do your competitors currently hold? What is left over for you or what is your strategy for taking share from them? Your business may have broad market appeal, but if the market is already saturated, the battle to gain customers may be too expensive.

Startups trying to manufacture new automobiles have found it exceedingly difficult to take market share from existing car companies. Evaluate whether that's a battle worth fighting and if you have the funds to fight it.

How much will it take to open your business? If you have family obligations, you'll probably have to pay yourself, adding additional costs to your budget. How will you get the money? Recently, Washington passed the JOBS Act, a law that made crowdfunding legal . This may provide a way for small businesses to gain funding without the use of banks or venture capital, but even with all of the recent legislation, businesses are finding it difficult to secure funding.

As an entrepreneur, your dream is likely centered around being one of those $1 billion or more businesses, but remember that many businesses fail and that's largely due to poor planning. Before investing a large amount of money in your business idea, create a plan and make sure that your idea is something that customers would be excited about purchasing. There are plenty of great opportunities waiting for a small business owner who follows a business startup system.

Top 6 Reasons New Businesses Fail

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10 Qualities of a Good Business Plan Explained

9 min. read

Updated August 1, 2024

What makes a good business plan? 

Results. 

Goals met, milestones achieved, objectives accomplished. 

Forget the old-fashioned thinking of evaluating plans like a college term paper. You don’t get points for writing style, formatting, or completeness. 

A good business plan shows you can get results. But what does that look like in practice? What should you focus on when writing? 

Well, I’ve narrowed it down to 10 key qualities. Qualities I’ve found make for the best business plans and, ultimately, more successful businesses.

• 1. It fits the business need

You have to consider why you need a business plan in the first place. Business plans aren’t one-size-fits-all . Form follows function. 

Not all business plans have to be pretty

Most business plans exist to help run the company , not to be presented to outsiders. They don’t have to be polished and formal; they just need to work for you and be easy to review, revise, and run your business. 

Write it for your audience

A business plan being shown to outside investors does, in fact, have to look good, read well, and be presentation-worthy. It needs good summaries and descriptions to validate the idea, the team, the market, and other key elements. It should also describe how you intend to exit in the future. 

The business plan to support a loan application also needs summaries and descriptions. They need to reassure a lender about risk, usually with assets, often with the owner’s personal financial statements, and past performance on credit ratings and debt repayment. 

2. It’s realistic and can be implemented

The second measure of a good or bad business plan is realism. You don’t get points for ideas that can’t be implemented. Setting unrealistic and unachievable goals is a waste of time.  

For example, a brilliantly written, beautifully formatted, and excellently researched business plan for a product that can’t be built is not a good business plan. A plan that requires millions of dollars of investment but lacks a management team to get that investment is not a good plan. 

A plan that ignores a fatal flaw is not a good plan. Make sure your goals are achievable.

For example, if you share a financial forecast , is it realistic? Based on current revenue, can you realistically achieve your goals? If you’ve brought in $200,000 annually in revenue for the last few years, don’t expect to jump to $400,000 in the next quarter. 

Make a plan for increasing revenue—but in increments that make sense and are achievable.  Look at changes in revenue drivers, such as traffic, web views, sales per store, etc. Get into the details. 

Link your projected increases to actions and events, such as milestones, promotions, a new product launch, or a new location. Think of the power of cause and effect. Increases are more real when they result from activities and events, not just out of the blue. 

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3. It’s specific and measurable

Every business plan should include tasks, deadlines, dates, forecasts, budgets, and metrics. These will make your plan measurable .

Ask yourself: 

• How will we know if we followed the plan?
• How will we track actual results and compare them against the plan? 
• How will we know if we are on track or not?

While high-end strategy can be fun to develop, good planning depends more on what, when, who, and how much. These are the concrete specifics that offer visibility into the real progress toward your goals. 

• 4. It clearly defines responsibilities for implementation

You have to be able to identify a single person who will be responsible for every significant task and function. A task that doesn’t have an owner isn’t likely to be implemented. 

You should be able to review a business plan and recognize who is responsible for implementation at every point. If you don’t, you have a gap and need to fill it.

Avoid sharing responsibilities between different people or groups because this reduces accountability. Match every important task or function with one person in charge and accountable. 

Again, if you don’t have that person right now, don’t just ignore it. Mention in your plan that it’s a known gap, when you intend to address it, and if you have anyone in mind.

• 5. It clearly identifies assumptions

Business plans are always wrong. They’re written by humans who are making guesses about the future. Humans tend to guess wrong. 

So, your business plan must clearly address assumptions upfront. 

Did you assume the company will increase productivity by 10% this year because it did the last few years? Do you assume the market won’t change much? No new competitors? Do you assume that your technology will reduce your direct costs? Do you assume growth in your social media impact? 

Share your thoughts on why this is achievable based on past factors, but also clarify that you’re guessing. 

You may need to update or refine these areas of your plan after a few months. By flagging them as assumptions from the start, you won’t be surprised when you over or underperform and are prepared to revisit and adjust. 

• 6. It defines strategy and tactics

In the real world, a small business can’t do everything, so it has to do the right things. You can’t please everybody, so you need to please the right people. That is the essence of strategy. 

A strategy defines what problem you solve, the solution you offer, the relevant target market, and why you are the one to do it. 

How you treat strategy in a business plan depends on the nature and objective of the plan itself. 

Strategy can be as simple as a bulleted list taking up a page or two of a lean business plan. It could also be one or more slides in a pitch deck or a more detailed formal chapter of a traditional plan. 

The plan defines the strategy so you can refer back to it as often as necessary. It might be there for management value or to explain to outsiders. And who will be using or looking at it will dictate how it needs to be presented. 

Get into the details

Strategy is useless without the key tactics . 

Tactics might be pricing, distribution, marketing, financial plans, sales plans, etc. Make sure the tactics you choose are directly in service of executing your strategic goal. 

You should be able to explain how every action you take relates to your overall business strategy. And don’t leave tactics without developing concrete specifics, milestones, budgets, tasks, responsibility assignments, tracking, and how you’ll follow up. 

• 7. It incorporates a monthly review schedule

Good business plans include timing and schedules for regular updates. You anticipate the need for a regular monthly review . 

You know your plan is not perfect and needs to be revised to accommodate ongoing results. Real business plans need to be kept fresh. 

• 8. It includes essential numbers

Sure, there is a place for a simpler one-page business plan and other shorter plan summaries. Investors, banks, and strategic partners might want that kind of simple summary to quickly understand your business. 

But real business runs on cash, and keeping your business in cash requires thorough financial planning. 

You need budgets and tracking. 

So a real business plan includes essential financial projections , including sales, costs of sales, expenses, profits, and cash flow.  

You track sales, costs, and expenses to monitor related budgets and progress toward goals. You also track cash flow factors such as accounts receivable and inventory to look for indications of change that might require management actions. 

Remember that management is about constant course corrections. This is why you include a regular monthly review of the plan against your actual results. 

9. It’s clear and simple

Keep it simple. 

Most businesses need and will use a lean business plan , which can be just a few pages of bullet point lists (strategy, tactics, milestones, etc.) and tables (sales, costs, expenses, profits, cash flow). 

Don’t use a business plan to show off. 

A business plan is about the business, not the science. Avoid industry jargon and long technical explanations. Investors and bankers will have experts review your details, but they don’t expect to find them all in the plan document.

Related Reading: How long should your business plan be?

• 10. Easy to communicate with the right people

Again, form follows function. 

For example, an internal plan to manage your business is not lengthy and formal. Instead, it links key elements together to make them easy for team members to access and work on. 

If you do have to present the plan, make the text business-appropriate.

Take the time and trouble to avoid typos and spelling errors. Use outlines and summaries to make the more important points easy to find. Make font sizes clean and large enough for older readers. Have somebody else read it before you finish. 

This makes it professional and shows respect for the reader and the business situation. It should also be presented in a format that lends itself to sharing, like a website or PDF document. 

Security is important too. Is the plan safely locked away from the prying eyes of outsiders? Most business plans live online or on local networks where team members can access and manage.  Some are online, and outsiders can see them. In both cases, use security safeguards. 

Ongoing planning process: it’s about the management it causes

U.S. president and military strategist Dwight D. Eisenhower is often quoted as saying: 

The plan is useless, but planning is essential .

The key point is that no clear criteria exists to tell you if a business plan is good or bad. 

What makes a business plan useful (good) is the management that comes out of it. The regular reviews and revisions that help you stay on track. That’s good planning , as opposed to just a good plan.

To start your own planning on the right foot, download our free business plan template . It provides the structure and guidance needed to create a good business plan and can be adapted to fit your meeds.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 2. It’s realistic and can be implemented
• 3. It’s specific and measurable
• 9. It’s clear and simple
• Ongoing planning process: it’s about the management it causes

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