business plan and why do i need one

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What Is A Business Plan (& Do I Really Need One?)

The term "business plan" is a familiar one, often bandied about in entrepreneurial circles. Yet, despite its ubiquity, it's remarkable how much mystery and confusion can surround this essential business tool.

What exactly is a business plan? What purpose does it serve? How is it structured? This article aims to lift the veil, demystifying the business plan and revealing its multifaceted nature.

Business Plan Definition

A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them. It's more than a mere document; it's a structured communication tool designed to articulate the vision of the business, allowing stakeholders to easily find the information they seek.

The business plan is a tangible reflection of the strategic planning that has gone into the business's future. While the plan is a static document, the planning is a dynamic process, capturing the strategic thinking and decision-making that shape the business's direction.

Purposes of a Business Plan

1. attracting funding opportunities.

A well-crafted business plan illustrates the company's potential for growth and profitability. It outlines the company's vision, mission, and strategies, providing a clear roadmap for success. A potential investor, whether venture capitalists or angel investors, can see how capital will be utilized, fostering trust and confidence in the business venture. A bank or financial institution can assess your company's ability to meet debt service obligations and compliance with strict financial accounting to meet underwriting requirements.

2. Aligning Organizational Objectives

A business plan acts as a unifying document that aligns the team with the company's goals and strategies. It ensures that everyone is on the same page, working towards common objectives. This alignment fosters collaboration and efficiency, driving the business towards its targets.

3. Validating the Business Concept

Before launching, a business plan helps in validating the feasibility of the business idea. It's a rigorous process that tests the concept against real-world scenarios, ensuring that the idea is not only innovative but also practical and sustainable. This validation builds credibility and prepares the business for the challenges ahead. For an existing business, a business plan can help address a possible merger and acquisition (M&A), rolling out a new business product or location, or expanding the target market.

4. Facilitating Legal and Regulatory Compliance

Whether it's securing a visa for international operations or meeting other regulatory requirements, a business plan can be an essential tool. It provides the necessary information in a structured format, demonstrating compliance with legal and regulatory standards. This can streamline processes and prevent potential legal hurdles.

5. Articulating and Formalizing the Business Vision

The business plan is more than a set of numbers and projections; it's the embodiment of the business vision. It communicates the essence of the business to stakeholders, turning abstract ideas into a concrete operational plan. It's a vital tool for leadership to articulate and formalize the vision, setting the stage for strategic execution.

Identifying the Right Type of Business Plan

Once you understand who your business plan is for and what specific needs it must address, you can identify the type of plan that best suits your situation. Business plans can be categorized into two main types: traditional and lean, each serveing its own unique purpose.

Traditional Business Plan

The Traditional Business Plan is a detailed and comprehensive document, often used by a new business, especially those seeking significant funding. It provides a complete picture of the company's vision, strategies, and operations. A traditional business plan leaves no stone unturned, offering a robust tool that communicates the business's entire vision and plan to stakeholders.

Lean Business Plan

In contrast, the Lean Business Plan is an abbreviated structure that still emphasizes the key elements of a Traditional Business Plan, but in less detail. It's suitable for early-stage startups, small businesses, or situations where agility and speed are essential. The Lean Business Plan focuses on the essentials, providing a quick overview without overwhelming details. It's a flexible and adaptable tool that can evolve with the business. One of the primary distinctions between it and a Traditional Business Plan is that a Lean Business Plan does not typically include financial planning, or if it does, it's a simple financial forecast or cash burn.

Components of a Business Plan

There are many places online where you can buy a business plan template. Often, those documents are just an outline of the sections of the business plan and what is included in each. If that's what you're looking for, here's a good business plan outline:

Executive Summary

The Executive Summary is the first section read but often the last written, as it encapsulates the entire plan. If the company has a mission statement, it's typically included here. When used for funding, it includes the ask or uses of funds, and for investment, it may contain an investor proposition. It's a concise overview that sets the tone, summarizing each section that follows.

Company Overview

The Company Overview is the foundation of the business, articulating how it operates, generates revenue, and delivers unique value to its customers. This section defines products and/or service the business sells, as well as the company’s business model and unique value proposition. It covers key partners, pricing strategy, revenue model, and other essential business activities. 

Market Analysis Summary

The Market Analysis is the business intelligence portion of the plan. It comprises an industry analysis, market segments, target customers, competitive analysis, competitive advantage. This section provides insights into the market landscape, identifying opportunities, challenges, and how the business positions itself uniquely within the industry.

Strategy & Implementation Summary

Here, the business plan should outline the short-term and long-term objectives, marketing strategy and sales approach. It's a roadmap that details how the business will achieve its goals, including tactical steps, timelines, and resources. In a business plan for investors, the inclusion of an exit strategy can provide a vision for the future, considering various potential outcomes.

Management Summary

The Management Summary offers profiles of key personnel, their qualifications, roles, and plans to fill talent gaps. It's a snapshot of the leadership team, providing assurance that the right people are in place to execute the business plan successfully.

Financial Projections

This section includes standard financial statements like the profit & loss statement (P&L), the balance sheet, and the cash flow statement. It offers a detailed financial blueprint, illustrating the company’s revenue drivers and unit assumptions, income statement, a break-even analysis, and a sensitivity analysis to examine how changes in variables affect outcomes. For businesses with complex structures, framing the revenue in terms of market share can offer additional insight into the viability and feasibility of the financial projections.

The Appendices often include year 1 and year 2 monthly financial statements, intellectual property like patents and trademarks, construction blueprints, and other essential documentation. It's a repository for supporting information that adds depth and context to the main sections of the plan.

Do I Need a Business Plan?

The question "Do I need a business plan?" is one that many entrepreneurs and business leaders grapple with. The answer, however, is not as straightforward as it might seem. While not every business requires a traditional business plan, the strategic planning process is essential for all. 

In some cases, a traditional business plan is required. Applying for a Small Business Administration (SBA) loan , obtaining a entrepreneurship visa , or meeting specific investor requirements may mandate a comprehensive business plan.

However a traditional business plan isn’t always necessary. For example, in early-stage investor funding, particularly in industries like SaaS, a lean business plan accompanied by a pitch deck presentation will often suffice. The focus here is on agility and essential information rather than exhaustive detail.

Every Business Needs Business Planning

Unlike the traditional business plan, which may or may not be required depending on the situation, business planning as a process is indispensable for every business, regardless of size or stage.

Business planning is a dynamic, continuous process. It's not confined to a single document but evolves with the business, adapting to changes, challenges, and opportunities. Effective strategic planning ensures internal alignment with both long-term vision and short-term objectives. It's a holistic approach that guides business goal-setting decision-making, resource allocation, and strategic direction. It often serves as the basis for a fully developed marketing plan.

Every business, from a small startup to a large corporation, benefits from strategic planning. It's a practice that fosters growth, innovation, and resilience, providing a roadmap for success.

Not every business needs a traditional business plan as a document, but all businesses need to engage in business planning as a process. While the traditional business plan serves specific purposes and audiences, business planning is a universal practice that guides and grows the business.

Entrepreneurs and business leaders must assess their specific needs, recognizing that the traditional business plan is just one tool among many. The true value of the business plan lies in continuous planning, adapting, and aligning with the unique vision and goals of the business.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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• Mar 29, 2023

What is a Business Plan and Why Do I Need One?

Have you ever heard the saying, "failing to plan is planning to fail?" It may sound cliché, but when it comes to starting or growing a business, it's absolutely true. One of the most important tools in your arsenal as an entrepreneur is a well-written business plan. In this article, we'll answer the frequently asked question "What is a business plan and why do I need one?" in a conversational and informative manner.

What is a Business Plan?

So, what exactly is a business plan? A business plan is a written document that outlines your business goals, strategies, and tactics for achieving those goals. It includes information about your target market, competitors, marketing and sales plans, financial projections, and more. Think of it as a roadmap for your business - a guide that helps you stay focused and on track as you navigate the challenges of entrepreneurship.

Why Do You Need a Business Plan?

Now, you may be wondering why you need a business plan in the first place. After all, can't you just wing it and hope for the best? Well, you could, but that would be a recipe for disaster. Here are some of the key reasons why having a business plan is essential:

It helps you clarify your vision and goals: When you sit down to write a business plan, you're forced to think through all the important details of your business - from the products or services you'll offer, to your target market, to your financial projections. This process helps you clarify your vision and goals, and ensures that you're on the right track.

It helps you identify potential problems: By thinking through all the details of your business, you'll be able to identify potential problems before they arise. This could be anything from a competitor who's already established in your market, to a lack of funding to get your business off the ground. Knowing about these potential issues ahead of time gives you the opportunity to plan for them and minimize their impact.

It helps you secure funding: If you're looking for funding from investors or lenders, a business plan is essential. It shows that you've thought through all the details of your business and have a solid plan in place for achieving your goals. Without a business plan, it's unlikely that you'll be able to convince anyone to invest in your business.

It helps you stay on track: As an entrepreneur, it's easy to get sidetracked by shiny objects or new ideas. But with a business plan in place, you have a roadmap to keep you focused on your goals. You can refer back to your plan regularly to make sure you're on track, and adjust your strategies as needed.

What’s in a Business Plan?

Now that you understand the importance of having a business plan, let's talk about what should be included in one. While every business plan is unique, there are some key elements that should be included:

Executive Summary: This is a high-level overview of your business, including your goals, strategies, and financial projections.

Company Description: This section should include information about your company's history, mission statement, and products or services.

Market Analysis: This section should include information about your target market, competitors, and industry trends.

Marketing and Sales Plan: This section should include your marketing and sales strategies, as well as any pricing and distribution plans.

Financial Projections: This section should include your financial projections, including revenue, expenses, and profit margins.

Management Team: This section should include information about your management team, including their experience and qualifications.

Appendix: The appendix is where you can include any additional information that supports your business plan, such as resumes of key team members, market research data, patents, or other supporting documents.

How Long Should a Business Plan Be?

Now that you know what should be included in a business plan, you may be wondering how long it should be. There's no one-size-fits-all answer to this question, as the length of your business plan will depend on the complexity of your business and the audience you're presenting it to. In general, though, most business plans are between 20 and 40 pages long.

Speaking of audiences, it's important to understand who your business plan is intended for. If you're using it to secure funding, your audience will likely be investors or lenders. In this case, you'll want to make sure your plan is professional, well-written, and includes all the necessary information to convince them to invest in your business. If you're creating a business plan for your own use, your audience may be yourself and your team. In this case, you may be able to be more informal and focus on the details that are most important to you.

Benefits of Writing a Business Plan

Now, let's talk about some of the benefits of creating a business plan. In addition to the benefits we've already mentioned, such as clarifying your vision and securing funding, a business plan can help you:

Make better decisions: With a well-thought-out business plan in place, you'll be able to make more informed decisions about your business. You'll have a better understanding of your market, your competition, and your financials, which will help you make smarter choices.

Attract top talent: If you're looking to hire top talent for your business, a solid business plan can help. It shows that you're serious about your business and have a clear plan in place for success.

Measure your progress: By setting clear goals and outlining strategies for achieving them, you'll be able to measure your progress over time. This can be incredibly motivating and help you stay on track as you work towards your goals.

Updating Your Business Plan

Finally, let's talk about how often you should update your business plan. While the answer to this question will depend on your business and the pace of change in your industry, it's generally a good idea to update your plan every 6-12 months. This will give you the opportunity to review your progress, adjust your strategies as needed, and ensure that your plan is still relevant and up-to-date.

A business plan is an essential tool for any entrepreneur. It helps you clarify your vision, identify potential problems, secure funding, and stay on track as you work towards your goals. By following the guidelines we've outlined in this article, you can create a professional, well-written business plan that will help you achieve success in your business.

• Writing Your Business Plan

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The importance of a business plan

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

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

What is a business plan?

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

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

Why is a business plan important?

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

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

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

10 reasons why you need a business plan

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

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

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

1. To help you with critical decisions

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

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

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

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2. To iron out the kinks

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

3. To avoid the big mistakes

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

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

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

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

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

4. To prove the viability of the business

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

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

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

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

5. To set better objectives and benchmarks

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

6. To communicate objectives and benchmarks

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

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

7. To provide a guide for service providers

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

8. To secure financing

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

Learn what you need to get a small business loan.

9. To better understand the broader landscape

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

10. To reduce risk

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

Understanding the importance of a business plan

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

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

Related Posts

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

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

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15 Reasons Why You Need a Business Plan in 2024

Posted january 21, 2022 by noah parsons.

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

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

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

What is the key purpose of a business plan? 

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

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

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

Why do you need to write a business plan?

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

1. Reduce your risk

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

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

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

2. Uncover your business’s potential

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

3. Test a new business idea

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

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

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

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

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

5. Plan for different scenarios

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

6. Research shows that business plans definitely work

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

7. Build a better budget and a financial forecast

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

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

8. Determine your financial needs

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

9. Attract employees

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

10. Get your team all on the same page

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

11. Manage your business better 

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

12. Understand your market and build a marketing plan

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

13. It’s easier than you think

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

14. You’ll sleep better at night

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

15. Effectively navigate a crisis

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

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

Don’t wait, start writing your business plan today

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

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

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

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Noah Parsons

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What is a Business Plan and why do you NEED one?

• EntrepreneursGateway.com Team
• October 31, 2018

If you want your business to be successful, you’ll need to produce a business plan.

In this article, we will explore why every company needs a business plan as well as how you can identify which business plan is right for you. We will cover:

• What a business plan is
• Why having one is so important
• What components you should include in it
• Different types of business plans you can have

Whether  you need a one-page business plan or something more in-depth, this ultimate business planning guide has you covered!

We will walk you through all the steps necessary to impress your investors and guarantee business success.

Ready? Let’s go.

What you need to know before writing your plan

It’s all about the 7 Ps!

P rior P reparation and P lanning P revents P i** P oor P erformance!!!

Bottom Line:

This article tells you exactly what you need to know before writing your business plan.

This article is part of the Business Planning Hub , where you’ll find lots of guides and resources to help you create the perfect business plan!

Table of Contents

Keep in mind:

It is a MUST for all businesses to have a business plan – no matter if you are looking for investment, if you’re a one-person business, or a multi-national million-dollar company.

It has been proven in studies that   companies that have a business plan grow 30% faster than those that don’t – while 3 in 5 business go bust in their first 2 years of trading.

As the adage goes, if you fail to plan, you’re planning to fail…

Let’s get started.

Businesses who have a #businessplan grow 30% faster than those who don't have one. Tweet

#1 What is a Business Plan?

To put it simply, a business plan is a written document that outlines your core business objectives and how you are planning to achieve them over a period of time.

Think of it as a roadmap.

It explains the nature of a business, sales, goals, marketing technique, strategy and also financial history, as well as consisting of a forecast revenue and loss declaration.

Your business plan ought to comply with the standards pertaining to form and content. There are important areas that should include certain components and address appropriate concerns that individuals who review your plan are most likely to ask.

So, if you’ve ever had that business idea but are short for ways on how to realize it … this section is for you.

How long should my business plan be?

A business plan can vary from a few pages to hundreds pages (usually for large businesses).

If you have a fairly small business (like a cosmetic or bakery one, for example), you should keep your plan as brief and concise as possible – ideally under 30 pages. Even more so if you are planning to submit it to investors or bankers to secure funding!

The business plan that most of us need is what is known as the “ Lean Business Plan ”.

This is something created only  for internal use within the organization, and has bullet points and projections. It’s essential to keep this up to date.

Compiling a Lean Business Plan is a much less daunting task, because it makes the planning process a lot easier. 

Just keep it simple and let it grow organically.

#2 How should you present your business plan?

You don’t necessarily have to print out your business plan (unless on special occasions such as sharing with third parties).

K eep in mind:

A business plan is never a finished document.

If you are using it correctly, you are going to keep tweaking it while checking the health of your business.

#3 What should be included in a formal business plan?

If it is funding or investment that you are looking for , then you will need to do a more formal business plan.

In a formal business plan, you need to include:

• The Executive Summary
• Company Overview
• Information about your Management Team and what they bring to the Company
• Information about your products and/or services
• Marketing Plan
• Your Company Milestones
• A Financial Plan with graphs and charts to illustrate your financial information.

How frequently should you update your business plan?

Updating your business plan is key if you want to grow your business successfully.

Studies show that people who write business plans not only grow their companies faster , but also have a greater chance of getting the resources they need and reach their sale targets more quickly. They are also more likely to deal with product development successfully, and are less likely to see their business fail.

According to William Gartner, Clemson University Entrepreneurship Professor: “Business plans are all about walking the walk.”

PRO TIP : Why not schedule a repeat event on your calendar app? This can be, say, the last Wednesday of every month.

Whatever you choose, be sure to set aside a day each month to have your monthly plan review meeting.

By reviewing your actual financial health compared to your financial projections, you will be sure to have an overview of your business growth and make sure it’s always on track .

A #businessplan is never a finished document. It’s always going to need tweaking to support the #health of your business. Tweet

#4 Who needs a Business Plan?

Do i need a business plan.

The short answer is:

The long anwer is…

It might depend on your situation. If you’re simply looking to pick up the odd bit of freelance work to boost your monthly earnings, then you can do without a business plan.

If this is a venture that is going to take a lot of time, resources, and money, then you will need a business plan.

 This will be critical to your success.

ALL businesses should have a business plan , regardless of the stage they are in.

If you’re already an established business, how can you keep track of ever-changing market conditions and any new opportunities that are out there without a plan? A business plan is just as important to a company that’s over 10 years old and looking to grow, as it is to a start-up that’s looking to raise funds.

All businesses should have both long and short term goals and Sales & Marketing budgets .

1. Business Plan for Start-ups

If you’re a start-up business, having a business plan will help you break uncertainty down into meaningful pieces – such as your projected sales, your milestones, budget expenses and tasks.

With this kind of plan, you can explain what your company is looking to do, how it plans to accomplish its goals, what amount of money it needs to start with, as well as what people are qualified to do the job.

2. Business Plan for Existing Businesses

If you’re already in business, having a business plan will help you to steer your company and take advantage of any new opportunities in the market .

Existing businesses will use their plan to track their results, reinforce their strategy, manage their resources and responsibilities.

Having a business plan can also be a great competitive advantage and help you spot any potential problems.

People investing in a business plan see their business grow 30% faster. #ultimatebusinessplanguide Tweet

#5 Choosing the Right Business Plan for your Requirements

Before even starting to write  your business plan, it’s vital that you think about the following:

• What are your goals for your plan?
• What’s your audience ?

It’s important to explain that the format of your business plan can vary depending upon the business type and the audience .

For example:

If you are writing a Restaurant business plan , you might want to include the location of the restaurant and any renovation work that needs doing.

If you are writing a Medical Center business plan , you may well need to go into details regarding government approval processes, etc.

Of course the language that you would use for the medical centre would be a lot more technical than that for the restaurant.

Business Plans also differ in:

• Presentation 

Business Plans that are created solely for internal use would use much more causal language and wouldn’t need a polished finish.

If you are looking for investment, your business plan will need to be of the highest spec.

#6 The most common types of business plans:

1. one-page business plan.

The purpose of a one-page business plan is simply to be a great ‘introductory’ tool for you to use with outsiders, for example potential investors. 

It is simply a short, quick business summary that fits on one page . It’s very concise and to the point.

You will need a much more detailed plan later, but initially, this is a great way to get that ‘first meeting’ and your foot in the door.

Having your summary on one page is also a great way to be able to see your company concept at a quick glance, so that it’s easy to refine.

Learn more about creating a  One Page Business Plan .

2. The Lean Business Plan

  A Lean Business Plan is slightly more detailed than the one-page business plan, as it includes some financial information; but it’s nowhere near as in depth as a traditional business plan.

The main purpose of having a Lean Plan would be for internal use, such as using it as a strategic planning tool.

The main aspects a Lean Business Plan focuses on are:

• Business Strategy

With a Lean Plan , you tend to skip out sections such as the history of the company and your management team. (If its main purpose is for internal use, you don’t need this information.)

We recommend you review your lean plan at least every month. If you do this regularly, you would only need an hour or two every month to revise it.

Lean Business Plans are a great management tool that can guide both start-up companies and existing businesses. They help you direct your business growth, make you think about your business strategically, and measure your progress.

3. The Standard Business Plan (External Business Plan)

In this section, you can find the more formal of business plans , which are meant for outsiders to read. This is primarily for businesses who are looking for investment.

The Standard Business Plan should be considered an extension of the Lean Business Plan , but it should be much better presented with a lot more attention to detail. 

See our example standard business plans

If you’re looking for a more detailed plan, why not take a look at our business plan examples:

• Ecommerce Business Plan sample
• Bar & Restaurant Business Plan sample
• Medical Center Business Plan sample
• Outdoor Activity Business Plan sample
• Advertising Agency Business Plan sample
• Real Estate Business Plan sample
• Boutique Business Plan sample
• Baker Business Plan sample

#7 What you should include in your Formal Business Plan

What are the components of a business plan? Well, this will vary from plan to plan. However, when writing a formal business plan , there are some elements that definitely need to be included.

1. Executive Summary

The Executive Summary section of your business plan usually goes at the beginning of your business plan and outlines what your business does.

It’s an overview.

It summarizes your key points and prepares the rest of the business plan content.

It’s vital that you provide a solid case for your business idea, which is why your executive summary is so important . Many potential investors may never read more than this section.

Be sure to include the problem your business is going to solve, the target market, any key financial highlights, and an overview of the key management team members.

Remember: The key is to hook the reader.

2. The opportunity

This section of the plan describes the following:

• Target Market
• Market Analysis
• Projections

Competition

Your target market.

You need to define who you are going to sell to, and especially: you need to understand who your target market is , so that you can market to them. 

Market Trends

You need to be able to know if there are any changes happening in your target market, and explain if these trends will go in your favour.

Market Growth

You need to be able to show whether your target market has grown or shrunk over the past few years. Do your research: you can use the Internet, as well as trade associations and any journalists and articles to gauge the market growth.

It’s encouraging to show there is a growing market, which in turn shows there is a stronger demand for your products/services.

It’s good to research your competition.What other options are out there that address your customers’ needs? Why is your solution a better choice? What makes you stand out?

3. Execution

Products and services.

This section outlines the core of your achievements. You detail the actual problem you want to solve, how you plan to solve it, your competitive landscape and competitive edge.

Marketing and Sales

This informs the reader how you plan to reach your target market. How you plan to price your products/services, what methods you will use to promote your products/services as well as the sales processes you have put in place.

You can include how you plan to operate the business. This can mean your office locations, any technology such as software systems etc, and any regulatory issues.

Milestones and Metrics

Having milestones lays out specific tasks which you plan to achieve. Set realistic dates for when they need to be complete and assign a person to these tasks to make them accountable.

You should also give details of key metrics which will help track your business growth. This includes:

• Generated Sales Leads
• Visitors to your website

This all helps in determining your business health.

Company overview

For an external business plan, your company overview gives a brief summary of the following:

• Legal structure
• Mission Statement.

For Internal plans, this is not required.

4. Management Team

This section should show all key management team players and include a biography of them to show it is made up of the right type of people.

Business plans not only help identify the strengths of a business, but also any areas that need to be improved. If you identify any gaps within the management team, it shows not only knowledge, but also foresight.

5. Financial plan

This is a crucial part of your business plan. To be successful in your business, you need to pay close attention to how much money you are bringing in and how much money is going out.

If you’re starting a business, having a financial plan enables you to know how much you need to get your business up and running, and then know what to ask a bank or investor.

A financial plan typically includes:

• Sales Forecast
• Personnel Plan
• Profit and Loss Statement
• Cash Flow Statement
• Balance Sheet.

#8 Your Business Plan is a Management Tool

Having a business plan doesn’t guarantee success.

Think of it as your ongoing management tool.

Ensure you constantly review it.

Additional Resources

To help you even further in creating your business plan, why not check out the following articles to help you in writing the perfect plan to impress:

• 40 Common Business Plan Mistakes
• How to Write a Business Proposal in 5 Easy Steps
• 10 FREE Business Name Generator Tools to find your perfect business name
• Understanding your Business Model
• How to write a One Page business plan FAST
• Which type of Business Plan is best for you?

Now, over to you...

Now I’d love to hear from you:

Are you still unsure of which business plan you need?

Maybe you have written a business plan and would like us to review it?

Leave any comments below and I will be sure to answer as soon as they come in!

Useful Links

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20 Reasons Why You Need a Business Plan in 2024

Written by Dave Lavinsky

What is the Purpose of a Business Plan?

The purpose of a business plan is to provide a clear roadmap for the company’s future. It outlines the vision, goals, and strategies of the business, guiding entrepreneurs and stakeholders in understanding its operations and objectives. A well-crafted business plan template helps attract investors and funding by showcasing the potential for profitability and growth.

Top 20 Reasons Why you Need a Business Plan

1. to prove that you’re serious about your business.

A formal business plan is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business. Creating your plan forces you to think through and select the strategies that will propel your growth.

2. To Establish Business Milestones

The business plan should clearly lay out the long-term milestones that are most important to the success of your business. To paraphrase Guy Kawasaki, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death). Would you tell your spouse that you tweaked the company brochure? Probably not. But you’d certainly share the news that you launched your new website or reached $1M in annual revenues.

3. To Better Understand Your Competition

Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages. And if you don’t currently have competitive advantages, to figure out what you must do to gain them.

Finish Your Business Plan Today!

Quickly & easily complete your business plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.

4. To Better Understand Your Customer

Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to an effective business plan and to a successful business. Understanding your customers will not only allow you to create better products and services for them, but will allow you to more cost-effectively reach them via advertising and promotions.

5. To Enunciate Previously Unstated Assumptions

The process of actually writing the business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity. For example, you might have assumed that local retailers would carry your product; in your business plan, you could assess the results of the scenario in which this didn’t occur.

6. To Assess the Feasibility of Your Venture

How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. In some cases, the result of your planning will be to table the venture. And it might be to go forward with a different venture that may have a better chance of success.

7. To Document Your Revenue Model

How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model. And upon reading your plan, others may suggest additional revenue streams to consider.

8. To Determine Your Financial Needs

Does your business need to raise capital? How much? One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital. It will also enable you to plan ahead, particularly if you need to raise additional funding in the future.

9. To Attract Investors

A formal business plan is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service? What are the financial projections? What is the company’s exit strategy? While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your business plan.

10. To Reduce the Risk of Pursuing the Wrong Opportunity

The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.

11. To Force You to Research and Really Know Your Market

What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. And it will allow you to use this knowledge to make decisions to improve your company’s success.

12. To Attract Employees and a Management Team

To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its strategic goals. Importantly, as you grow your company, your employees and not you will do most of the work. So getting them aligned and motivated will be key to your success.

13. To Plot Your Course and Focus Your Efforts

The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones. You wouldn’t go on a long driving trip without a map; think of your business plan as your map.

14. To attract partners

Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed explanation of your company.

15. To Position Your Brand

Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.

16. To Judge the Success of Your Business

A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not).

17. To Reposition Your Business to Deal with Changing Conditions

For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new ideas and strategies.

18. To Document Your Marketing Plan

How are you going to reach your customers? How will you retain them? What is your advertising budget? What price will you charge? A well-documented marketing plan is essential to the growth of a business. And the marketing strategies and tactics you use will evolve each year, so revisiting your marketing plan at least annually is critical.

19. To Understand and Forecast Your Company’s Staffing Needs

After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a roadmap for your staffing needs, and thus helps to ensure smoother expansion. Importantly your plan can not only help you understand your staffing needs, but ensure your timing is right as it takes time to recruit and train great employees.

20. To Uncover New Opportunities

Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.

Business Plan FAQs

What is a business plan.

A business plan is a document that details your business concept and strategy for growth.

A business plan helps guide your company's efforts and, if applicable, gives investors and lenders the information they need to decide whether or not to fund your company. A business plan template helps you to most easily complete your plan.

Why Do You Need a Business Plan?

A business plan provides details about your company, competition, customers and industry so that you make the best possible decisions to grow your company.

What is the Importance of a Business Plan?

The 3 most important purposes of a business plan are 1) to create an effective strategy for growth, 2) to determine your future financial needs, and 3) to attract investors (including angel investors and VC funding ) and lenders.

Why is a Business Plan Important to an Entrepreneur?

Business plans help entrepreneurs take their visions and turn them into tangible action plans for success.

Need help with your business plan? 

• Speak with a professional business plan consultant from our team.
• Use our simple business plan template .
• Check out our business plan examples .
• Or, if you’re creating your own PPM, you can save time and money with Growthink’s private placement memorandum template .
• Learn more about us via our Growthink Business Plan Review page

The World’s #1 Business Plan Template

Would you like to know the quickest and easiest way to create a winning business plan?

And how to use it to raise funding, improve your strategy, or both?

Well, we’ve developed the ultimate business plan template to help you do this. Simply click below to learn more.

Other Helpful Business Plan Articles & Templates

Do You Really Need a Business Plan?

The art of storytelling, from net margin to sales.

Why is a business plan important?

• Who will the reader be?
• What do you want their response to be?

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

More by this contributor:

• Challenges Become Opportunities
• Discontinuing Healthy Workplace Consultancy
• Financial Planning for the Pandemic

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What is a Business Plan and Why Do I Need One?

Lisett Comai-Legrand About The Author

Jun 1, 2017 6:51:39 PM

A key factor in a successful business is organization. When starting a new business , the owner will have to consider the location of the business, strategies for marketing, and the strategies for the growth of the business. A business plan is a tool that effectively helps the owners to organize the goals and objectives of a business.

A business plan is used by new businesses as well as existing businesses to present potential strategies to their business partners and help the business to focus on the goals.

Starting a new business?  Apply to become a First Alliance Business member today. hbspt.cta._relativeUrls=true;hbspt.cta.load(2628547, 'fefe9f1b-8b44-490b-bf8c-1bddaa01e48f', {"useNewLoader":"true","region":"na1"});

What is a business plan.

A business plan is a detailed document that has the organization’s objectives written out, and the steps that need to be taken for meeting the company’s goals. Business plans are not solely for new businesses, but are also used by existing businesses to clearly define the target audience and the financial options when they enter a new market.

Contents of a Business Plan

The following are the elements that are included in a business plan:

• An executive summary
• Analysis (market research)
• Description of the company
• Organization and management details
• Marketing and sales objectives
• Product lines
• Funding requests

Business plans also include tables and charts to demonstrate the trends, and can also include research studies regarding a potential customer.

A business plan has three basic objectives:

• Communication

Small businesses use a business plan to get creditors to finance their business operations. A business plan is also used to solicit partners to join up for joint ventures. Large suppliers and customers usually request a business plan in order to ensure that the company has the ability to pay for taking on a large order.

Limitations

Though a business plan helps the owner of a business to determine the objectives of a business, it is static in nature. The owner of a business may use a business plan to gain financing and to increase the business activity.  However, once these objectives are met the initial business plan will be outdated or expired. A business plan needs to be revised each time as the business grows and the needs change. Business plans also report on the current conditions of the business, and these plans do not integrate the owner’s response to unexpected changes in the marketplace. One of the constant factors in a business is that it continues to change, but business plans do not account for the risks or changes that may occur in the market.

Why Do You Need a Business Plan?

Writing a business plan does not mean that you have to shut yourself in a library and come up with a 40-page text. At most, your business plan can be completed within a month. For different purposes, you will require varying business plans. You’ll need a plan for acquiring capital or taking risks. Fewer details are fine if you are not trying to raise capital or taking too much of a risk. In any case, you need a plan.

Here are five important reasons to create a business plan :

1. to avoid big mistakes.

The last thing that you want to do is work on your startup for a year, and, in the end, realize that you were heading towards failure. When you do not set aside enough capital to reach your desired goals, or take on a partner with the wrong skills and resources, it will cause your downfall. Having a business plan helps you ensure that you are moving along the right path.

2. To Counterbalance Your Emotions During the startup period of your business, you might be too close to it to comprehend reality. Additionally, you might be too clouded with doubt and fear. When emotions are invested it can cause havoc so it is best to have a business plan to help look at the objectives of your business clearly.

3. To Make Sure Everyone Is On the Same Page You will not be building a business yourself. Ideally, there will be other people involved in advancing your business. A business plan helps everyone involved in your business to head towards the same direction.

4.   To Develop a Game Plan Execution is everything when starting up. Ultimately, it means you have to set priorities, measure performance, and set goals. There will be key questions that may need to be answered, and these things will be addressed during the business planning process.

5. To Raise Capital To borrow money or raise capital, whether it is from a friend or family, you will still need to communicate your vision clearly and in a compelling way. A business plan will help you do that.

Get Your Business Started With First Alliance Credit Union

A business plan is a document that tells what your objectives and goals are for the business. Having a business plan can be crucial for a business in several ways. Knowing what a business plan can do for you can help reach your business’s potential, and ultimately its success.

Once  you've got your business plan prepared, become a member at First Alliance Credit Union to take advantage of the services we offer business owners. Get a business checking and savings account to better organize your business finance, then use a business credit card or equipment loan to give your business everything it needs to be successful

Become a First Alliance member today!

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8 Business Plan Templates You Can Get for Free

8 min. read

Updated April 10, 2024

A business plan template can be an excellent tool to simplify the creation of your business plan. 

The pre-set structure helps you organize ideas, covers all critical business information, and saves you time and effort on formatting.

The only issue? There are SO many free business plan templates out there. 

So, which ones are actually worth using? 

To help remove the guesswork, I’ve rounded up some of the best business plan templates you can access right now. 

These are listed in no particular order, and each has its benefits and drawbacks.

What to look for in a business plan template

Not all business plan templates are created equal. As you weigh your options and decide which template(s) you’ll use, be sure to review them with the following criteria in mind:

• Easy to edit: A template should save you time. That won’t be the case if you have to fuss around figuring out how to edit the document, or even worse, it doesn’t allow you to edit at all.
• Contains the right sections: A good template should cover all essential sections of a business plan , including the executive summary, product/service description, market/competitive analysis, marketing and sales plan, operations, milestones, and financial projections. 
• Provides guidance: You should be able to trust that the information in a template is accurate. That means the organization or person who created the template is highly credible, known for producing useful resources, and ideally has some entrepreneurial experience.
• Software compatibility: Lastly, you want any template to be compatible with the software platforms you use. More than likely, this means it’s available in Microsoft Word, Google Docs, or PDF format at a minimum. 

1. Bplans — A plan with expert guidance

Since you’re already on Bplans, I have to first mention the templates that we have available. 

Our traditional and one-page templates were created by entrepreneurs and business owners with over 80 years of collective planning experience. We revisit and update them annually to ensure they are approachable, thorough, and aligned with our team’s evolving best practices.  

The templates, available in Word, PDF, or Google Doc formats, include in-depth guidance on what to include in each section, expert tips, and links to additional resources. 

Plus, we have over 550 real-world sample business plans you can use for guidance when filling out your template.

Download: Traditional lender-ready business plan template or a simple one-page plan template .

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2. SBA — Introduction to business plans

The U.S. Small Business Administration (SBA) offers two different business plan templates along with a short planning guide. 

While not incredibly in-depth, it’s enough to help you understand how traditional and lean plans are structured and what information needs to be covered. The templates themselves are more like examples, providing you with a finished product to reference as you write your plan.

The key benefit of using these templates is that they were created by the SBA. While they may provide less guidance, you can be assured that the information and structure meet their expectations.

Explore: The SBA’s planning guide and free templates

3. SCORE — Planning workbook

SCORE’s template is more like a workbook. It includes exercises after each section to help you get your ideas down and turn them into a structured plan.

The market research worksheets are especially useful. They provide a clear framework for identifying your target market and analyzing competitors from multiple angles. Plus, they give you an easy way to document all the information you’re collecting.

You will likely have to remove the exercises in this template to make it investor-ready. But it can be worth it if you’re struggling to get past a blank page and want a more interactive planning method.

Download: SCORE’s business plan template

4. PandaDoc — A template with fillable forms

PandaDoc’s library offers a variety of industry-specific business plan templates that feature a modern design flair and concise instructions. 

These templates are designed for sharing. They include fillable fields and sections for non-disclosure agreements, which may be necessary when sending a plan to investors.  

But the real benefit is their compatibility with PandaDoc’s platform. Yes, they are free, but if you’re a PandaDoc subscriber, you’ll have far more customization options. 

Out of all their templates, the standard business plan template is the most in-depth. The rest, while still useful, go a bit lighter on guidance in favor of tailoring the plan to a specific industry.

Explore: PandaDoc’s business plan template library  

5. Canva — Pitch with your plan

Canva is a great option for building a visually stunning business plan that can be used as a pitch tool. It offers a diverse array of templates built by their in-house team and the larger creative community, meaning the number of options constantly grows.

You will need to verify that the information in the template you choose matches the standard structure of a traditional business plan. 

You should do this with any template, but it’s especially important with any tool that accepts community submissions. While they are likely reviewed and approved, there may still be errors.

Remember, you can only edit these templates within Canva. Luckily, you only need a free subscription, and you may just miss out on some of the visual assets being used. 

To get the most value, it may be best to create a more traditional planning document and transfer that information into Canva. 

Explore: Canva’s business plan gallery

6. ClickUp — The collaborative template

Out of all the project management tools that offer free business plan templates, ClickUp’s is the most approachable.

Rather than throwing you into all the features and expecting you to figure it out—ClickUp provides a thorough startup guide with resource links, images, and videos explaining how to write a plan using the tool. 

There’s also a completed sample plan (structured like an expanded one-page plan) for you to reference and see how the more traditional document can connect to the product management features. You can set goals, target dates, leave comments, and even assign tasks to someone else on your team. 

These features are limited to the ClickUp platform and will not be useful for everyone. They will likely get in the way of writing a plan you can easily share with lenders or investors. 

But this is a great option if you’re looking for a template that makes internal collaboration more fluid and keeps all your information in one place.

Sign Up: Get a free trial of ClickUp and explore their template library

7. Smartsheet — A wide variety of templates

I’m including Smartsheet’s library of templates on this list because of the sheer number of options they provide. 

They have a simple business plan template, a one-page plan, a fill-in-the-blank template, a plan outline, a plan grading rubric, and even an Excel-built project plan. All are perfectly usable and vary in visual style, depth of instructions, and the available format.

Honestly, the only drawback (which is also the core benefit) is that the amount of templates can be overwhelming. If you’re already uncertain which plan option is right for you, the lengthy list they provide may not provide much clarity.

At the same time, it can be a great resource if you want a one-stop shop to view multiple plan types.

Explore: Smartsheet’s business plan template library  

8. ReferralRock affiliate marketing business plan

I’m adding ReferralRock’s template to this list due to its specificity. 

It’s not your standard business plan template. The plan is tailored with specific sections and guidance around launching an affiliate marketing business. 

Most of the template is dedicated to defining how to choose affiliates, set commissions, create legal agreements, and track performance.

So, if you plan on starting an affiliate marketing business or program, this template will provide more specific guidance. Just know that you will likely need to reference additional resources when writing the non-industry sections of your plan.

Download: ReferralRock affiliate marketing business plan template

Does it matter what business plan template you use?

The short answer is no. As long as the structure is correct, it saves you time, and it helps you write your business plan , then any template will work. 

What it ultimately comes down to, is what sort of value you hope to get from the template. 

• Do you need more guidance? 
• A simple way to structure your plan? 
• An option that works with a specific tool?
• A way to make your plan more visually interesting?

Hopefully, this list has helped you hone in on an option that meets one (or several) of these needs. Still, it may be worth downloading a few of these templates to determine the right fit. 

And really, what matters most is that you spend time writing a business plan . It will help you avoid early mistakes, determine if you have a viable business, and fully consider what it will take to get up and running. 

If you need additional guidance, check out our library of planning resources . We cover everything from plan formats , to how to write a business plan, and even how to use it as a management tool . 

If you don’t want to waste time researching other templates, you can download our one-page or traditional business plan template and jump right into the planning process.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

Table of Contents

• Qualities of a good template
• ReferralRock
• Does the template matter?

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Original text

We will discuss the major reasons for assembling a plan, whether or not you need to obtain financing for your business. We will cover what should be in your plan and how to assemble the information you need using library and other resources.

This workshop will cover the following topics:

What is a business plan?

What are the main reasons for developing a business plan?

If I don't need to raise capital to start my business, do I still need a business plan?

If I do need to raise capital, what will lenders want in my business plan?

Where can I find a business plan template I can use to get started?

What are the main sections of a business plan?

Where can I get the information I will need in a business plan?

This Webinar is FREE.

Our presenter is Hugh McLean.

After earning his Master’s degree in Business Administration, his carrier spanned several different fields:  Manufacturing, Materials Management in the food production and distribution industry; Executive Search and Placement in both Manufacturing as well as the Legal profession. He has managed a residential plumbing company as well as a Bankruptcy Law firm as the Business Manager for each entity. The latter part of his career was spent in Sales and Marketing with a product emphasis of Payroll, Workman’s Comp and Health Insurance. Hugh as owned 3 business, 2 of which he sold successfully and is currently operating a third.

For the Last 8+ years he has been a SCORE Certified Counselor working mainly in Nassau County as well as a Workshop presenter.

          Business Tips: 

• Never maintain, your competition will beat you every time
• Each Day is a New day, a new day to be successful.

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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Solar eclipse 2024: Follow the path of totality

Solar eclipse, what you need to know to watch monday's total solar eclipse.

The NPR Network

A stunning celestial event is visible across the country Monday, when the moon crosses directly in front of the sun: a total solar eclipse. For those in the path of totality, there will be a few brief moments when the moon completely covers the sun and the world becomes dark.

Traveling for totality? Skip ahead.

This will be the last chance to catch a total solar eclipse in the continental U.S. for about 20 years, so here's what you need to know to safely enjoy!

When is the eclipse?

April 8, 2024 there will be a total solar eclipse that crosses from the Pacific coast of Mexico through the United States.

What is totality and why it matters

According to NASA , totality will start around 11:07 a.m. PDT/1:07 EDT in Mexico and leave Maine at around 1:30 pm PDT/3:30 pm EDT.

Here's what time the eclipse will be visible in your region

Check out this table for when the partial eclipse and totality are visible in each region or check by zip code here.

A partial solar eclipse will be visible across the contiguous United States, so even if you're not directly in the path, you should be able to see something special, weather permitting.

Unable to get to totality? We'll be sharing highlights here from across the NPR Network throughout the day Monday if you can't see it in real time.

Where to see totality?

More than 30 million people live in the path of totality for Monday's eclipse, and many more in nearby areas.

Here's what we know about Monday's weather forecast.

Why totality matters

As NPR's Neil Greenfieldboyce explains , "During a total eclipse, the sky darkens suddenly and dramatically . The temperature drops. Stars come out. Beautiful colors appear around the horizon. And the once-familiar sun becomes a black void in the sky surrounded by the glowing corona — that's the ghostly white ring that is the sun's atmosphere."

Eclipse Science

For april's eclipse, going from 'meh' to 'omg' might mean just driving across town.

A partial eclipse, while still a fun experience, is hardly as dramatic. Those with a view of the partial eclipse will see crescent-shaped shadows like those seen here in 2017.

How to watch safely

If you plan to look directly at the eclipse (partial or totality), you're going to need eclipse glasses handy because looking directly at the sun without proper protection ( traditional sunglasses don't count! ) can be harmful to your eyes.

The perfect celestial soundtrack to the total solar eclipse

As NPR's Joe Hernandez explains, "Proper eye protection must be worn throughout a total solar eclipse — except for the roughly 3 1/2 to 4 minutes when the moon fully obscures the sun, a brief period known as 'totality.' (You will need to take your glasses off during totality to actually see it.)"

If you don't have access to eclipse glasses, you can get crafty with things you have around the house ( like some of us did back in 2017!) More on that here.

Traveling for totality?

The celestial event is driving a ton of domestic travel to the path of totality. If you're headed out of town to view the eclipse, here are some NPR Network resources for areas in the path of totality:

Texas The path of totality crosses through the Lone Star State, with some areas expecting a possible influx of visitors in the hundreds of thousands to catch prime viewing. Our member stations across the state have gathered local resources to help you navigate the region and the eclipse!

• San Antonio: Check out the latest from Texas Public Radio
• Dallas: Explore KERA's coverage for the latest
• Austin: Head to KUT for the best local resources

Arkansas The eclipse will be cutting through the state, putting Little Rock in the path of totality. Check out Little Rock Public Radio for local resources.

The southwestern edge of the state will be well-positioned to witness the total solar eclipse this year. Kentucky Public Radio is covering the eclipse throughout the region, from Kentuckiana eclipse mania to the University of Louisville's free class about the celestial event. Keep an eye on WKMS for the latest local updates.

Missouri The southeastern corner of the state will be in the path of totality, crossing across towns like Whitewater and Ste. Genevieve. Head to St. Louis Public Radio for local coverage and resources. Illinois Carbondale seems to have won the eclipse lottery, being in the path of totality both in 2017 and for this year's eclipse . For resources from across the state, check out Illinois Public Media .

Indiana A huge portion of the state will be within the path of totality, giving cities across Indiana, including Bloomington and Indianapolis, prime viewing of the eclipse.

• Bloomington: Check out Indiana Public Media
• Indianapolis: Head to WFYI for the latest
• Fort Wayne: Just north of the path of totality, WBOI has resources for the Allen County area

Ohio The Buckeye State is getting bisected by this year's path of totality, plunging a number of the state's most populous areas into darkness for a few minutes on Monday.

• Cleveland: Head to Ideastream Public Media for the latest.
• Columbus: With the capital city just south of totality, head to WOSU for regional resources.
• Cincinnati: Totality will just miss the border town. Here are some tips from WVXU on how to navigate the eclipse in the region.

Pennsylvania Only the northwestern-most corner of the state will catch totality, with views from the lakeside in Erie being particularly well-positioned for a stunning viewing experience. WESA has more from across the region.

Plan to watch the eclipse from a wild mountain summit? Be ready for harsh conditions

New York Buffalo, Rochester, Syracuse and Plattsburgh will fall under the path of totality on Monday. If you're planning to travel to the region for the best views, here are some local resources to stay safe and informed:

• Buffalo: Head to WBFO for the latest
• Syracuse: WAER has more on plans in the Salt City
• North Country: NCPR has the latest from across the region, as well as information on local viewing events to check out

Vermont The Green Mountain State will see totality across its most populous region, including Burlington and Montpelier, as well as the Northeast Kingdom on the Canadian border. Vermont Public has everything you need to know to navigate your time in the region to enjoy the eclipse safely. New Hampshire The northernmost region of the Granite State will be in the path of totality, providing prime viewing to those in Coos County. NHPR has info on local events, travel updates as well as special coverage with New Hampshire Public Television. Maine The last state in the path of totality in the U.S., much of Northern Maine will be positioned for prime viewing. The rural region is preparing for an influx of visitors, and safety officials are encouraging visitors and locals alike to be prepared. Maine Public will be covering the eclipse and has everything you need to know to navigate the region safely.

How to document the eclipse safely

With the ease of cell photography , it can be tempting to reach for your phone to document the eclipse and the moments of totality, but make sure to do so safely.

As NPR's Scott Neuman explains , "For starters, you'll need to wear eclipse glasses or similar protective eye gear while aiming your camera or even just observing the eclipse."

Feeling ambitious? Here are a few more tips.

Or if you're not inclined to capture the moment visually, you lean into some other forms of creative expression. Indiana, for example, has named Linda Neal Reising the official poet in the state for this year's eclipse.

As former NPR reporter and eclipse superfan David Baron shared with Life Kit , viewing totality "[is] like you've left the solar system and are looking back from some other world."

So consider focusing on being present in the moment to enjoy the celestial spectacle.

More resources to enjoy the eclipse

• Sharing the eclipse with tiny humans? Check out these kid-friendly total solar eclipse learning guides from Vermont Public's But Why, and this great explainer from KERA Kids on the difference between a solar and a lunar eclipse.
• Want to see how a solar eclipse alters colors? Wear red and green on Monday
• Plan to wander into the wild for the best view? Here are some tips from outdoor experts.
• Tips from Bill Nye on the best ways to enjoy the eclipse.

NPR will be sharing highlights here from across the NPR Network throughout the day Monday if you're unable to get out and see it in real time. NPR's Emily Alfin Johnson compiled these resources.

• 2024 eclipse

Watch CBS News

Biden's new student loan forgiveness plan could help 30 million borrowers. Here's who would qualify.

By Aimee Picchi

Edited By Anne Marie Lee

Updated on: April 10, 2024 / 11:28 AM EDT / CBS News

President Joe Biden once again is trying to deliver widespread student debt forgiveness, with a new plan unveiled on Monday that could help about 30 million borrowers erase some or all of their college loans. 

The latest attempt at broad debt relief comes less than a year after the Supreme Court blocked Biden's previous attempt to help student borrowers, when the court's  June 2023 ruling denied up to $20,000 in forgiveness to roughly 40 million Americans. 

Biden, who had made student loan relief a major campaign pledge, unveiled the new plan on Monday, describing it as potentially "life changing" for millions of Americans. About 43 million people are carrying $1.7 trillion in student debt, a burden that some borrowers and their advocates say hampers their ability to buy a home or achieve other financial milestones. 

"While a college degree still is a ticket to the middle class, that ticket is becoming much too expensive. Much too expensive," Biden said an event at Madison College in Madison, Wisconsin. "The ability for working and middle-class folks to repay their student loans has become so burdensome that a lot can't repay it for even decades after being in school."

Here's what to know about Biden's new plan and who would qualify. 

How is this plan different from the one struck down by the Supreme Court?

The new plan relies on a different law to provide debt relief to student borrowers. 

The previous plan relied on the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, a pandemic-era stimulus package. The Supreme Court ruled that law didn't provide the Biden administration with the authority to forgive student debt. 

The new plan turns to an older law, the Higher Education Act, which allows the Secretary of Education to "compromise, waive or release" federal student loans. It's through this mechanism that the Biden administration is tackling its new debt relief program. 

Who will qualify for debt forgiveness under the new plan?

There are 5 major groups of borrowers who could benefit under the new plan. 

• 2.5 million borrowers who have been in repayment for 20 years or more. 

The Biden administration said people with only undergraduate debt could qualify for forgiveness if they first began repaying their loans at least 20 years ago, or on or before July 1, 2005. Borrowers with graduate school debt would qualify if they first began repaying their loans 25 years ago, or on or before July 1, 2000. 

Borrowers don't have to be enrolled in an income-driven repayment plan to qualify, the White House said. Both direct loans and direct consolidation loans would be covered.

• People with debt who attended "low-financial-value programs"

College is supposed to provide its graduates with the skills to achieve higher-income careers, but there are some programs that have left people in debt but without a marketable degree, such as some offered by for-profit colleges like the now-defunct Corinthian Colleges .

The new plan would cancel student debt for loans from colleges or programs that lost their eligibility to participate in the Federal student aid program or were denied recertification because they cheated students, the White House said. Borrowers who also attended colleges that don't provide "sufficient value," such as leaving grads without the ability to earn more than a high school grad, would also be eligible for relief. 

• People experiencing hardship in paying back their loans.

Borrowers who are experiencing hardship that hampers their ability to repay their loans could also qualify for forgiveness. Although the White House didn't specify the financial threshold for qualifying under this pathway, it said this could cover borrowers at high risk of defaulting on their student loans or who are grappling with issues like medical debt.

• 25 million borrowers whose balances ballooned because of interest.

Some borrowers have seen their balances grow due to a financial issue called "negative amortization," in which a person's loan balance keeps growing despite their consistently making payments. Under the plan, roughly 25 million people who have experienced this issue could get up to $20,000 of their interest canceled. 

• 2 million low- and middle-income borrowers who qualify for forgiveness but haven't applied.

The plan would also provide debt relief for about 2 million low- and middle-income borrowers who qualify for programs like Public Service Loan Forgiveness or income-driven repayment plans but haven't applied for them.

"No application will be needed for borrowers to receive this relief if the plan is implemented as proposed," the White House said.

What are the next steps to getting the plan approved? 

The Education Department said it plans to release a formal proposal in the "coming months." That would usually be followed by a public comment period of 60 days. Then if the rule is finalized by November 1, it would usually take effect the following July — in this case, July 2025.

But the Higher Education Act authorizes the education secretary to fast-track rules for "early implementation" in some cases. The Biden administration recently  used that power  to accelerate student loan cancellation offered through a new federal repayment plan. Invoking that authority could allow Biden to start canceling debt later this year.

When could the new plan go into effect?

That's not known yet because the plan has to get pass some additional hurdles before becoming effective, as noted above. Asked by reporters when U.S. student loan recipients might see their interest balances canceled, officials said the forgiveness could happen starting "early this fall."

Could the plan be challenged in court?

Yes, conservative opponents are expected to challenge Biden's plan in court.

Republicans have repeatedly fought Biden's plan for student loan cancellation, saying it's an unfair benefit shouldered by taxpayers who repaid their loans or didn't go to college. Opponents say the Supreme Court was clear that widespread loan cancellation must come from Congress.

Separately, seven states, led by Missouri, filed a federal lawsuit Tuesday challenging Biden's  SAVE Plan, an income-based repayment program that was introduced last year. The new lawsuit largely mirrors another suit  filed last month  by Republican attorneys general in 11 states, led by Kansas.

The suit doesn't directly challenge Biden's newest plan for cancellation, but its architect, Missouri's attorney general, separately threatened to bring action against that plan, too.

If Biden's plan faces a lawsuit, courts could order the administration to halt cancellation until legal questions are sorted out. That scenario could leave the plan on hold beyond the November presidential election. Even if it survives legal challenges, a Donald Trump victory would spell almost certain doom for Biden's plan.

— With reporting by the Associated Press.

• Student Debt
• Student Loan

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

More from CBS News

Biden cancels $7.4 billion in student debt. Here's who is eligible.

Do I qualify for credit card debt forgiveness if my debts are in collections?

Inflation's rising. Here's how debt relief can help.

What are the cheapest ways to get out of debt? Here's what experts say

Student-loan borrowers could benefit from Biden's new debt cancellation plan as early as this fall. Here's what you need to know.

• Biden unveiled details for a new student-debt relief plan that could benefit 30 million borrowers.
• The new plan could go into effect as early as this fall.
• While there could be lawsuits, the White House said it's confident in the legality of the plan.

A new student-loan forgiveness plan is coming — and millions of borrowers could benefit.

President Joe Biden's administration unveiled new details for a student-debt relief proposal that could benefit over 30 million borrowers. While this plan is more narrow than Biden's first attempt for broad relief that the Supreme Court struck down , it would aim to tackle a range of issues borrowers face, including interest capitalization and decadeslong repayment without relief .

Biden formally announced the new plan during a speech in Madison, Wisconsin, on Monday, saying that even when borrowers "have worked hard and paid their student loans, their debt increases, not diminishes."

Related stories

"Too many people feel the strain and stress, wondering if they're going to get married, have their first child, start a family, because even if they get by, they still have this crushing, crushing debt," Biden said.

I said I wouldn't back down from using every tool at our disposal to get student loan borrowers the relief they need. That's why today we're announcing new plans that, if implemented, would cancel student debt for millions more. pic.twitter.com/rNiCxzzlU3 — President Biden (@POTUS) April 8, 2024

While more details on the plan will be announced in the coming months, Monday's announcement offers a fresh look into the types of borrowers that could benefit from this debt relief. Here are the key details from the administration's proposal.

Which borrowers will qualify for this relief?

The administration outlined five groups of borrowers that could benefit from this relief. They include:

Up to $20,000 in debt relief for over 25 million borrowers whose balances have grown due to unpaid interest. 23 million of those borrowers would have "all of their balance growth forgiven," per the White House.

Relief for borrowers eligible for loan forgiveness under repayment programs like Public Service Loan Forgiveness or an income-driven repayment plan but who have not yet enrolled

Relief for borrowers who entered repayment over 20 years ago. Borrowers with undergraduate student debt would qualify if they entered repayment on or before July 1, 2005, and borrowers with graduate debt would qualify if they first entered repayment on or before July 1, 2000.

Relief for borrowers with who took on debt for "low-financial-value programs," including schools that lost financial aid eligibility or were found to have defrauded students.

Relief for borrowers experiencing financial hardship . A senior administration official told Business Insider that more details on hardship requirements will be released in the coming months, but it's likely to address those who are at high risk of defaulting, along with borrowers who have other financial burdens on top of their student debt.

What is the timeline for this relief?

The administration said it expects to begin implementing this relief in the fall. In the coming months, it will publish the proposed text for the new rules to the Federal Register, after with the public will have an opportunity to submit comments on the proposals.

Is this relief legal?

This new plan results from the Supreme Court striking down Biden's first attempt at broad debt cancellation at the end of June. While the first plan used the HEROES Act of 2003, which allows the education secretary to waive or modify student-loan balances in connection with a national emergency like the COVID-19 pandemic, this new plan uses the Higher Education Act of 1965, which doesn't require an emergency but does require a lengthy regulatory process.

Senior administration officials told reporters during a Sunday press call that they believe this new plan for relief is consistent with the Supreme Court's decision, noting that the new plan differs significantly from the one the high court struck down.

Of course, the plan's legality is ultimately up to the courts, and it's likely conservative groups will launch legal challenges against the plan in the coming months. There are already ongoing challenges to some of Biden's other targeted debt relief efforts — for example, a group of GOP state attorneys general recently sued the administration over its new SAVE income-driven repayment plan, arguing that loan forgiveness through the plan is unconstitutional.

Watch: Why student loans aren't canceled, and what Biden's going to do about it

• Main content

Is it safe to look at a total solar eclipse? What to know about glasses, proper viewing

If you have your eyewear to take in monday's eclipse, here are some last-minute things to consider to ensure you're good to go..

The much-anticipated solar eclipse will finally enshroud thousands of miles of North America today in its long, narrow shadow. By now, those who plan to witness it should have their plans in place .

Travel has been completed. Schedules have been coordinated around the anticipated moment of totality. And proper eyewear is, of course, in your possession. Right?

We at USA TODAY have published no shortage of articles guiding you away from scam eclipse glasses and to the safest, most reliable options – some of which were even free. But if you need a last-minute refresher – or a crash course to catch you up on a topic you entirely missed – we're happy to oblige.

If you don't have your eclipse glasses by now, it may be too late. But some vendors, including Warby Parker , and even public libraries, have offered eclipse glasses giveaways , so be sure to check your local area before the historic event rolls into town.

And if you do have your eyewear to take in Monday's eclipse – the last one of these incredible astronomical events in North America for 20 years – here are some last-minute things to consider to ensure you're in good shape.

Solar eclipse 2024 live updates: See latest weather forecast, what time it hits your area

Can you go blind by looking at the solar eclipse?

Staring at the sun is  unlikely to completely blind you , but its powerful rays can still burn and  damage your retinas if you don't take proper safety precautions to view  solar eclipses .

That's why eyewear is recommended if you plan to look up at the sun Monday to witness the solar eclipse, which most of the country will be able to experience in some way.

In the face of the sun's powerful rays, regular sunglasses made of cheap plastic and polycarbonate material just aren't going to cut it. Astronomers and other experts instead emphasize that skygazers intent on viewing the upcoming total solar eclipse do so with  specialized eyewear  crafted to  protect their sensitive retinas  from permanent damage.

Even viewing any part of the bright sun through camera lenses, binoculars and telescopes without a specialized solar filter  could instantly cause severe eye injury , according to the American Astronomical Society.

Often made with a polyester film coated in aluminum, the glasses are highly specialized . Compared to regular sunglasses, proper eclipse glasses are 100,000 times darker to block nearly all visible, infrared and ultraviolet light and protect our sensitive retinas when looking skyward.

As another point of safety, don't look up while driving , please.

How to know when it's safe to view the eclipse without glasses

A  total solar eclipse  offers the unique opportunity for skygazers to  witness the spectacular astral display  with the naked eye – but only when the time is right.

Hundreds of cities in  13 states are along the path of totality  for the eclipse, which will move across North America from southwest to northeast . When the moon moves completely in front of the sun and blocks its light for a brief period of time, you'll know it's safe to fully take in the dazzling display.

That moment is what is called "totality," whereby uncharacteristic darkness falls and all but the sun's outermost layer known as its corona makes a rare appearance to us here on Earth,  according to NASA .

How to make sure your eclipse glasses aren't fake

In the rush to acquire  some coveted eclipse glasses  before April 8 , you may have inadvertently fallen victim to the  fakes and imitators proliferating online retailers .

While plenty of legitimate certified eyewear was widely available – and may still be – less-scrupulous manufacturers try all sorts of methods and tricks to get your attention and make you believe the product you're about to buy is the real deal.

For instance, many vendors began making the grand (and entirely made-up) claim that their products are endorsed by NASA.

As the space agency  reiterated to USA TODAY , NASA highly recommended that skygazers get a pair of certified eclipse glasses before the total solar eclipse  charts a 115-mile-wide path of totality  blanketing much of North America in  uncharacteristic darkness . But it does not approve  any particular brand of solar viewers, despite what many vendors may claim.

The responsibility of guiding American consumers to the safest eclipse glasses is largely left to the American Astronomical Society.

The organization maintains  a curated list of approved vendors  of solar eclipse glasses that it updated to give priority to North American manufacturers ahead of the total solar eclipse. Products you purchase that are listed on that site are guaranteed to be  in compliance with  the highest international safety standards.

Those standards are set by the International Organization for Standardization, which only vouches for solar eclipse glasses that are dark and strong enough to filter out a certain amount of the sun's harmful light.

The astronomical society also provides some  helpful tips  for how to spot counterfeit glasses.

No eclipse glasses? Welding lenses, pinhole projectors among alternative viewers

While certified solar eclipse glasses are the preferred method for viewing the eclipse, alternative methods do exist that don't necessarily sacrifice one's safety.

Many people, particularly blue-collar workers, may be tempted to turn to those welding lenses they have sitting in their workshop.

But beware: The most common welding goggles and helmets aren't typically strong enough to adequately withstand the sun's powerful rays and protect your vulnerable eyes.

Any welding lenses weaker than a Shade 12 filter – a number that indicates the level of protection offered – just aren't going to cut it when it comes to gazing upward in anticipation of the moon blocking all but the sun's outermost layer.

It's also not too late to buy some welding lenses, which Tractor Supply is promoting for sale at its 282 stores along the path of totality as a viable option for viewing the eclipse.

Another simple method is to create your own pinhole projector to project the sun onto a nearby surface. The American Astronomical Society offers helpful  instructions  to set them up.

And one final note: As you make your eclipse-viewing plans,  these interactive maps  should help you chart the time and duration for when totality would occur in cities along the path.

Eric Lagatta covers breaking and trending news for USA TODAY. Reach him at [email protected]

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How Tesla Planted the Seeds for Its Own Potential Downfall

Elon musk’s factory in china saved his company and made him ultrarich. now, it may backfire..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Katrin Bennhold. This is “The Daily.”

[MUSIC PLAYING]

Today, the story of how China gave Tesla a lifeline that saved the company — and how that lifeline has now given China the tools to beat Tesla at its own game. My colleague, Mara Hvistendahl, explains.

It’s Tuesday, April 9.

So, Mara, you’ve spent the past four months investigating Elon Musk and his ties to China through his company, Tesla. Tell us why.

Well, a lot of American companies are heavily invested in China, but Tesla’s kind of special. As my colleagues and I started talking to sources, we realized that many people felt that China played a crucial role in rescuing the company at a critical moment when it was on the brink of failure and that China helps account for Tesla’s success, for making it the most valuable car company in the world today, and for making Elon Musk ultra rich.

That’s super intriguing. So maybe take us back to the beginning. When does the story start?

So the story starts in the mid 2010s. Tesla had been this company that had all this hype around it. But —

A lot of people were shocked by Tesla’s earnings report. Not only did they make a lot less money than expected, they’re also making a lot less cars.

Tesla was struggling.

The delivery of the Model 3 has been delayed yet again.

Tesla engineers are saying 40 percent of the parts made at the Fremont factory need reworking.

At the time, they made their cars in Fremont, California, and they were facing production delays.

Tesla is confirming that Cal/OSHA is investigating the company over concerns over workplace safety.

Elon Musk has instituted a kind of famously grueling work culture at the factory, and that did not go over well with California labor law.

The federal government now has four active investigations involving Tesla.

They were clashing with regulators.

The National Transportation Safety Board will investigate a second crash involving Tesla’s autopilot system.

Billionaire entrepreneur Elon Musk — friends are really concerned about him. That’s what Musk told “The New York Times.”

And by 2018, he was having all of these crises.

According to “The Times,” Musk choked up multiple times and struggled to maintain his composure during an hour-long interview about turmoil at his electric car company, Tesla.

So all of this kind of converged to put immense pressure on him to do something.

And where does China come in?

Well, setting up a factory in China, in a way, would solve some of these problems for Musk. Labor costs were lower. Workers couldn’t unionize there. China provided access to this steady supply of cheaper parts. So Elon Musk was set on going to China. But first, Tesla and Musk wanted to change a key policy in China.

Hmm, what kind of policy?

So they wanted China to adopt a policy that was aimed at lowering car emissions. And the idea was that it would be modeled after a similar policy in California that had benefited Tesla there.

OK, so explain what that policy actually did. And how did it benefit Tesla?

So California had this system called the Zero-Emission Vehicle program. And that was designed to encourage companies to make cleaner cars, including electric vehicles. And they did that by setting pollution targets. So companies that made a lot of clean cars got credits. And then companies that failed to meet those targets, that produced too many gas-guzzling cars, would have to buy credits from the cleaner companies.

So California is trying to incentivize companies to make cleaner cars by forcing the traditional carmakers to pay cleaner car makers, which basically means dirtier car makers are effectively subsidizing cleaner cars.

Yes, that’s right. And Tesla, as a company that came along just making EVs, profited immensely from this system. And in its early years, when Tesla was really struggling to stay afloat, the money that it earned from selling credits in California to polluting car companies were absolutely crucial, so much so that the company structured a lot of its lobbying efforts around this system, around preserving these credits. And we talked to a former regulator who said as much.

How much money are we talking about here?

So from 2008, when Tesla unveiled its first car, up until the end of last year, Tesla made almost $4 billion by selling credits in California.

Wow. So Musk basically wants China to recreate this California-style program, which was incredibly lucrative for Tesla, there. And they’re basically holding that up as a condition to their building a factory in China.

Right. And at this point in the story, an interesting alliance emerges. Because it wasn’t just Tesla that wanted this emissions program in China. It was also environmentalists from California who had seen the success of the program up close in their own state.

If you go back to that period, to the early 2010s, I was living in China at the time in Beijing and Shanghai. And it was incredibly polluted. We called it airpocalypse at times. I had my first child in China at that point. And as soon as it was safe to put a baby mask on her, we put a little baby mask on her. There were days where people just would try to avoid going outside because it was so polluted. And some of the pollution was actually wafting across the Pacific Ocean to California.

Wow, so California is experiencing that Chinese air pollution firsthand and, in a way, has a direct stake in lowering it.

That’s right. So Governor Jerry Brown, for example — this became kind of his signature issue, was working with China to clean up the environment, in part by exporting this emission scheme. It was also an era of a lot more US-China cooperation. China was seen as absolutely crucial to combating climate change.

So you had all these groups working to get this California emissions scheme exported to China — and the governor’s office and environmental groups and Tesla. And it worked. In 2017, China did adopt a system that was modeled after California’s.

It’s pretty incredible. So California basically exports its emissions-trading system to China, which I imagine at the time was a big win for Californian environmentalists. But it was also a big win for Tesla.

It was definitely a big win for Tesla. And we know that in just a few years Tesla, made almost $1 billion from the emissions-trading program he helped lobby for in China.

So Elon Musk goes on, builds a factory in China. And he does so in Shanghai, where he builds a close relationship with the top official in the city, who actually is now the number-two official in all of China, Li Qiang.

So according to Chinese state media, Elon Musk actually proposed building the factory in two years, which would be fast. And Li came back and proposed that they do it in one year, which — things go up really quickly in China. But even for China, this is incredibly fast. And they broke ground on the factory in January 2019. And by the end of the year, cars were rolling off the line. So then in January 2020, Musk was able to get up on stage in Shanghai and unveil the first Chinese-made Teslas.

Really want to thank the Tesla team and the government officials that have been really helpful in making this happen.

Next to him on stage is Tesla’s top lobbyist who helped push through some of these changes.

Thank you. Yeah, everybody can tell Elon’s super, super happy today.

[SPEAKING CHINESE]

And she says —

Music, please.

Cue the music. [UPBEAT MUSIC]

And he actually broke into dance. He was so happy, a kind of awkward dance.

[UPBEAT MUSIC]

And what is the factory like?

The Shanghai factory is huge. 20,000 people work there. Tesla’s factories around the world tend to be pretty large, but the Shanghai workers work more shifts. And when Tesla set up in China, Chinese banks ended up offering Tesla $1.5 billion in low-interest loans. They got a preferential tax rate in Shanghai.

This deal was so generous that one auto industry official we talked to said that a government minister had actually lamented that they were giving Tesla too much. And it is an incredibly productive factory. It’s now the flagship export factory for Tesla.

So it opens in late 2019. And that’s, of course, the time when the pandemic hits.

Yes. I mean, you might think that this is really poor timing for Elon Musk. But it didn’t quite turn out that way. In fact, Tesla’s factory in Shanghai was closed for only around two weeks, whereas the factory in Fremont was closed for around two months.

That’s a big difference.

Yes, and it really, really mattered to Elon Musk. If you can think back to 2020, you might recall that he was railing against California politicians for closing his factory. In China, the factory stayed open. Workers were working around the clock. And Elon Musk said on a podcast —

China rocks, in my opinion.

— China rocks.

There’s a lot of smart, hardworking people. And they’re not entitled. They’re not complacent, whereas I see —

We’ve seen a lot of momentum and enthusiasm for electric vehicles, stocks, and Tesla certainly leading the charge.

Tesla’s stock price kept going up.

Tesla has become just the fifth company to reach a trillion-dollar valuation. The massive valuation happened after Tesla’s stock price hit an all-time high of more than $1,000.

So this company that had just a few years earlier been on the brink of failure, looking to China for a lifeline, was suddenly riding high. And —

Tesla is now the most valuable car company in the world. It’s worth more than General Motors, Ford, Fiat, Chrysler.

By the summer, it had become the most valuable car company in the world.

Guess what? Elon Musk is now the world’s richest man.

“Forbes” says he’s worth more than $255 billion.

And Elon Musk’s wealth is tied up in Tesla stock. And in the following year, he became the wealthiest man in the world.

So you have this emission trading system, which we discussed and which, in part, thanks to Tesla, is now established in China. It’s bringing in money to Tesla. And now this Shanghai factory is continuing to produce cars for Tesla in the middle of the pandemic. So China really paid off for Tesla. But what was in it for China?

Well, China wasn’t doing this for charity.

What Chinese leaders really wanted was to turn their fledgling electric vehicle industry into a global powerhouse. And they figured that Tesla was the ticket to get there. And that’s precisely what happened.

We’ll be right back.

So, Mara, you’ve just told us the story of how Elon Musk used China to turn Tesla into the biggest car maker in the world and himself — at one point — into the richest man in the world. Now I want to understand the other side of this story. How did China use Tesla?

Well, Tesla basically became a catfish for China’s EV industry.

A catfish, what do you mean by that?

It’s a term from the business world. And, essentially, it means a super aggressive fish that makes the other fish in the pond swim faster. And by bringing in this super competitive, aggressive foreign company into China, which at that point had these fledgling EV companies, Chinese leaders hoped to spur the upstart Chinese EV makers to up their game.

So you’re saying that at this point, China actually already had a number of smaller EV companies, which many people in the West may not even be aware of, these smaller fish in the pond that you were referring to.

Yes, there were a lot of them. They were often locally based. Like, one would be strong in one city, and one would be strong in another city. And Chinese leaders saw that they needed to become more competitive in order to thrive.

And China had tried for decades to build up this traditional car industry by bringing in foreign companies to set up joint ventures. They had really had their sights set on building a strong car industry, and it didn’t really work. I mean, how many traditional Chinese car company brands can you name?

Exactly none.

Yeah, right. So going back to the aughts and the 2010s, they had this advantage that many Chinese hadn’t yet been hooked on gas-guzzling cars. There were still many people who were buying their first car ever. So officials had all these levers they could pull to try to encourage or try to push people’s behavior in a certain direction.

And their idea was to try to ensure that when people went to buy their first car, it would be an EV — and not just an EV but, hopefully, a Chinese EV. So they did things like — at the time, just a license plate for your car could cost an exorbitant amount of money and be difficult to get. And so they made license plates for electric vehicles free. So there were all these preferential policies that were unveiled to nudge people toward buying EVs.

So that’s fascinating. So China is incentivizing consumers to buy EV cars and incentivizing also the whole industry to get its act together by chucking this big American company in the mix and hoping that it will increase competitiveness. What I’m particularly struck by, Mara, in what you said is the concept of leapfrogging over the conventional combustion engine phase, which took us decades to live through. We’re still living in it, in many ways, in the West.

But listening to you, it sounds a little bit like China wasn’t really thinking about this transition to EVs as an environmental policy. It sounds like they were doing this more from an industrial-policy perspective.

Right. The environment and the horrible era at the time was a factor, but it was a pretty minor factor, according to people who were privy to the policy discussions. The more significant factor was industrial policy and an interest in building up a competitive sphere.

So China now wants to become a leader in the global EV sector, and it wants to use Tesla to get there. What does that actually look like?

Well, you need sophisticated suppliers to make the component parts of electric vehicles. And just by being in China, Tesla helped spur the development of several suppliers. Like, for example, the battery is a crucial piece of any EV.

And Tesla, with a fair amount of encouragement — and also various levers from the Chinese government — became a customer of a battery maker called CATL, a homegrown Chinese battery maker. And they have become very close to Tesla and have even set up a factory near Teslas in Shanghai. And today, with Tesla’s business — and, of course, with the business of some other companies — CATL is the biggest battery maker in the world.

But beyond just stimulating the growth of suppliers, Tesla also made these other fish in the pond swim faster. And the biggest Chinese EV company to come out of that period is one called BYD. It’s short for Build Your Dreams.

We are BYD. You’ve probably never heard of us.

From battery maker to the biggest electric vehicle or EV manufacturer in China.

They’ve got a lot of models. They’ve got a lot of discounts. They’ve got a lot of market growth.

China’s biggest EV maker just overtook Tesla in terms of worldwide sales.

BYD 10, Chinese automobile redefined.

I’ve actually started seeing that brand on the streets here in Europe recently, especially in Germany, where my brother actually used to lease a Tesla and now leases a BYD.

Does he like it?

He does. Although he did, to be fair, say that he misses the luxury of the Tesla, but it just became too expensive, really.

The price point is a huge reason that BYD is increasingly giving Tesla a run for its money. Years ago, back in 2011 —

Although there’s competitors now ramping up. And, as you’re familiar with, BYD, which is also —

— Elon Musk actually mocked their cars.

— electric vehicles, here he is trying to compete. Why do you laugh?

He asked an interviewer —

Have you seen their car?

I have seen their car, yes.

— have you seen their cars? Sort of suggesting, like, they’re no competition for us.

You don’t see them at all as a competitor?

Why is that? I mean, they offer a lower price point.

I don’t think they have a great product. I think their focus is — and rightly should be — on making sure they don’t die in China.

But they have been steadily improving. They’ve been in the EV space for a while, but they really started improving a few years ago, once Tesla came on the scene. That was due to a number of factors, not entirely because of Tesla. But Tesla played a role in helping train up talent in China. One former Tesla employee who worked at the company as they were getting set up in China told me that most of the employees who were at the company at the time now work for Chinese competitors.

So they have really played this important role in the EV ecosystem.

And you mentioned the price advantage. So just for comparison, what does an average BYD sell for compared to a more affordable Tesla car?

So BYD has an ultra-cheap model called the Seagull that sells for around $10,000 now in China, whereas Tesla Model 3s and Model Ys in China sell for more than twice that.

Wow. How’s BYD able to sell EVs at these much lower prices?

Well, the Seagull is really just a simpler car. It has less range than a Tesla. It lacks some safety measures. But BYD has this other crucial advantage, which is that they’re vertically integrated. Like, they control many aspects of the supply chain, up and down the supply chain. When you look at the battery level, they make batteries. But they even own the mines where lithium is mined for the batteries.

And they recently launched a fleet of ships. So they actually operate the boats that are sending their cars to Europe or other parts of the world.

So BYD is basically cutting out the middleman on all these aspects of the supply chain, and that’s how they can undercut other car makers on price.

Yeah. They’ve cut out the middleman, and they’ve cut out the shipping company and almost everything else.

So how is BYD doing now as a company compared to Tesla?

In terms of market cap, they’re still much smaller than Tesla. But, crucially, they overtook Tesla in sales in the last quarter of last year.

Yeah, that was a huge milestone. Tesla still dominates in the European market, which is a very important market for EVs. But BYD is starting to export there. And Europe traditionally is kind of automotive powerhouse, and the companies and government officials there are very, very concerned. I interviewed the French finance minister, and he told me that China has a five - to seven-year head start on Europe when it comes to EVs.

Wow. And what has Elon Musk said about this incredible rise of BYD in recent years? Do you think he anticipated that Tesla’s entry into the Chinese market could end up building up its own competition?

Well, I can’t get inside his head, and he did not respond to our questions. But —

The Chinese car companies are the most competitive car companies in the world.

— he has certainly changed his tune. So, remember, he was joking about BYD some years ago.

Yeah, he’s not joking anymore.

I think they will have significant success.

He had dismissed Chinese EV makers. He now appears increasingly concerned about these new competitors —

Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world.

— to the point that on an earnings call in January, he all but endorsed the use of trade barriers against them.

They’re extremely good.

I think it’s so interesting, in a way — of course, with perfect hindsight — the kind of maybe complacency or naivete with which he may not have anticipated this turn of events. And in some ways, he’s not alone, right? It speaks to something larger. Like, China, for a long time, was seen as kind of the sweatshop or the manufacturer of the world — or perhaps as an export market for a lot of these Western companies. It certainly wasn’t putting out its own big brand names. It was making stuff for the brand names.

But recently, they have quite a lot of their own brand names. Everybody talks about TikTok. There’s Huawei. There’s WeChat, Lenovo. And now there is BYD. So China is becoming a leader in technology in certain areas. And I think that shift in some ways has happened. And a lot of Western companies — perhaps like Tesla — were kind of late to waking up to that.

Right. Tesla is looking fragile now. Their stock price dropped 30 percent in the first quarter of this year. And to a large degree, that is because of the threat of companies like BYD from China and the perception that Tesla’s position as number one in the market is no longer guaranteed.

So, Mara, all this raises a much bigger question for me, which is, who is going to own the future of EVs? And based on everything you’ve said so far, it seems like China owns the future of EVs. Is that right?

Well, possibly, but the jury is still out. Tesla is still far bigger for now. But there is this increasing fear that China owns the future of EVs. If you look at the US, there are already 25 percent tariffs on EVs from China. There’s talk of increasing them. The Commerce Department recently launched an investigation into data collection by electric vehicles from China.

So all of these factors are creating uncertainty around what could happen. And the European Union may also add new tariffs against Chinese-made cars. And China is an economic rival and a security rival and, in many ways, our main adversary. So this whole issue is intertwined with national security. And Tesla is really in the middle of it.

Right. So the sort of new Cold War that people are talking about between the US and China is, in a sense, the backdrop to this story. But on one level, what we’ve been talking about, it’s really a corporate story, an economic story that has this geopolitical backdrop. But it’s also very much an environmental story. So, regardless of how Elon Musk and Tesla fare in the end, is BYD’s rise and its ability to create high-quality and — perhaps more importantly — affordable EVs ultimately a good thing for the world?

If I think back on those years I spent living in Shanghai and Beijing when it was extremely polluted and there were days when you couldn’t go outside — I don’t think anyone wants to go back to that.

So it’s clear that EVs are the future and that they’re crucial to the green energy transition that we have to make. How exactly we get there is still unclear. But what is true is that China did just make that transition easier.

Mara, thank you so much.

Thank you, Katrin.

Here’s what else you need to know today.

[CROWD CHEERING]

Millions of people across North America were waiting for their turn to experience a rare event on Monday. From Mexico —

Cuatro, tres, dos, uno.

— to Texas.

Awesome, just awesome.

We can see the corona really well. Oh, you can see —

[BACKGROUND CHATTER]

Oh, and we are falling into darkness right now. What an incredible sensation. And you are hearing and seeing the crowd of 15,000 gathered here in south Illinois.

Including “Daily” producers in New York.

It’s like the sky is almost —

— like a deep blue under the clouds.

Wait, look. It’s just —

Oh my god. The sun is disappearing. And it’s gone. Oh. Whoa.

All the way up to Canada.

Yeah, that’s what I’m talking about. That’s what I’m talking about.

The moon glided in front of the sun and obscured it entirely in a total solar eclipse, momentarily plunging the day into darkness.

It’s super exciting. It’s so amazing to see science in action like this.

Today’s episode was produced by Rikki Novetsky and Mooj Zadie with help from Rachelle Bonja. It was edited by Lisa Chow with help from Alexandra Leigh Young, fact checked by Susan Lee, contains original music by Marion Lozano, Diane Wong, Elisheba Ittoop, and Sophia Lanman and was engineered by Chris Wood.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m catching Katrin Bennhold. See you tomorrow.

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Hosted by Katrin Bennhold

Featuring Mara Hvistendahl

Produced by Rikki Novetsky and Mooj Zadie

With Rachelle Bonja

Edited by Lisa Chow and Alexandra Leigh Young

Original music by Marion Lozano ,  Diane Wong ,  Elisheba Ittoop and Sophia Lanman

Engineered by Chris Wood

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When Elon Musk set up Tesla’s factory in China, he made a bet that brought him cheap parts and capable workers — a bet that made him ultrarich and saved his company.

Mara Hvistendahl, an investigative reporter for The Times, explains why, now, that lifeline may have given China the tools to beat Tesla at its own game.

On today’s episode

Mara Hvistendahl , an investigative reporter for The New York Times.

Background reading

A pivot to China saved Elon Musk. It also bound him to Beijing .

Mr. Musk helped create the Chinese electric vehicle industry. But he is now facing challenges there as well as scrutiny in the West over his reliance on China.

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We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Fact-checking by Susan Lee .

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Katrin Bennhold is the Berlin bureau chief. A former Nieman fellow at Harvard University, she previously reported from London and Paris, covering a range of topics from the rise of populism to gender. More about Katrin Bennhold

Mara Hvistendahl is an investigative reporter for The Times focused on Asia. More about Mara Hvistendahl

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