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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?

with Fundera by NerdWallet

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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What is a Business Plan? Definition, Tips, and Templates

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]

Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
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You're all set!

Click this link to access this resource at any time.

Free Business Plan [Template]

Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

• Business Plan Subtitle
• Executive Summary
• Company Description
• The Business Opportunity
• Competitive Analysis
• Target Market
• Marketing Plan
• Financial Summary
• Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

• Startup Business Plan
• Feasibility Business Plan
• Internal Business Plan
• Strategic Business Plan
• Business Acquisition Plan
• Business Repositioning Plan
• Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

• A detailed product description
• Market analysis
• Technology needs
• Production needs
• Financial sources
• Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

• Department-specific budgets
• Target demographic analysis
• Market size and share of voice analysis
• Action plans
• Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

• Relevant data and analysis
• Assessments of company resources
• Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

• How an acquisition will change its operating model
• What will stay the same under new ownership
• Why things will change or stay the same
• Acquisition planning documentation
• Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

• What the new owner will do to turn the business around
• Historic business metrics
• Sales projections after the acquisition
• Justification for those projections

6. Business Repositioning Plan

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

• Acknowledge the current state of the company.
• State a vision for the future of the company.
• Explain why the business needs to reposition itself.
• Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

• SWOT analysis
• Growth opportunity studies
• Financial goals and plans
• Marketing plans
• Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

That just scratches the surface for why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those that are ready to start a business. It’s just as valuable for those that have an idea and want to determine if it’s actually possible or not. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

Document your strategy and goals

For those starting or managing a business understanding where you’re going and how you’re going to get there are vital. Writing your plan helps you do that. It ensures that you are considering all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll have an idea of where you want your business to go as well as how you’ve performed in the past. This alone better prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

This will be the first part of your plan but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps .  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add it. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing the viability of your business. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex on the surface, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

• Sales and revenue projections
• Profit and loss statement
• Cash flow statement
• Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first and only add documentation that you think will be beneficial for anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. So, to get the most out of your plan, it’s best to find a format that suits your needs. Here are a few common business plan types worth considering. 

Traditional business plan

The tried-and-true traditional business plan is a formal document meant to be used for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

Business model canvas

The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan. This format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Now, the option that we here at LivePlan recommend is the Lean Plan . This is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

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What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.

• What are some of the reasons why business plans don't succeed?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

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These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

Access specialized business plan writing service now!

Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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

May 24, 2021

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

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

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

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

What Is a Business Plan?

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

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

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

Get a Business Idea

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

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

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

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

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

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

Conduct Market Analysis

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

Product and Service Demand

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

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

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

 I ran a quick test of how many people between 18-65  you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

• Other Interests
• Marital Status
• Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,  

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan. 

Each of the following should be a section of your business plan:

• Business Plan Cover Page
• Table of Contents
• Executive Summary
• Company Description
• Description of Products and Services

SWOT Analysis

• Competitor Data
• Competitive Analysis
• Marketing Expenses Strategy 

Pricing Strategy

• Distribution Channel Assessment
• Operational Plan
• Management and Organizational Strategy
• Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go. 

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

• Professionally designed logo
• Company name
• Mission or Vision Statement
• Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a  table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

An executive summary is where your business plan should catch the readers interest.  It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches .  This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

• An introduction to you and your business.
• What your business is about.
• A call to action

Example of an informal executive summary 

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

• Introduction of yourself and company.
• An origin story (Recognition of a problem and how you came to solution)
• An introduction to your products or services.
• Your unique value proposition. Make sure to include intellectual property.
• Where you are in the business life cycle
• Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

• Marketing and sales processes
• Financial statements
• Organizational structure
• Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

• Mission statement
• Philosophy and vision
• Company goals

Target market

• Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements. 

Company Philosophy and Vision

The company philosophy is what drives your company. You’ll normally hear them called core values.  These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity. 

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

•  Prioritize communication.
•  Never stop learning.
•  Be transparent.
•  Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team  understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources. 

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

• What is the industry outlook long-term and short-term?
• How will your business take advantage of projected industry changes and trends?
• What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

• Trade Associations
• Federal Reserve
• Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

• Sole proprietorships
• Limited Liability Companies (LLC)

Partnerships

Corporations.

• Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a  Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

• Unique features that differentiate your business products from competitors
• Intellectual property
• Your supply chain
• Cost and pricing structure 

Questions to answer about your products and services

Mike gave us a list  of the most important questions to answer about your product and services:

• How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
• How do you let them know they need a product?
• How do you communicate the message?
• How will you do transactions?
• How much will you be selling it for?
• How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer.  It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

• Adding offerings that fit with your current small business
• Increase sales to current customers
• Reducing costs through bulk ordering
• Finding ways to reduce inventory
•  And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing. 

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market .  The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

• Online: Facebook and Google are the big names to work with here.
• Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
• Radio : iHeartMedia is one of the best ways to advertise on the radio
• Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
• Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

• Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
• Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
• Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
• Freemium services –  Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies  would need to cover aspects such as:

• Suppliers for lawn care equipment and tools
• Any chemicals or treatments needed
• Repair parts for sprinkler systems
• Vehicles to transport equipment and employees
• Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

• Raw materials
• Shipping of raw materials
• Converting of raw materials to thread
• Shipping thread to produce garments
• Garment producer
• Shipping to company
• Company storage
• Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers.  The business plan should provide an overview of  how the team will manage the following aspects:

Quality Control

• Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

• International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
• AICPA – Standard defined for accounting.
• The Joint Commission – Healthcare
• ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

• The size of your location
• The type of building (retail, industrial, commercial, etc.)
• Zoning restrictions – Urban Wire has a good map on how zoning works in each state
• Accessibility – Does it meet ADA requirements?
• Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
• Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

• Any licenses and/or permits that are needed and whether you’ve obtained them
• Any trademarks, copyrights, or patents that you have or are in the process of applying for
• The insurance coverage your business requires and how much it costs
• Any environmental, health, or workplace regulations affecting your business
• Any special regulations affecting your industry
• Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

• What is the current leadership structure and what will it look like in the future?
• What types of employees will you have? Are there any licensing or educational requirements?
• How many employees will you need?
• Will you ever hire freelancers or independent contractors?
• What is each position’s job description?
• What is the pay structure (hourly, salaried, base plus commission, etc.)?
• How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements 

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

• Higher Revenue if expanding business
• Lower Cost of Goods Sold if purchasing inventory with bulk discounts
• Adding interest if utilizing financing (not equity deal)
• Changes in expenses
• Addition of financing information to the cash flow statement
• Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data,  you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

• Bootstrapping – Using your savings without external funding.
• Taking out debt – loans, credit cards
• Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
• Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

• How much to get started?
• What is the minimum viable product and how soon can you make money?
• How will the money be spent?

Mike emphasized two aspects that should be included in every plan, 

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline. 

• Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

• Wise Plans –  Shares a lot of information on starting businesses and is a business plan writing company.
• Optimus Business Plans –  Another business plan writing company.
• Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

• The definition of a business plan
• Coming up with a business idea
• Performing market research
• The critical components of a business plan
• An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

80% of businesses fail... Learn how not to.

Learn from business failures and successes in 5 min or less. The stories, frameworks, and tactics that will make you a 10x better founder.

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Standard Operating Procedures (SOP): The Complete Guide

Why do some companies scale while others grow, burn out, and collapse? Why do some small business owners barely work and make millions, while others become a slave to their business? 

Over the last two years, we have gotten inside looks into some amazing businesses, and the owners all share similar insights. Their secret? You need standard operating procedures.

Remarkably, the largest companies in the world make up to $2 million per employee (excluding the energy industry) while solo entrepreneurs make an average of $50k per year . SOPs, or standard operating procedures, are the basis for these gains because they are the stepping stone to automating a business.

[su_note note_color="#dbeafc"]

We’ll look at how to implement standard operating procedures to help your company run more smoothly. We’ll also provide SOP templates and examples to get you started. Click on a link below to jump ahead to the part that interests you.

Industries That Use Standard Operating Procedures

• Why are SOPs Important?

Standard Operating Procedure (SOP) Templates

5 elements of sops, step 1. identify pain points, step 2. establish solution, step 3. implement a solution, step 4. write the sop document, step 5. implement the sop, step 6. training employees, step 7. refine and update.

• What are the three types of SOP format?
• What is a Standard Operating Procedure (SOP) Plan?

Sample Standard Operating Procedure Checklist

Sop frequently asked questions, what are sops (standard operating procedures) in business.

A standard operating procedure (SOP) defines the step-by-step process to complete a routine task. SOPs are created to help companies:

• Perform more effectively
• Maintain quality
• Maintain consistency
• Reduce rework
• Comply with regulations
• Delegate tasks

Even small businesses and startups benefit from SOPs. For example, entrepreneur Christopher Mondragon told us:

[su_quote]Exceptional customer service will help cleaning companies start making money in days. Two things I do that others don’t is my phone support is available from 7 a.m. -11 p.m., seven days a week. I also have an online system where people can go online, put in their information, and book it without talking to anyone. Customers love it![/su_quote]

These are the kind of SOPs Chris used to grow his cleaning business to $1.5 million in record time. Would you like to achieve more in your business? 

Find out how Chris did it below.

[su_youtube url="https://youtu.be/d4Iip7BHXwg"]

Then sign up for our 7-figure cleaning blueprint where we provide all the tools Chris uses to succeed.

If cleaning doesn’t sound like the right business for you, get ready to dig deeper into what makes a good standard operating procedure.

Every industry has standard operating procedures. Some industries have more government regulation and therefore more stringent SOP documents. Some of the most regulated industries include:

• Manufacturing 
• Transportation
• Health care
• Financial institutions
• Energy production
• Professional services
• Business administration services

In fact, there are over three million regulations governing businesses in the United States.

I can’t imagine running a business that has employees without a clearly defined SOP document. We have dozens of them just to get this blog out to you. We have a keyword research SOP, a blog writing SOP, an editing SOP, a graphic design SOP, a WordPress SOP, not to mention all the accounting, payroll, and other SOP documents that businesses like ours need to follow.

Why Are SOPs Important?

Standard operating procedures are important because they:

• Reduce training time
• Increase quality 
• Improve brand loyalty
• Reduce regulatory penalties
• Prevent knowledge loss

Our mission at UpFlip is to provide the best tools to help you succeed in business. That’s why we've created a template for SOP creation and other helpful resources. Check out some of the standard operating procedure documents we’ve created for you:

• Standard Operating Procedure pdf
• Step-by-Step Standard Operating Procedure template word
• Stample Standard Operating Procedure Checklist for Hiring and Onboarding
• Sample SOP Document

A standard operating procedure (SOP) should include at a bare minimum:

• Roles and Responsibilities
• Quality Requirements

If you want a more formal SOP document, you might also want to include a header, scope, appendix, revision history, and signatures.

How to Create SOPs

Creating Standard operating procedures follows a simple process:

• Identify Pain Points
• Establish Solution
• Implement Solution
• Write the SOP Document
• Implement SOP
• Train Employees
• Refine and Update

Entrepreneur Adam Hill also uses SOPs in his vending machine business. He uses them for standardizing machines, determining his route, and deciding how much to pay for a vending route. Check out our interview with him below.

You can also pre-enroll for our free vending machine training course .

Let’s look at each step in the process so you can start creating your own effective SOPs.

Pain points are routine tasks that impact your company on a regular basis. Your pain points may be challenges like:

• Training new employees to do a specific job
• Complying with industry regulations
• Reducing the time a business process consumes
• Improving quality control
• Reviewing employee performance

Make sure to identify why these are pain points, how much time or money they consume, and what solutions you could use to solve them. This step will be the basis for the purpose section for your SOP forms when you create them. 

Next, we’ll provide an example of a pain point.

SOP Example Pain Point:

We’re going to provide standard operating procedure examples throughout the article.

Given one of the main pain points companies have today is the ability to find employees, I’m going to tackle this concern in many of the SOP examples. You might describe the pain point in one of the following manners:

• Hiring new employees costs the company $10,000 in lost productivity every time we hire. The goal of this SOP is to improve the company’s retention of employees.
• Our business is growing so fast that we can’t hire enough employees. We aim to attract more candidates so we can fill positions faster.

Once you’ve identified a problem, you’ll want to identify the solution.

Business processes will vary from company to company, but you want to consider solutions that solve the problem as easily as possible. Using the hiring example, some solutions might include:

• Adopt an SOP to offer current employees up to 5% more pay than competing job offers to reduce turnover.
• Increase employee referral bonuses.
• Increase pay packages for new hires.
• Partner with a staffing agency to offer temp-to-hire positions.
• Run paid ads for job openings.
• Include salaries in job descriptions.
• Remove or reduce educational or experience requirements from job descriptions.
• Do keyword research for job descriptions.

Numerous solutions can be implemented to solve any problem with business processes. Hopefully, you’re starting to get some ideas about what standard operating procedure we’re going to create to solve the problem of not finding enough employees.

Next, you’ll want to implement the solution to your problem. When you’re in the process of SOP creation, you may not get it right the first time, but make sure to write step-by-step instructions of what you did. This will be the basis for the SOP format. 

Many of the suggestions to solve employers’ hiring problems employers centered around the job description, which means you might want to adopt standard operating procedures that work like this:

• Perform keyword research for job descriptions.
• Analyze pay for a position on the local level and set your salaries on the high end. (Yes, I know it costs more, but better pay means better candidates and happier employees. If the pay is higher than that of current employees, give your entire team a raise so they don’t get upset.)
• Write the job description. Make sure to include the keywords and salary information. 
• Reduce or remove educational or experience requirements from existing job descriptions.
• Share the posting with employees. Remind them about your referral program. Add a perk and ask them to share.
• Share the posting on job boards. You don’t have to do paid promotion at first, but it might help if you need an employee fast.
• Contact a staffing agency . Discuss your needs and budget with them.
• Run paid ads. If the above steps haven’t been successful, paying for preferential treatment in the job listings is worthwhile.

Now that you have a process, you’ll want to write the SOP document. You want to make it foolproof. Personally, I like to give the document to someone who has no understanding of the subject and ask them to follow the directions in the standard operating procedure. 

Let’s look at how to write SOPs.

How to Write a Standard Operating Procedure

Writing SOPs shouldn’t be difficult. The point is to make them easy to follow. You’ll want to:

• Consider your target audience
• Create a cover page 

Add a Table of Contents

Include the purpose .

• Include Roles and Responsibilities
• Include Quality Requirements
• Write the Standard Operating Procedure (SOP)

Provide References

• Include the Revision History
• Include Document Authorization

Consider Your Target Audience 

Before you begin developing SOPs, you should identify the relevant employees, their prior knowledge, and the SOP format most likely to communicate the SOPs properly. Do they need technical SOPs, step-by-step instructions, or hierarchical SOPs? 

Make sure to write in an active voice and use language employees understand. Once you’ve considered these factors, you can begin writing.

Create a Cover Page 

The first page you’ll create is a cover page. It should be obvious what the standard operating procedure is about. The best way to do that is to create a title page with the:

• Name of the company
• Name of the standard operating procedure
• Unique SOP identification number 
• Most recent revision date

We'll provide you with an SOP cover page template. Get your copy and more helpful documents in our free SOP template download below.

If your standard operating procedures don’t fit on a single page, include a table of contents. This is especially true if you have a three-inch-thick notebook with all the standard operating procedures. No one wants to read an entire rule book to find a single policy.

The purpose or scope tells people what the SOP is about. You should have already defined this in the previous steps. Now it’s just a matter of communicating what the SOP covers, what it doesn’t cover, and why employees perform the new SOP as directed. 

If you provide digital (not printed) standard operating procedures, provide links to other SOPs mentioned in the purpose.

Roles and Responsibilities 

You’ll want to define who will implement the standard operating procedure, who will check the procedure, and anyone who may need to be aware of the SOP.

Quality Requirements 

Depending on the standard operating procedure, you may have quality control measures in place to make sure you achieve a positive outcome. 

For instance, a t-shirt design SOP might specify that an acceptable design is only 1/16” off-center and that the measurements are taken by a machine. You might also want a human to check every 10 pieces to verify there is no equipment failure.

Write the Standard Operating Procedure 

SOP writing should be as concise as possible and should include images for a better understanding of the intent. Make sure to give examples of the key steps. Digital SOPs can have videos so people can watch the SOP in action.

If there are additional resources that a team member needs to understand, make sure to include them in the resources. This might include customer complaints, organizational knowledge, internal processes, relevant laws, and more.

Include Revision History

As you grow, your standard operating procedure will evolve to be more effective. You’ll want to document changes. This can be helpful for helping employees understand how the SOP format has changed over time and why.

Document Who Authorized The SOP

Large organizations might need authorizations from specific people before they implement standard operating procedures. Make sure to include a space for these. 

At this point, you’ve defined the SOP and written out the documentation, but you still need to implement it. Implementation could mean:

• Adopting and integrating software into your business
• Buying new tools or equipment (This is common in fields that require personal protective equipment.)
• Training employees

During this stage, your main goal is preparing your business to implement clearly defined SOPs. If your new SOP impacts other SOPs, edit them as well. For instance, new compliance standards would impact both the onboarding process and ongoing employee training SOPs.

Creating SOP templates for your employees to work with can help you achieve more with fewer resources, but you’ll need to train your employees on the new SOP to reach maximum efficiency. Common ways of training employees on the company policies include:

• Providing written SOPs upon hire.
• Top employees training new employees.
• Sending an email about policy changes.
• Having a team meeting or training. These can be virtual or in-person, but allowing employees to perform the step-by-step SOP to see it in action normally works best. It helps them see the SOP’s impact on their workflow and provides useful feedback.

No matter how effective SOP writing is, you’ll always find better ways to complete a process as technology changes, your skill sets increase, and your business grows. 

After you create standard operating procedures, make sure to go back to them occasionally and make sure that they still adhere to regulatory compliance and best practices.

What Are the Three Types of SOP Format?

A standard operating procedure will normally use one of three SOP formats:

• Step-by-step SOP
• Hierarchical SOP

Flow Chart SOP

Let’s look at each SOP format to understand how to create standard operating procedure documents.

Step-by-Step SOP

A step-by-step SOP shows how to complete a task by completing a series of steps from a sequentially ordered list. How-to guides and recipes are good examples, but there are many other uses as well.

In fact, every blog we write on how to start a business follows a standard operating procedure (SOP) template. We just alter them based on the requirements to start each business.

These SOPs follow the sequence:

These are the most common SOPs and are sometimes referred to as step-by-step instructions or workflows. These can be automated in many scenarios to create a quality output faster.

Hierarchical Format SOP

When written instructions would be too complex for employees to follow, you may need to break them down into a hierarchical SOP where the knowledge for one part of the task is covered in one SOP document, and the next part of the process is separate. 

For example, hiring employees is a huge task. If you try to include the entire process in one step-by-step guide, it will be overwhelmingly long.

Developing standard operating procedures using the hierarchical format might follow an SOP template that looks like this:

• SOP: Hiring Employees (SOP1) a. Notifying HR of Hiring Needs (link to SOP2)         i.   Submit termination paperwork         ii.  Submit form to create job description         iii. Other associated tasks (List all) b. Researching Hiring Market (Link to SOP3) c. Creating Job Descriptions (Link to SOP4) d. Sharing Job Descriptions (Link to SOP5) e. Interviewing Applicants (Link to SOP6) f. Confirming New Hire Job Acceptance (Link to SOP7) g. Preparing New Hire Paperwork (Link to SOP8) h. Procuring Tools (Link to SOP9) I. Granting Software Access (Link to SOP10) j. Setting Up Workspace (Link to SOP11) k. First Day Tasks (Link to SOP12) l. Orientation Tasks (Link to SOP13) m. Probationary Meetings (Link to SOP14)

Each of the letters in this list would serve a specific purpose that has hierarchical steps. The full process to complete the fourteen tasks listed could require hundreds or thousands of steps, and the people involved could span across different teams of employees. 

When processes depend on changing variables. use flow charts like the one below. To create an SOP template for a flow chart, you need to determine what the relevant decisions are. 

As an example, we created this flow chart to help you decide what type of standard operating procedure templates to use. There are 3 relevant decisions that impact which template you should create:

• Is there a process to follow?
• Is the process difficult to follow?
• Do decisions change the process?

Based on the answers, you get a different result that shows you how to make SOPs easier to follow. Using this strategy maintains organizational knowledge and can be the basis for an SOP plan, which we’ll discuss next.

What Is a Standard Operating Procedure (SOP) Plan?

An SOP plan is a document you may need to create when you grow from being a single person running a small business to hiring employees.

You have certain ways you like things done, and the best way to get employees to follow your hierarchical steps is to create an SOP for anything that is important to you. You’ll then train the employees using the SOP and provide them documents and work tools that make it easier to follow the SOP.

You might include the following elements in an SOP plan:

• What SOPs you need
• Templates for standard operating procedures
• SOP naming conventions
• When and how to edit each standard operating procedures template

We’ve created a sample standard operating procedure checklist for hiring and onboarding employees. Download the checklist along with the standard operating procedure guidelines and other templates we created to help you get started with SOPs.

What is an SOP? 

The SOP meaning in business stands for standard operating procedure. The definition of standard operating procedure is a written process that is followed every time the process needs to be repeated. 

Why SOPS Are Important

SOPs are important because the majority of tasks are repeated consistently during the course of business. Documenting and following standard operating procedures helps businesses:

• Reduce decision making
• Increase efficiency
• Increase quality
• Comply with government regulations
• Train new employees
• Maintain the body of knowledge 

Technical vs. Management SOPs

Technical SOPs explain how to perform and complete tasks while management SOPs explain how to create, update, distribute, and oversee other SOPs. As an example, Technical SOPs are used for routine tasks like payroll, work orders, and inspections, while management SOPs are used to maintain consistency in the SOP full form creation.

How Businesses Use SOPs to Improve Efficiency 

Every time you make a decision, you have to think about the factors that go into the decision. When businesses create standard operating procedures, they eliminate the decision-making process for that procedure, which increases efficiency.

This also makes training easier because everyone has the same method of performing a task. This standardization also decreases defects and errors, which leads to greater efficiency. 

What is a Standard Operating Procedures Manual?

A standard operating procedure manual is a list of all standard operating procedures gathered in one place.

Today, an SOP manual is best kept in the cloud where all employees can access it, but for brick and mortar businesses, the standard operating guidelines may also need to be printed and stored in a readily accessible location.

What Are SOPs Doing for Your Business?

As you can see, there are many benefits to implementing SOPs in a business. No matter the size of your company, you can benefit from defining your standard operating procedures. 

What are some ways that you have defined your business operations?

• Complying with Government Regulations
• Automating Processes
• Training Employees
• Other - Tell us in the comments!

17 Boring Businesses That Make Big Money (2024)

Get ready for the most boring blog you’ve ever read! In just a few minutes’ time, you’ll know a lot more about 17 boring businesses that could bring in serious revenue.

In this post, we’ll discuss an array of boring business ideas and explain how to start or buy them. We’ll also provide some general tips on what to look for when investing in boring businesses.

By the time you finish reading, you’ll know which boring business is right for you, and how to make it profitable.

[su_note note_color="#dbeafc"] Click on any of the boring links below for more information on the “boring business” model, or just continue reading.

What are boring businesses?

Best boring businesses to buy, how to buy a boring business, property management businesses, more boring business ideas, ‘mirror, mirror on the wall, what’s the most boring business of them all’.

• Start your own business [/su_note]

The term “boring business” has become popular because of Codie Sanchez , the owner of the business education service Contrarian Thinking . A major part of her wealth-building strategy is buying boring businesses.

A boring business is defined by four characteristics. It is:

• Stale: There is little to no disruptive innovation opportunity in the business model, which means you can implement best practices and let the business run with minimal participation.
• Old: An old business is at least five years old. The older the small business is, the more likely it is to remain successful.
• Weak: Industries with less competition or lots of dissatisfied customers tend to find it easier to stand out from the pack by simply improving customer service.
• Simple: You want a small business model that is easy to understand, doesn’t require research and development costs, and has clear opportunities to improve service or technology to improve profit margins.

You might hear this boring business framework called SOWS for short.

The industries in this list aren’t the sexiest, but they offer essential services and make a steady income with recurring revenue. Steady income means there aren’t huge fluctuations in cash flow; recurring revenue is achieved by having customers return regularly.

Many have low startup costs and can serve as passive income streams.

The boring business ideas below can help you hit the ground running as a business owner.

• Laundromats
• Vending machines
• Rental properties
• Home maintenance
• Office supplies
• Bookkeeping
•  Storage units
•  Landscaping
•  Shipping centers
•  Ice vending
•  Renting your car
•  Pre-made meals
•  Petsitting
•  Waste removal

Keep reading to get the low-down on each boring business.

#1. Laundromats

• Average Annual Revenue: $311,220 • Average Profit Margins: 22.10% • Startup Cost: $100K-$3.5M • Time to Revenue: 6-18 months • Annual Market Growth Rate: -0.1% • Best For: Customer service pros with high attention to detail

Laundromats have recurring revenue and provide a valuable service for the 16% of American households that do not have washers and dryers in their homes.

These small businesses provide a steady income because Americans do an average of eight loads of laundry per week, and laundromats charge $2 to $4 per load .

Laundromats in zip codes below the poverty line will normally have the most profit potential. Cities like New York City, Chicago, and Los Angeles have higher percentages of people without laundry machines in their homes.

#2. Car washes

• Average Annual Revenue: $73,100 • Average Profit Margins: 16.10% • Startup Cost: $500+ • Time to Revenue: 3+ months • Annual Market Growth Rate: 1% • Best For: Car enthusiasts and detail-oriented entrepreneurs

A car wash is another boring business with heavy cash flow.

With a quick online search, you can find lots of car washes for sale. Sometimes, you can find them for as low as the cost of the land. From there, you can increase cash flow with simple fixes like adding automation, cashless payments, or even leasing extra space to other businesses.

You’ll also be able to use the land to secure capital through small business loans and grow your business empire faster.

#3. Vending machines

• Average Annual Revenue: $182,100 • Average Profit Margins: 4.30% • Startup Cost: $2K-$10K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.5% • Best For: Organized entrepreneurs who like driving, people who want a semi-passive business

Automated vending appears to have a small growth rate and average profit margins. Meanwhile, it’s one of those business opportunities that combines low startup costs and good cash flow, and it gets more profitable as you add more machines to a route.

Just ask vending machine business owner Adam Hill, who makes $700K per year working just two days per week.

Did you enjoy the video? Check out our vending machine business course .

• Average Annual Revenue: $182,100 • Average Profit Margins: 4.30% • Startup Cost: $2K-$10K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.50% • Best For: Organized entrepreneurs who like driving, people who want a semi-passive business

Another boring business you can start is placing ATMs in other small businesses. Many businesses need ATMs but don’t want to manage them. You’ll make $2 to $5 per transaction, and potentially even more in high-demand areas, like Vegas casinos.

You can manage the services or turn the revenue into 100% passive income by using services like ATM Together , which help (or completely) set up your business.

There are even specialized ATMs like Bitcoin ATMs or Coinstar .

#5. Franchises

• Average Annual Revenue: $621,212 • Average Profit Margins: Varies by industry • Startup Cost: $1K-$3.5M • Time to Revenue: 3-18 months • Annual Market Growth Rate: Varies by industry • Best For: People who want to skip the trial-and-error phase of small businesses

Companies in several industries offer franchising opportunities, making it easy to start making money as a business owner.

Over 10% of companies are a franchise, and franchises account for 3% of GDP. The McDonald’s down the street, for instance, is likely a franchise, meaning it’s owned and run by an independent franchisee with the company’s permission.

Franchises are boring businesses because the business model's success has already been proven and you can use existing intellectual property and processes in day-to-day operations to make a great living.

If you’re ready to buy a small business, check out our blog on the best franchises to own .

#6. Rental properties

• Average Annual Revenue: $27,375 per home • Average Profit Margins: -11% to +10% • Startup Cost: $60K+ • Time to Revenue: 3-12 months • Annual Market Growth Rate: Fluctuates with tourism and value compared to hotels • Best For: Recognized real estate professionals or service business owners

Real estate ownership is the number one driver of wealth for most American households. In fact, second homes contribute to wealth creation in 4% to 6% of the population. That makes rental properties a great way to earn more money and develop a steady stream of recurring revenue.

Two particularly successful rental property management strategies include opening Airbnb rentals and buying and leasing quadplexes.

Find out how to turn real estate rentals into a $3M per year business below:

#7. Home maintenance services

• Average Annual Revenue: $204,700 • Average Profit Margins: 5.40% • Startup Cost: $500-$5K • Time to Revenue: 3+ months • Annual Market Growth Rate: 0.7% • Best For: Construction and repair pros, creative problem solvers, outgoing and hands-on entrepreneurs

Providing home maintenance can be a very consistent way to earn money because you’re providing an essential service. It’s also one of the few small businesses in the construction industry that doesn’t require a contractor's license.

Learn how to start a home maintenance service company from a handyman making $250K per year with just two trucks.

#8. Office supplies

• Average Annual Revenue: $1.94M • Average Profit Margins: .9% • Startup Cost: $100-$5K • Time to Revenue: 1-3 months • Annual Market Growth Rate: -2.3% • Best For: SEO experts and people who are great at finding low-competition keywords

The office supply industry can be risky to invest money in because there is declining demand for many of the products they offer. But there are plenty of ways to get customers, especially if you run an online business.

You can make a steady stream from eCommerce if you offer business supplies with a dropshipping business model. If you have a physical location, you can include services-based offerings, like graphic design, printing, and shipping.

#9. Bookkeeping

• Average Annual Revenue: $1.57M • Average Profit Margins: 18% • Startup Cost: $500-$5K • Time to Revenue: 1-3 months (not including time training as a CPA) • Annual Market Growth Rate: 1.7% • Best For: CPAs, finance experts, entrepreneurs with strong math skills

One of the most boring businesses you can conceive of is an accounting or bookkeeping business.

There’s a high demand for these services because 33 million small businesses and 124 million U.S. households need tax advice and other services. You can increase your success by specializing in niche areas, like eCommerce accounting.

Of course, accountants and bookkeepers require specialized education.

#10. Storage units

• Average Annual Revenue: $135,882 • Average Profit Margins: 66.5% • Startup Cost: $100K-$10 million • Time to Revenue: 6-18 months • Annual Market Growth Rate : -1.8% • Best For: Commercial landowners, remote workers, and people who like having spare time during their day job

When you invest in storage space, most of the cost will be the purchase of the building and any upgrades you do. Many businesses in this industry can be turned into almost entirely passive income sources by adding keypads, automated locks, and online booking.

#11. Landscaping companies

• Average Annual Revenue: $272,790 • Average Profit Margins: 8.7% • Startup Cost: $1K-$100K • Time to Revenue: 1-3 months • Annual Market Growth Rate: 8.1% • Best For: Gardeners, landscape designers, people who love hands-on, outdoor work

There’s constant demand in this growing market, and there’s also great opportunity.

Most landscaping companies lose 8% to 10% of their customers each year, and their biggest challenge is when people aren’t happy with their services. That makes the industry ripe for businesses that focus on offering clients great customer service. If you can automate the business processes, your revenue could increase even more.

Mike Andes started in landscaping services when he was just a teenager, and today, he’s sold over 133 Augusta Lawn Care Services franchises and has expanded into real estate. Check out our playlist of interviews with Mike Andes below:

#12. Cleaning companies

• Average Annual Revenue: $755,180 ($62K for solo) • Average Profit Margins: 10.8% • Startup Cost: $1K+ • Time to Revenue: 1-18 months • Annual Market Growth Rate: 5.1% • Best For: Friendly professionals with an attention to detail

This boring business idea is in high demand. You can clean homes on a one-time or routine basis, and people pay good money for it.

Before you invest in a cleaning business, review our resources for cleaning businesses that we created with Chris Mondragon. He’s a featured speaker at housecleaning conventions and runs a multi-million-dollar house and Airbnb cleaning service.

We even have a cleaning business course that promises to help you earn $10K and comes with a 90-day refund policy.

#13. Parking lots

• Average Annual Revenue: $1.47M • Average Profit Margins: 5% to 10% • Startup Cost: $100K-$3.5M • Time to Revenue: 6-18 months • Annual Market Growth Rate: 4.3% • Best For: Landowners in high-traffic areas

Owning parking lots is perfect for people who want to run an automated business or sit outside all day at work.

Many businesses in this industry have lots of land in high-demand areas, like downtown in major cities. They charge by the hour and make money accepting cash and credit cards, so no one is required to be on site.

Parking lot owners commonly have relationships with the local government so law enforcement tickets people who don’t pay to use their parking spaces.

#14. Dry cleaning

• Average Annual Revenue: $265,808 • Average Profit Margins: 22.10% • Startup Cost: $100K-$3.M • Time to Revenue: 6-18 months • Annual Market Growth Rate: -6.7% • Best For: Customer service pros with high attention to detail

Dry cleaning can be decent money, but the industry is in decline with the rise of work-from-home jobs. That just means you have opportunities to buy businesses at a discount.

Many of the dry cleaners for sale online are asking for less than two times the annual cash flow. If you buy them using seller financing with 20% of the money down, you could buy a dry cleaner for as little as $20K now and pay it off over time.

For more on seller financing, check out our guide to buying businesses with little to no money .

You may have difficulty getting loans from traditional lenders when considering this investment because of the industry decline.

#15. Pre-made meals

• Average Annual Revenue: $25.4M • Average Profit Margins: 1%-10% • Startup Cost: $1K+ • Time to Revenue: 1-18 months • Annual Market Growth Rate: 7% • Best For: People who love cooking

Providing customers with pre-proportioned meals is boring because it consists of primarily repetitive tasks and has a low profit margin.

A small business in this industry makes money by cooking food in bulk and breaking it into individual meals. Its clients are mostly busy professionals who want to eat healthier and don’t have time to do their own meal prep.

People can pay by the meal and may get a discount if they return the reusable packaging.

#16. Pet sitting

• Average Annual Revenue: $73,533 • Average Profit Margins: 11.5% • Startup Cost: $1K-$100K • Time to Revenue: 3+ months • Annual Market Growth Rate: 1.1% • Best For: Pet lovers and experts, salon and grooming professionals, empathetic and detail-oriented entrepreneurs with strong customer service skills

Pet sitting and grooming companies are boring business ideas that can make decent profits. They aren’t high-growth and are labor-intensive, but you get to play with cute dogs and kitties.

Martin Burt and his wife explain how to start a pet sitting business in our definitive guide. We have information on pet boarding , too.

#17. Waste management

• Average Annual Revenue: $8.72M • Average Profit Margins: 7.29% • Startup Cost: $1K+ • Time to Revenue: 3-18 months • Annual Market Growth Rate: 1.9% • Best For: Customer service pros with high attention to detail

Waste management companies remove junk from sites and take it to the dump. Society’s reliance on them is here to stay.

When you buy a waste removal business, you’ll want one with employees already if you’d like it to be a passive income source. Otherwise, you’ll have to work in the business until the hiring systems, insurance, and payroll are in place.

Learn how Kyle Landwehr started his junk hauling business and turned it into a $3 million per year business.

Next, let’s look at how to buy a business with little money and convert it into a steady stream of revenue.

You can buy many small businesses with less capital than it takes to start a new business, but you’ll need to go through a defined process before you invest. We suggest the following process for buying businesses:

• Work with business brokers.
• Identify your goals.
• Find the right business for sale.
• Value the business.
• Negotiate the deal.
• Close the deal and transition into ownership.

You’ll specifically want to master securing seller financing to achieve the most success when pursuing boring businesses for sale. Again, you can learn about the process in our blog about how to buy a business without money .

Now let’s look at a list of property management businesses that can help you make a great living.

Real estate and property management businesses are boring businesses that lots of people look to for investment opportunities. Whether you’re just getting started in the real estate investment world or have years in the space, you can make a great living.

You’ll earn cash flow, at least, but you may also earn additional funds from appreciation of assets when you sell them. Check out the list of real estate businesses I love:

• Airbnb rentals
• Apartment buildings
• Mailbox centers
• Mobile home parks
• Property management and repair companies
• Rental arbitrage
• Storage space rentals
• Tiny home rentals

The best thing about these boring businesses is you can manage your entire investment portfolio from a single platform and website, which makes it easier to manage multiple businesses as the demand grows.

Want more bloody boring business ideas?

Check out the list of 99 more boring businesses below!

Now you have plenty of boring businesses to consider buying or starting up. They span several industries and skill sets. You might want to start with a business that costs less and build up to more expensive ones as you develop wealth.

The Boring Company is the most boring business in all the world. Seriously! 

Maybe not the take on “boring” you expected, but Elon Musk started The Boring Company because he was tired of dealing with traffic.

The Boring Company uses boring machines called Prufrocks to bore tunnels at a rate of one mile per week, but they aim to eventually bore seven times faster than that. The tunnels are used to transport passengers around the Las Vegas Convention Center and to Resorts World in Tesla vehicles. There are other tunnels in the works.

Start your own business

The world is full of opportunities with lots of demand and not a lot of competition. It’s up to you to find the boring businesses that work for your portfolio.

What boring businesses do you find the most appealing for your investment strategy?

How Much to Charge for House Cleaning in 2024

Professional house cleaning is a major industry. The global cleaning industry is currently valued at over $55 billion, and that’s expected to double by 2030. That means it's a great market for new entrants, but you'll need a house cleaning pricing guide to make sure you charge properly, which is exactly what we provide here.

[su_note note_color="#dbeafc"] Read from start to finish or click any of the links below to jump to the section you need right now.

Case study: Queen Bee Cleaning

How much to charge for cleaning a house, what kind of house cleaning services should i provide, ways to charge for professional house cleaning.

• Sign up for our exclusive 7-Figure Cleaning Business Blueprint [/su_note]

Chris Mondragon’s wife started cleaning houses in 2015 to make some extra money. Their company, Queen Bee Cleaning, took off so quickly Chris quit his job and helped build it into a $1.5 million empire. Today, Queen Bee is also top-rated on Nextdoor, Yelp, Houzz, Thumbtack, HomeAdvisor, and Porch.

We'll share Chris’s insights to help you create a cleaning pricing guide that will allow you to make a great living in the house cleaning services industry. We'll cover the types of services and different ways to charge—and share a pricing list.

Keep reading for a rare opportunity to learn Chris's unique pricing strategies from his UpFlip-exclusive course . You'll discover exactly how he prices his cleaning services, which skyrocketed the growth of his business to $4.5M in record time.

House cleaning prices for a home should be between $100 and $800, but each house cleaning service will have different prices depending on the size of the home, the type of cleaning, and where you live.

There are three typical ways house cleaning prices are calculated by a house cleaner:

• Hourly: $25 to $90 per hour, per cleaner
• Flat fee : $100 to $800 weekly or biweekly for standard cleaning of a single-family home
• Room rate: $100 for 1 bed/1 bath + $10 to $20 for each additional bedroom and bathroom
• Per square foot: $0.05 to $0.10 per square foot

Now that you know how much to clean a home, let’s discuss the different kinds of house cleaning services.

A housecleaning service will normally offer other services besides just cleaning homes for people who live in them. They may also provide services for Airbnbs, moving, apartments, and commercial spaces. For instance, Queen Bee also offers:

• Airbnb cleaning
• Carpet cleaning
• Disinfecting services
• Home cleaning
• Move-in cleaning
• Deep cleaning
• Move-out cleaning
• Office and commercial cleaning

Chris told us:

[su_quote] If I was to start today, I would probably focus on Airbnb cleaning because it has a higher profit margin. [/su_quote]

For standard house cleaning services, Queen Bee includes:

• Dusting all furniture, walls, fans, counters, and other hard surfaces
• Vacuuming all floors
• Mopping wood, marble, tile, and linoleum floors
• Mirror and window cleaning with a glass cleaner
• Cleaning and sanitizing all bathroom surfaces including toilets, sinks, tubs, and showers
• Sanitizing all kitchen surfaces including inside the microwave and the front of the fridge
• Spot-cleaning cabinets
• Changing linens (if fresh linens are left out) and making beds
• Emptying the trash and relining the trash can before exiting each room

These are just some of the house cleaning services Queen Bee offers. You can find Chris’s complete cleaning services checklist, including 11 add-ons, in our Cleaning Business Master Course .

Let's look at what you might offer as the owner of your own house cleaning business, starting with Airbnb cleaning.

What should I include in Airbnb cleaning services?

In addition to your standard offerings as a house cleaning service, Chris suggests maintaining an inventory of your own supplies to replace toiletries, kitchen essentials, and linens. For the laundry portion, you'll need to have someone do laundry or partner with a laundry service.

He also told us:

[su_quote] I charge extra for the toiletries and linens, but it basically takes me the same time as a normal home clean. [/su_quote]

Check out our interview with Chris below:

[su_youtube url="https://www.youtube.com/watch?v=d4Iip7BHXwg"]

What should I include in carpet cleaning services?

Carpet cleaning services focus only on rugs, carpets, and other floorings. You'll need to assess your time differently from other services and have the special cleaning equipment to do the job best.

Chris shared his cleaning pricing guide for carpet cleaning, and it includes five main cleaning points with time and price for:

It's typical for a carpet cleaning business to have a minimum amount, such as $99 for two bedrooms.

What should I include in disinfecting services?

Disinfecting services are focused on cleaning surfaces with medical-grade cleaning products. The goal here is on keeping the space particularly clean in a way that helps to minimize germs. I would imagine this is popular for businesses or households that have had a COVID outbreak.

Christ told us:

[su_quote] Eliminating germs & pathogens requires more than just a wipe of a towel with bleach. We use an electrostatic sprayer to apply the disinfectant. The sprayer ‘loads’ the mist with a positive charge, making the disinfectant stick to all surfaces killing 99% of the pathogens. Our hospital-grade disinfectant is an EPA-certified product safe to use around children and pets [that’s] safe on all surfaces. [/su_quote]

What should I include in deep cleaning services?

Deep cleaning services should include everything you do in standard house cleaning, plus baseboards and behind furniture. Chris also includes dishes in his standard deep clean service and offers a variety of additional offerings.

How much does a deep clean cost?

Deep cleaning services are normally charged at a premium compared to a standard cleaning price. For Queen Bee clients, deep house cleaning costs between $199 and $319 above the standard house cleaning prices.

So, once you know how much you'll charge for regular services, it's easy to decide how much to charge for deep cleaning a house.

What should I include in a move-out cleaning service?

Move-out cleaning is a service offered to renters to help them save time and money by helping them get their deposits back. These services include:

• Thoroughly cleaning all counters, cabinets, and appliances
• Cleaning bathrooms, including toilets, sinks, and showers
• Cleaning floors and carpets
• Wiping down light switches, walls, and doorknobs
• Disposing of any expired food items
• Deep-cleaning the oven

Chris recommends using the move-out checklist provided by the client's landlord as the basis for bidding on the cleaning job and told us:

[su_quote] I charge $279 to $479 more for move-out cleaning costs than my standard cleaning rates. [/su_quote]

Want more great tips like this? Check out all of our UpFlip courses .

What should I include in office and commercial cleaning?

Offices and commercial cleaning jobs are different for every building. Chris recommends touring the property and establishing the following:

• Square footage
• Number of desks
• Percent of floors that are carpet and tile
• Number of windows
• Number of toilets and sinks
• Square footage of counters
• Kitchens in the building
• Parking lots
• Special requirements

These jobs can be more complex, but businesses need more routine cleaning services, which could be a win for you. Commercial buildings also tend to be better suited for pricing per square foot because you can assign a price per square foot to each task and then just multiply quantities. It might look like the table below. (Note that sqft = square feet.)

House cleaning prices vs. operating costs

Every cleaning company will have costs associated with operating. One powerful difference between a successful cleaning business and other cleaning companies is how well the business owner manages their cleaning costs. Your house cleaning prices need to cover the following expenses:

Payroll expenses, taxes

• Marketing costs

Cleaning supplies

Professional fees.

Based on Queen Bee Cleaning Service's annual expenses, you might expect your total overhead costs to be approximately 87% of the amount that you make if you have employees. If you are a single-person house cleaner, the total overhead will be between 30% and 50%.

In the following sections, we share a few examples. You can use similar math regardless of what type of cleaning business you run. Queen Bee is primarily house cleaning, so I refer to house cleaners in these sections.

Let's look at each of these to give you an idea of what they are for Queen Bee and what you can expect to pay when you start to charge for housecleaning.

How labor impacts house cleaning prices

Labor typically accounts for approximately 50% of the costs of running a house cleaning company. Whether this amount is going to you or your employees will vary. If you have employees, you'll typically need to pay them either an hourly rate or billable hours.

Just make sure you don't try to consider them independent contractors. Chris told us:

[su_quote] I was misclassifying the maids and got a hefty fine. [/su_quote]

To help establish an hourly rate, check what house cleaning companies in your area pay their housekeepers. The Bureau of Labor Statistics has a lot of data on the hourly rate of the house cleaning industry, too. In most places, a house cleaner will be paid an hourly rate of $15 or more.

Remember to train your staff well because employee efficiency can impact both quality and overhead.

Assuming the following:

• Employee pay: $15 per hour
• Employee hourly rate, revenue: 50%
• Number of people on cleaning crew: Two

You'll want to charge the customer no less than $60 per hour . That is far lower than the cleaning rates for many house cleaning companies. The reason is that a house cleaner has other costs that go into the standard cleaning fees.

On top of employee pay, your house cleaning price will also need to cover the costs of payroll expenses and taxes. The government requires employers to collect:

• Income taxes: You'll need to withhold these for all employees using the information in Publication 15-T .
• Payroll taxes: The employee pays 7.65%, and the employer pays 7.65%.
• State taxes: There are seven states without income taxes . You'll have to collect these from employee pay unless you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming.
• Other deductions: Insurance, 401K, etc., will be deducted if you offer them.

There are a lot of tasks associated with compliance, so you may want to outsource your human resources . Most of these services start around $39 per month plus $6 per month for each employee.

The 7.65% tax increases the $60 per hour fee to $65 per hour, which is starting to get closer to the cleaning rates of industry leader Molly Maid, which charges $75 to $96 per hour for a basic cleaning package.

Your revenue will also need to cover other costs such as cleaning supplies, which we'll discuss next.

Based on standard cleaning services, you'll probably need to spend an average of $3 to $5 per hour on cleaning supplies. You'll be buying these in bulk to save money, but Chris estimates that the supply list for many cleaning companies will be around $900 for startup costs.

That means a rate of $70 per hour, which gets us even closer to the price your house cleaning service needs to charge.

Vehicle, fuel, insurance, and repairs

Local businesses will have to drive to provide weekly cleaning to residential and commercial clients. That means you'll need to maintain the vehicle and meet insurance requirements. At Queen Bee, these costs are approximately 17% of the revenue.

This is why your credit score is so important to businesses. Bankrate estimates that insurance costs 25% more for an average credit score than excellent credit, and those with poor credit spend twice as much as any other group.

If you add 17% to the $70 cleaning crew rate, that brings you to $81.9 per hour—without any administrative costs, marketing costs, rent, or other utilities.

Marketing and administration costs

The Small Business Administration advises spending 5% to 15% of your desired revenue on marketing your cleaning business (or any other business). Chris doesn't think you need to spend that much, though

If you have good software, you can automate many of your tasks and reduce the final cost of operating. Chris runs his marketing for between 2.4% and 6.2% of revenue per month, with the lower percentages during the holidays.

Pro Tip: To learn some of the ways Chris uses marketing, check out our blog on getting clients , and don’t miss our original report on small business marketing budget statistics that will help you make the most of your marketing spend.

Chris’s rent and utilities are based on running a home-based business. These are marvelous because they are mostly legal accounting maneuvers. If you store supplies in your home or do office work out of it, you can claim the space you use and the energy associated with it on your taxes.

There are a lot of rules governing this, but if you choose the simplified method of claiming, you get an allowance of up to $1,500 a year. If use your the actual expenses, it can go higher (but may increase the chances of an audit). You'll want to measure the square footage of the space used.

You don't have to include the costs of operating from home in your house cleaning cost, but if you do, it will raise the hourly rate by about $1 per hour.

If you have a home-based business, you'll be using the energy associated with work as a write-off, but if you have a separate location where you store everything, you'll need to cover those costs.

Utilities shouldn't be too much unless your cleaning business does a lot of laundry or manufacturing in-house. To give you an idea, Chris only spends about $300 per month on utilities.

Local companies will often need a lawyer and an accountant to help them structure their domestic services correctly. You'll want to budget for these. Chris assumes approximately $1,000 per month for his cleaning company, but different cleaning services will have different needs.

There are a variety of ways to charge for a cleaning service. We'll cover the most common pricing strategies cleaning businesses use, including:

• Charging by the hour
• Pricing per square foot
• Pricing per room
• Comparing house cleaning prices in your area
• Offering weekly cleaning subscriptions with discounts
• Proposing household chores as add-ons
• Giving free estimates

How much to charge for house cleaning per hour

The hourly rate for house cleaning is the easiest pricing structure to use, but it can create fluctuations in costs based on how long it takes to clean the property. This works best if the client provides all the cleaning supplies and just needs someone to help. You might want to do this if a client wants specific eco-friendly or other specific cleaning supplies.

You'll probably want to charge higher for the first hour. I typically assume that it will cost me $50 just to drive somewhere. Based on Queen Bee's pricing guide, Chris has established that cleaning services prices should be approximately $70 for the travel costs and booking fees.

To calculate how much you want to charge, assume:

• 2,000 hours per year
• 65% profit margin when you are the worker or 15% when someone else is doing the work
• Your income goals (let's say $100K per year to start)

Divide your income goal by the hours in a year to get an hourly rate. See the example below:

$100,000 / 2,000 = $50 per hour

$50 per hour would be revenue, though. To calculate the profit, you'd need to divide the hourly by .65.

$50 / .65 = $76.92 per hour

Let's make it a nice even number, so it's easy to multiply and make it a straight $80 per hour. You need to add your first-hour fee, though. Let's use the $70 Chris uses, and that will make the first hour $150, and each additional hour $80.

That means you need five hourly cleaners to make the same $100K profit you would if you were doing all the cleaning yourself. Now, if you have five employees plus yourself, you can make $200K per year after paying your employees their house cleaning rates per hour.

How to calculate cleaning cost per square foot pricing

The price per square foot is straightforward to estimate. Given that almost every address has a public record, you can look it up to see how many square feet their house is. Then to charge by the square foot, multiply the square feet by 20 cents (or divide by five).

Example: How much should I charge to clean a 2,000 sq ft house?

2,000 x $.20 = $400

2,000 / 5 = $400

Example: How much should I charge to clean a 3,000 sq ft house?

You can make it more complicated and separate it by carpet and tile, where the carpet is 20 cents and tile is 25 (examples for easy math).

(2,000*$0.20) + (1,000*$0.25) = $650

As you can see, the square foot billing can change based on the type of cleaning.

How much does it cost to clean a house per room?

Another easy way is to price by the room or by the fixture. Chris charges a fee per room plus fees for other specific tasks. For instance, he has a table that details:

• 1- to 10-room pricing
• Full restroom pricing
• Half bath pricing
• Add-ons like full window cleaning

Each has a specific price, so he can quickly estimate based on the number of rooms, restrooms, and add-ons. You should really check out how he does it on the Queen Bee Cleaning Service booking page .

Pro Tip: Chris uses Booking Koala to automate the whole booking process. Check it out, and let us know what you think!

How much do other cleaning services charge?

Professional cleaners have plenty of sites to help evaluate the average house cleaning cost in their areas. Many of the sites are the same ones you'll use to find customers for your house cleaning service.

For instance, Thumbtack makes it easy to establish the rates house cleaners charge in a particular area. While you're on the site, you might want to sign up to provide cleaning services.

Offer weekly cleaning service discounts

Whether you are a residential cleaning business or offer commercial cleaning services, your cleaning company can benefit tremendously by offering regular cleaning services at a discount to loyal customers.

House cleaners benefit from offering discounts for routine cleaning in the following ways:

• Increased efficiency: Less travel time, more cleaning jobs completed per day, reduced house cleaning costs.
• Better forecasting: Order your own cleaning supplies with more accurate forecasts.
• Better scheduling: You can schedule house cleaners working each day more effectively.
• Better cash flow: The more of your cleaning jobs that occur on a recurring basis, the better your cash flow will be.
• Reduces churn: CB Insights says that subscription models change the customer retention dynamic from mostly churning to mostly retention.
• Increases lifetime value: The value of a customer increases consistently over time.
• Reduced marketing costs: Your cleaning company will be able to spend less on marketing when you have higher retention rates.
• Lower overhead-to-revenue ratio: As a cleaning company's recurring jobs grow, the overhead stays the same until you have to invest in more equipment or administration.
• Happier customers: Everyone (except maybe hoarders) loves a clean home! Someone coming in each week and cleaning their home will delight customers.

When you have long-term relationships you may want to have a commercial cleaning contract . Chris doesn't use them, but a lot of his suggestions still work for contracts.

We used the pricing from Queen Bee Cleaning Service to show how their subscription model increases the revenue over the course of a year. As you can see, offering a 10% monthly, 15% bi-weekly, and 20% weekly discount can dramatically increase the revenue of a house cleaning business.

How much do house cleaners charge for add-ons?

Customers might want you to offer other services like appliance cleaning. Anticipate this and have easy ways to calculate cleaning cost estimates. Some of the most common add-ons are:

• Deep house cleaning
• Appliance cleaning
• Indoor and outdoor window washing

You can add each of these to the house cleaning cost to help improve your revenue per cleaning job. A $200 cleaning job easily turns into a full day if someone wants all the add-ons. It will increase the cleaning rate to potentially as high as $1,000 and make it so your cleaning crew only has to clean one house that day.

That's great for reducing expenses!

How much do house cleaners make for estimates?

Whether you are doing a deep clean, home cleaning, or post-construction cleaning, people love free stuff, and businesses should, too!

[su_quote] Most people don't know the square footage of their house. [/su_quote]

A free estimate gives you a chance to view the property, manage the risk of underestimating with a flat rate, and establish the square footage and whether it needs a deep clean. Plus, it gives you a chance to develop a relationship, ask questions, and help your customer develop a plan. This may increase overhead costs, but it builds loyalty.

Sign up for our exclusive 7-Figure Cleaning Business Blueprint

Knowing how to correctly price your cleaning services determines if your business will grow and prosper, or fail before it even gets off the ground. Chris will show you the best pricing strategies so you can start earning $10,000 a month in just three months as you launch your business! Sign up for our exclusive seven-figure cleaning course today by clicking here .

What type of pricing do you plan to adopt with your cleaning business?

nice work https://binarychemist.com/

My Name is PRETTY NGOMANE. A south African female. Aspiring to do farming. And finding a home away from home for the differently abled persons in their daily needs.

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What Is a Business Plan?

Definition and Examples of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Morsa Images / Getty Images

A business plan is a document that summarizes the operational and financial objectives of a business. It is a business's road map to success with detailed plans and budgets that show how the objectives will be realized.

Keep reading to learn the basic components of a business plan, why they're useful , and how they differ from an investment plan.

A business plan is a guide for how a company will achieve its goals. For anyone starting a business , crafting a business plan is a vital first step. Having these concrete milestones will help track the business's success (or lack thereof). There are different business plans for different purposes, and the best business plans are living documents that respond to real-world factors as quickly as possible.

In a nutshell, a business plan is a practice in due diligence. When it's done well, it will prevent entrepreneurs from wasting time and money on a venture that won't work.

How Does a Business Plan Work?

If you have an idea for starting a new venture, a business plan can help you determine if your business idea is viable. There's no point in starting a business if there is little or no chance that the business will be profitable, and a business plan helps to figure out your chances of success.

In many cases, people starting new businesses don't have the money they need to start the business they want to start. If start-up financing is required, you must have an investor-ready business plan to show potential investors that demonstrates how the proposed business will be profitable.

Since the business plan contains detailed financial projections, forecasts about your business's performance, and a marketing plan, it's an incredibly useful tool for everyday business planning. To be as effective as possible, it should be reviewed regularly and updated as required.

Business owners have leeway when crafting their business plan outline. They can be short or long, and they can include whatever detail you think will be useful. There are basic templates you can work from, and you'll likely notice some common elements if you look up examples of business plans.

Market Analysis

The market analysis will reveal whether there is sufficient demand for your product or service in your target market . If the market is already saturated, your business model will need to be changed (or scrapped).

Competitive Analysis

The competitive analysis will examine the strengths and weaknesses of the competition and help direct your strategy for garnering a share of the market in your marketing plan . If the existing market is dominated by established competitors, for instance, you will have to come up with a marketing plan to lure customers from the competition (lower prices, better service, etc.).

Management Plan

The management plan outlines your business structure, management, and staffing requirements. If your business requires specific employee and management expertise, you will need a strategy for finding and hiring qualified staff and retaining them.

Operating Plan

The operating plan describes your facilities, equipment, inventory, and supply requirements. Business location and accessibility are critical for many businesses. If this is the case for your business, you will need to scout potential sites. If your proposed business requires parts or raw materials to produce goods to be sold to customers, you will need to investigate potential supply chains.

Financial Plan

The financial plan is the determining factor as to whether your proposed business idea is likely to be a success. If financing is required, your financial plan will determine how likely you are to obtain start-up funding in the form of equity or debt financing from banks, angel investors , or venture capitalists . You can have a great idea for a business, along with excellent marketing, management, and operational plans, but if the financial plan shows that the business will not be profitable enough, then the business model is not viable and there's no point in starting that venture.

Business Plan vs. Investment Proposal

A business plan is similar to an investment proposal. In fact, investment proposals are sometimes called investor-ready business plans . Generally speaking, they both have the same contents. You can think of an investment proposal as a business plan with a different audience.

The business plan is largely an internal document, intended to guide the decisions of executives, managers, and employees. The investment proposal, on the other hand, is designed to be presented to external agencies.

Key Takeaways

• A business plan is a detailed road map that explains what the company's goals are and how it will achieve them.
• The exact details of a business plan will depend on the intended audience and the nature of the business.
• It's a good idea to regularly revisit your business plan so you know it's as accurate, realistic, and detailed as possible.

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Business Plan

By Entrepreneur Staff

Business Plan Definition:

A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask. Generally, a business plan has the following components:

Title Page and Contents A business plan should be presented in a binder with a cover listing the name of the business, the name(s) of the principal(s), address, phone number, e-mail and website addresses, and the date. You don't have to spend a lot of money on a fancy binder or cover. Your readers want a plan that looks professional, is easy to read and is well-put-together.

Include the same information on the title page. If you have a logo, you can use it, too. A table of contents follows the executive summary or statement of purpose, so that readers can quickly find the information or financial data they need.

Executive Summary The executive summary, or statement of purpose, succinctly encapsulates your reason for writing the business plan. It tells the reader what you want and why, right up front. Are you looking for a $10,000 loan to remodel and refurbish your factory? A loan of $25,000 to expand your product line or buy new equipment? How will you repay your loan, and over what term? Would you like to find a partner to whom you'd sell 25 percent of the business? What's in it for him or her? The questions that pertain to your situation should be addressed here clearly and succinctly.

The summary or statement should be no more than half a page in length and should touch on the following key elements:

• Business concept describes the business, its product, the market it serves and the business' competitive advantage.
• Financial features include financial highlights, such as sales and profits.
• Financial requirements state how much capital is needed for startup or expansion, how it will be used and what collateral is available.
• Current business position furnishes relevant information about the company, its legal form of operation, when it was founded, the principal owners and key personnel.
• Major achievements points out anything noteworthy, such as patents, prototypes, important contracts regarding product development, or results from test marketing that have been conducted.

Description of the Business The business description usually begins with a short explanation of the industry. When describing the industry, discuss what's going on now as well as the outlook for the future. Do the necessary research so you can provide information on all the various markets within the industry, including references to new products or developments that could benefit or hinder your business. Base your observations on reliable data and be sure to footnote and cite your sources of information when necessary. Remember that bankers and investors want to know hard facts--they won't risk money on assumptions or conjecture.

When describing your business, say which sector it falls into (wholesale, retail, food service, manufacturing, hospitality and so on), and whether the business is new or established. Then say whether the business is a sole proprietorship, partnership, C or Sub chapter S corporation. Next, list the business' principals and state what they bring to the business. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.

Description of the Product or Service The business description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs.

When you describe your product or service, make sure your reader has a clear idea of what you're talking about. Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors.

Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful. If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Give hard facts, such as "new equipment will create an income stream of $10,000 per year" and briefly describe how.

Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

Market Analysis A thorough market analysis will help you define your prospects as well as help you establish pricing, distribution, and promotional strategies that will allow your company to be successful vis-à-vis your competition, both in the short and long term.

Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain. Keep in mind that no one gets 100 percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections.

You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning." Positioning helps establish your product or service's identity within the eyes of the purchaser. A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP (unique selling proposition) is.

How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas. Many methods of establishing prices are available to you, but these are among the most common.

• Cost-plus pricing is used mainly by manufacturers to assure that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing is used by companies that sell their products through a variety of sources at differing prices based on demand.
• Competitive pricing is used by companies that are entering a market where there's already an established price and it's difficult to differentiate one product from another.
• Markup pricing is used mainly by retailers and is calculated by adding your desired profit to the cost of the product.

You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user. Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services. To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales.

Competitive Analysis The purpose of the competitive analysis is to determine:

• the strengths and weaknesses of the competitors within your market.
• strategies that will provide you with a distinct advantage.
• barriers that can be developed to prevent competition from entering your market.
• any weaknesses that can be exploited in the product development cycle.

The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future. Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage.

Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.

Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.

The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you'll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you'll need to include a personal financial statement or balance sheet.

In the business plan, you'll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don't need a business plan unless you're trying to borrow money. Of course, it's true that you do need a good plan if you intend to approach a lender--whether a banker, a venture capitalist or any number of other sources--for startup capital. But a business plan is more than a pitch for financing; it's a guide to help you define and meet your business goals.

Just as you wouldn't start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before--and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

More from Business Plans

Financial projections.

Estimates of the future financial performance of a business

Financial Statement

A written report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Executive Summary

A nontechnical summary statement at the beginning of a business plan that's designed to encapsulate your reason for writing the plan

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Business Plan: What It Is + How to Write One

Discover what a business plan includes and how writing one can foster your business’s development.

What is a business plan? 

Think of a business plan as a document that guides the journey to start-up and beyond. Business plans are written documents that define your business goals and the strategies you’ll use to achieve those goals. In addition to exploring the competitive environment in which the business will operate, a business plan also analyses a market and different customer segments, describes the products and services, lists business strategies for success, and outlines financial planning.  

How to write a business plan 

In the sections below, you’ll build the following components of your business plan:

Executive summary

Business description 

Products and services 

Competitor analysis 

Marketing plan and sales strategies 

Brand strategy

Financial planning

Explore each section to bring fresh inspiration and reveal new possibilities for developing your business. Depending on your format, you may adapt the sections, skip over some, or go deeper into others. Consider your first draft a foundation for your efforts and one you can revise, as needed, to account for changes in any area of your business.  

1. Executive summary 

This short section introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, development goals, and why it will succeed. If you are seeking funding, summarise the basics of the financial plan. 

2. Business description 

You can use this section to provide detailed information about your company and how it will operate in the marketplace. 

Mission statement: What drives your desire to start a business? What purpose are you serving? What do you hope to achieve for your business, the team, and your customers? 

Revenue streams: From what sources will your business generate revenue? Examples include product sales, service fees, subscriptions, rental fees, licence fees, and more. 

Leadership: Describe the leaders in your business, their roles and responsibilities, and your vision for building teams to perform various functions, such as graphic design, product development, or sales.  

Legal structure: If you’ve incorporated your business, include the legal structure here and the rationale behind this choice. 

3. Competitor analysis 

This section will assess potential competitors, their offers, and marketing and sales efforts. For each competitor, explore the following: 

Value proposition: What outcome or experience does this brand promise?

Products and services: How does each solve customer pain points and fulfill desires? What are the price points? 

Marketing: Which channels do competitors use to promote? What kind of content does this brand publish on these channels? What messaging does this brand use to communicate value to customers?  

Sales: What sales process or buyer’s journey does this brand lead customers through?

4. Products and services

Use this section to describe everything your business offers to its target market. For every product and service, list the following: 

The value proposition or promise to customers, in terms of how they will experience it

How the product serves customers, addresses their pain points, satisfies their desires, and improves their lives

The features or outcomes that make the product better than those of competitors

Your price points and how these compare to competitors

5. Marketing plan and sales strategies 

In this section, you’ll draw from thorough market research to describe your target market and how you will reach it. 

Who are your ideal customers?   

How can you describe this segment according to their demographics (age, ethnicity, income, location, etc.) and psychographics (beliefs, values, aspirations, lifestyle, etc.)? 

What are their daily lives like? 

What problems and challenges do they experience? 

What words, phrases, ideas, and concepts do consumers in your target market use to describe these problems when posting on social media or engaging with your competitors?  

What messaging will present your products as the best on the market? How will you differentiate messaging from competitors? 

On what marketing channels will you position your products and services?

How will you design a customer journey that delivers a positive experience at every touchpoint and leads customers to a purchase decision?

6. Brand strategy 

In this section, you will describe your business’s design, personality, values, voice, and other details that go into delivering a consistent brand experience. 

What are the values that define your brand?

What visual elements give your brand a distinctive look and feel?

How will your marketing messaging reflect a distinctive brand voice, including tone, diction, and sentence-level stylistic choices? 

How will your brand look and sound throughout the customer journey? 

Define your brand positioning statement. What will inspire your audience to choose your brand over others? What experiences and outcomes will your audience associate with your brand? 

7. Financial planning  

In this section, you will explore your business’s financial future. Suppose you are writing a traditional business plan to seek funding. In that case, this section is critical for demonstrating to lenders or investors you have a strategy for turning your business ideas into profit. For a lean start-up business plan, this section can provide a valuable exercise for planning how to invest resources and generate revenue [ 1 ].  

Use past financials and other sections of this business plan to begin your financial planning, such as your price points or sales strategies. 

How many individual products or service packages do you plan to sell over a specific period?

List your business expenses, such as subscribing to software or other services, hiring contractors or employees, purchasing physical supplies or equipment, etc.

What is your break-even point or the amount you must sell to cover all expenses?

Create a sales forecast for the next three to five years: (No. of units to sell X price for each unit) – (cost per unit X No. of units) = sales forecast

Quantify how much capital you have on hand.

When writing a traditional business plan to secure funding, you may append supporting documents, such as licences, permits, patents, letters of reference, resumes, product blueprints, brand guidelines, the industry awards you’ve received, and media mentions and appearances.

Business plan key takeaways and best practices

Remember: Creating a business plan is crucial when starting a business. You can use this document to guide your decisions and actions and even seek funding from lenders and investors. 

Keep these best practices in mind:

Your business plan should evolve as your business grows. Return to it periodically, such as quarterly or annually, to update individual sections or explore new directions your business can take.

Make sure everyone on your team has a copy of the business plan, and welcome their input as they perform their roles. 

Ask fellow entrepreneurs for feedback on your business plan and look for opportunities to strengthen it, from conducting more market and competitor research to implementing new strategies for success. 

Start your business with Coursera 

Ready to start your business? Watch this video on the Lean approach from the Entrepreneurship Specialisation on Coursera: 

Article sources

Inc. “ How to Write the Financial Section of a Business Plan ,   https://www.inc.com/guides/business-plan-financial-section.html.” Accessed April 15, 2024.

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Business Plan

Who should write a business plan, pros and cons of a business plan, the anatomy of a business plan, .css-uphcpb{position:absolute;left:0;top:-87px;} what is a business plan, definition of a business plan.

A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them.

In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and which tactics you plan to use to reach commercial success.

Whilst every enterprise should have a plan of some sort, a business plan is of particular importance during the investment process. Banks, venture capitalists, and angel investors alike will need to see a detailed plan in order to make sound investment decisions — think of your plan as a way of convincing them your idea is worth their resources.

Roadmapping From A to Z

Business plans can also be useful as a guide to keeping a new business on track, especially in the first few months or years when the road ahead isn’t too clear.

Starting a business isn’t an exact science. Some companies organically develop out of trial and error, while others are plotted out from start to finish.

So if you’re asking whether your company needs a lengthy business plan, the answer would be ‘no’. That said, there are definitely a few situations in which writing a plan makes sense and can help increase the chances of a business becoming successful:

In situations when the market is new and untested — or simply volatile — it can be very helpful to have a business plan to refer back to when the road ahead isn’t clear.

For those who have an exciting business idea but haven’t necessarily distilled it down into black-and-white. Writing a business plan is a great way to look at a concept from all angles and spot any potential pitfalls.

How to write a business plan?

The most important step in writing a business plan is to identify its purpose.

Who are you trying to attract with it, and why?

Here are a few key pointers for writing a business plan:

Are you looking to secure a bank loan, get funding from private investors, or to lure skilled professionals to join you?

Include a brief history of your business, the concept, and the products or services. Keep it professional and transparent.

Don’t exaggerate your experience or skills, and definitely don’t leave out information investors need to know. They’ll find out at some point, and if they discover you lied, they could break off their involvement. Trust is crucial.

Explain what the product or service your business offers in simplistic terms.

Watch out for complex language and do whatever you can to prevent readers from becoming confused.

Focus on the benefits the business offers, how it solves the core audience’s problem(s), and what evidence you have to prove that there is a space in the market for your idea. It’s important to touch on the market your business will operate in, and who your main competitors are.

Another essential aspect of writing an effective business plan is to keep it short and sweet. Just focus on delivering the crucial information the reader has to know in order to make a decision. They can always ask you to elaborate on certain points later.

Still, deciding whether or not a business plan will benefit you at this stage of your venture?

Let’s look at a few reasons why you might (or might not) want to write a business plan.

A business plan will help you to secure funding even when you have no trading history. At the seed stage, funding is all-important — especially for tech and SaaS companies. It’s here that a business plan can become an absolute lifesaver.

Your business plan will maintain a strategic focus as time goes on. If you’ve ever heard of “mission creep”, you’ll know how important an agreed can be — and your business plan serves exactly that purpose.

Having a plan down in black and white will help you get other people on board . Again, with no trading history, it can be hard to convince new partners that you know what you’re doing. A business plan elegantly solves this problem.

Your business plan can cause you to stop looking outward. Sometimes, especially in business, you need to be reactive to market conditions. If you focus too much on your original business plan, you might make mistakes that can be costly or miss golden opportunities because they weren’t in the plan.

 A lot of time can be wasted analyzing performance. It’s easy to become too focused on the goals and objectives in your business plan — especially when you’re not achieving them. By spending too much time analyzing past performance and looking back, you may miss out on other ways to push the business forward.

A business plan is out of date as soon as it’s written. We all know how quickly market conditions change. And, unfortunately, certain elements in your business plan may have lost relevance by the time you’re ready to launch. But there is another way — by transferring your strategic plan into an actionable roadmap , you can get the best of both worlds. The business plan contains important detail that is less likely to change, such as your mission statement and target audience, and the roadmap clarifies a flexible, adaptable, route forward.

So, you’ve decided to write a business plan — a great choice! 

But now comes the tricky task of actually writing it. 

This part can be a little frustrating because there is no one-size-fits-all template appropriate for all business plans. The best approach, in fact, is to look at common ingredients of a business plan and pick out the ones that make sense for your venture.

The key elements of a great business plan include:

An overview of the business concept . This is sometimes referred to as an executive summary and it’s essentially the elevator pitch for your business.

A detailed description of the product or service. It’s here that you’ll describe exactly what your core offering will be — what’s your USP , and what value do you deliver?

An explanation of the target audience. You need a good understanding of who you’ll be selling your product or service to, backed up by recent market research.

Your sales and marketing strategy. Now that you know who you’re targeting, how do you plan to reach them? Here you can list primary tactics for finding and maintaining an engaged client base.

Your core team . This section is all about people: do you have a team behind you already? If not, how will you build this team and what will the timeline be? Why are you the right group of people to bring this idea to the market? This section is incredibly important when seeking external investment — in most cases, passion can get you much further than professional experience.

Financial forecasts . Some investors will skim the executive summary and skip straight to the finances — so expect your forecasts to be scrutinized in a lot of detail. Writing a business plan for your eyes only? That’s fine, but you should still take time to map out your financial requirements: how much money do you need to start? How do you plan to keep money coming in? How long will it take to break even ? Remember, cash is king. So you need a cash flow forecast that is realistic, achievable and keeps your business afloat, especially in the tricky first few years.

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How to Start a Business From Scratch in 6 Easy Steps

10 min. read

Updated April 30, 2024

Did you know that most of the world’s new businesses are bootstrapped ? 

That’s right, most business owners do not launch with loans or outside investment but instead use their personal resources and savings to get up and running. They start from scratch and reinvest in the business as it gains traction.

And you can do the same. 

Key Takeaways:

• Start with an idea that uses your experience, knowledge, or passion.
• Determine if there’s a need for your product or service.
• Create a plan and financial forecasts.
• Treat it like a side hustle until you get traction.
• What does it mean to start from scratch?

“Starting a business from scratch” does not mean:

• Using no money to launch your business.
• Getting no outside assistance.
• Inventing a business idea no one has done before.

Starting from scratch is about building a business from the ground up, using personal resources and minimal external financial support. The goal is to establish a sustainable business you control that satisfies a need in the market. 

• Why start a business from scratch?

Here’s why starting from scratch might be the right approach for you:

• Risk reduction: Control your initial investment and expenses and scale gradually, allowing you to avoid overspending.
• Full control: With no outside investment or stakeholders to please, you can shape your business how you see fit.
• Proves your idea has real customers: Test your concept with customers early to help refine your offering and validate market demand.
• Fast decision-making: Quickly pivot to meet changing market demands without the red tape of larger organizations.
• Potentially makes future funding easier: You take the time to prove your business model and profitability before seeking funding. Your track record reduces investor and lender risk and can lead to better funding terms.

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• 6 steps to start a new business from scratch

For this article, we will focus on the steps that take you from a budding business idea to generating sales. 

For additional resources, check out our starting a business guide .

1. Start with an idea

Do some self-reflection and choose an idea you’re passionate about or one that uses your existing skills and experience. 

This will make it far easier to execute and often requires less research, training, and upfront investment to get up and running than an idea completely new to you.

For example, service-based businesses, like accounting or consulting, often need just your time and expertise. If any cash is needed, it should be a small enough amount to fund yourself, giving you full control over the speed at which you grow your business.

As you explore possible ideas, create a one-page business plan to document how it could work. 

It doesn’t have to be an official plan at this stage; just fill in what you can, mark any assumptions, and keep adding details throughout the rest of this process.

What businesses can you typically start from scratch?

While not an exhaustive list, here are a few potential ideas that can be started from scratch:

• Freelance Writing or Content Creation: Offer writing skills to businesses and online publications.
• Consulting Services: Share your professional management, marketing, or tech expertise.
• Handmade Crafts and Art: Sell your unique creations on platforms like Etsy or at local fairs.
• Tutoring: Offer either in-person or online.
• Web Design and Development: Build websites for small businesses or individuals.
• Virtual Assistant: Provide administrative support to businesses remotely.
• Landscaping and Gardening Services: Turn your love of plants into a business with basic gardening tools.

For more business options and a process to generate ideas, check out our guide on developing good business ideas .

2. Find product-market fit

Landing on an idea is not enough to create a viable business. You need to determine if you have initial product-market fit—that your business satisfies and is demanded by a large enough group of people. 

This involves identifying your potential customers, understanding their motivations and needs, and determining whether they are willing to pay for your product or service. Additionally, spend time researching the market and understand who your competitors are. 

At this stage, you don’t need a fully fleshed-out business. You just need enough of an idea to start speaking to potential customers.  

This is where your one-page plan can be incredibly useful, as it helps you formalize enough information to have the working framework of a business. You can even add notes from your customer interviews to help adapt your plan.

Your goal, in this instance, is to:

• Hone in on pain points your potential customers have
• Verify that you can solve them
• Identify any gaps or issues with your idea
• (Bonus) Make initial sales 

Keep in mind that you may find none of that. Your solution may not be needed or is missing key components. You may even be targeting the wrong audience and need to change course.

That’s completely okay! Most businesses don’t get things right the first time. Be willing to refine and iterate on your initial idea. Verify what works and what doesn’t, and make the right adjustments to create a sustainable business that customers really want.

3. Examine your resources

While I have this as the third step, you’ll likely be doing this throughout every stage of starting a business.

Start by evaluating your funding sources. Personal savings are ideal as they keep you in full control of your business. If needed, consider asking friends and family for small contributions, as they’ll likely be much more flexible about repayment than traditional lenders.

Next, consider if a partner could benefit your venture. Do they bring complementary skills, share the workload, or offer additional resources? 

The right partner can fill crucial roles – like marketing or operations – allowing you to focus on your core strengths. They may even fill a necessary gap to get customers in the door.

Finally, don’t underestimate the power of your network. Reach out to former colleagues, industry peers, and mentors for advice, services, or referrals.

Why you need to know your available resources

Taking stock of your resources is the first step in understanding what is feasible for your business. It helps you determine whether you have enough cash, expertise, and support to meet your customers’ expectations.

For example, let’s say you want to launch an eCommerce website and have enough cash on hand to fulfill orders but require customers to pay for shipping. If you’re competing with similar businesses that offer free shipping, your lack of it could turn customers away.

Similarly, you have a solid understanding of product development and have already gotten pre-orders. But you have no idea how to set up an eCommerce site , keep track of orders, and ensure they actually ship.

In both circumstances, your resources fall short of the needs of your customers. You may have to explore funding ( it doesn’t have to be a loan ) and find a partner with the right skill set to get your site up and running. 

4. Write a business plan and develop financial forecasts

At this point, you need to finalize your business plan and create initial forecasts . 

If you’ve been using the one-page plan throughout the last few steps, then this shouldn’t be a time-consuming process. Your goal at this point is to clearly define:

• Business Model: Value proposition, customer segments, distribution channels, and revenue streams.
• Milestones: Set realistic goals (landing your first customer, scaling, etc.) with specific timelines and action steps to track progress.

For your forecasts, start by estimating your:

• Startup costs and ongoing expenses
• Revenue in the first year of operation
• Cash flow — how much money will be moving in and out of your business each month as you collect revenue and pay expenses

These numbers do not have to be perfect. You’ll likely be making educated guesses or using industry estimates. The point is to have something that you believe represents your business. It will help you maintain a healthy cash flow and understand what it will take to be profitable.

Remember, you don’t need to create an overly lengthy plan or complex financial statements. They’re your tools, so focus on usability – they should be flexible and evolve with your business, helping you make informed decisions.

Dedicate time ( at least monthly or quarterly) to reviewing and updating your plan and forecasts as you gather data to ensure your strategy aligns with real-world performance.

5. Protect your business

As a business owner, you must make your business legal and guard against liabilities. To keep things simple, we’ll assume you’re starting as a sole proprietorship for this article.

Check out our full guide to learn more about the specifics of each legal structure .

Necessary legal components for a simple startup:

• Business Registration: As a sole proprietor, you may not need to register your business with the state government if you do business under your legal name. However, if you operate under a name that’s not yours, you must file for a “Doing Business As” (DBA) name. This is often required to set up a business bank account.
• Licenses & Permits: Research local requirements for your specific business type. You may need a general business license, professional licenses, or specific permits (e.g., health and safety). Contact your city or county business office for details.
• Tax Registration: Report business income on your personal tax return. If you plan to hire employees, you’ll need to apply for an Employer Identification Number (EIN) from the IRS. Even without employees, an EIN can protect your personal information and may streamline certain business transactions. Check if you need to register for state sales tax collections.
• Insurance : Consider general liability insurance for accidents and negligence claims. Get professional liability (errors and omissions) insurance if you offer professional services.
• Contracts: Use written agreements for business partners and supplier or contractor transactions. This clarifies expectations, prevents disputes, and protects both parties. Contact a lawyer to review or help you write this documentation if needed.

6. Promote and run your business

At this point, you just need to run your business. You don’t need to go all in, either. Launch it as a side hustle until you hit the point where it can become your full-time focus.

Don’t overcomplicate it: Set up a simple website, payment system, and essential operational tools. You want to serve customers immediately and learn from real-world experience.

But unless you locked in pre-orders earlier in this process, you’ll need to market your business to do it. 

Select marketing channels you believe will reach your target customers. Start small — you want to avoid overspending while you determine the right mix of marketing tactics. If you’re unsure where to start, paid social media ads (Facebook and Instagram), email campaigns, and local partnerships can be inexpensive options.

Stick to the budget you created, run small, easily measured marketing tests, and look for a positive return on investment (i.e., bringing in more revenue from sales than you spent on advertising). 

Only consider increasing spending after you start bringing in customers.

• Continue to review and revise

You are on your way to running a sustainable business and may even have your first customers already! 

Just don’t get too far ahead of yourself. You’re still proving that there is traction that can be repeated with multiple customers. 

As you operate, review your plan and forecasts. Pay close attention to your cash flow and be willing to pivot if things aren’t working. 

That’s the benefit of starting from scratch: You are in full control and can scale and spend at a pace that improves your chances of success.

If you haven’t yet, download a free one-page business plan template to document your idea. The earlier you begin developing the plan, the more useful it will be throughout the startup process.

Clarify your ideas and understand how to start your business 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.

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What a TikTok ban in the US could mean for you

The Senate passed legislation Tuesday that would force TikTok’s China-based parent company to sell the social media platform under the threat of a ban. Here’s what to know.

FILE - A TikTok content creator, sits outside the U.S. Capitol, April 23, 2024, in Washington. TikTok is gearing up for a legal fight against a U.S. law that would force the social media platform to break ties with its China-based parent company or face a ban. A battle in the courts will almost certainly be backed by Chinese authorities as the bitter U.S.-China rivalry threatens the future of a wildly popular way for young Americans to connect online. (AP Photo/Mariam Zuhaib, file)

• Copy Link copied

A TikTok content creator, speaks to reporters outside the U.S. Capitol, Tuesday, April 23, 2024, in Washington, as Senators prepare to consider legislation that would force TikTok’s China-based parent company to sell the social media platform under the threat of a ban, a contentious move by U.S. lawmakers. (AP Photo/Mariam Zuhaib)

Jennifer Gay, a TikTok content creator, sits outside the U.S. Capitol, Tuesday, April 23, 2024, in Washington as Senators prepare to consider legislation that would force TikTok’s China-based parent company to sell the social media platform under the threat of a ban, a contentious move by U.S. lawmakers. (AP Photo/Mariam Zuhaib)

FILE - The TikTok Inc. building is seen in Culver City, Calif., March 17, 2023. The House has passed legislation Saturday, April 20, 2024, to ban TikTok in the U.S. if its China-based owner doesn’t sell its stake, sending it to the Senate as part of a larger package of bills that would send aid to Ukraine and Israel. House Republicans’ decision to add the TikTok bill to the foreign aid package fast-tracked the legislation after it had stalled in the Senate. The aid bill is a priority for President Joe Biden that has broad congressional support. (AP Photo/Damian Dovarganes, File)

No, TikTok will not suddenly disappear from your phone. Nor will you go to jail if you continue using it after it is banned.

After years of attempts to ban the Chinese-owned app , including by former President Donald Trump , a measure to outlaw the popular video-sharing app has won congressional approval and is on its way to President Biden for his signature. The measure gives Beijing-based parent company ByteDance nine months to sell the company, with a possible additional three months if a sale is in progress. If it doesn’t, TikTok will be banned.

So what does this mean for you, a TikTok user, or perhaps the parent of a TikTok user? Here are some key questions and answers.

WHEN DOES THE BAN GO INTO EFFECT?

The original proposal gave ByteDance just six months to divest from its U.S. subsidiary, negotiations lengthened it to nine. Then, if the sale is already in progress, the company will get another three months to complete it.

So it would be at least a year before a ban goes into effect — but with likely court challenges, this could stretch even longer, perhaps years. TikTok has seen some success with court challenges in the past, but it has never sought to prevent federal legislation from going into effect.

WHAT IF I ALREADY DOWNLOADED IT?

TikTok, which is used by more than 170 million Americans, most likely won’t disappear from your phone even if an eventual ban does take effect. But it would disappear from Apple and Google’s app stores, which means users won’t be able to download it. This would also mean that TikTok wouldn’t be able to send updates, security patches and bug fixes, and over time the app would likely become unusable — not to mention a security risk.

BUT SURELY THERE ARE WORKAROUNDS?

Teenagers are known for circumventing parental controls and bans when it comes to social media, so dodging the U.S. government’s ban is certainly not outside the realm of possibilities. For instance, users could try to mask their location using a VPN, or virtual private network, use alternative app stores or even install a foreign SIM card into their phone.

But some tech savvy is required, and it’s not clear what will and won’t work. More likely, users will migrate to another platform — such as Instagram, which has a TikTok-like feature called Reels , or YouTube, which has incorporated vertical short videos in its feed to try to compete with TikTok. Often, such videos are taken directly from TikTok itself. And popular creators are likely to be found on other platforms as well, so you’ll probably be able to see the same stuff.

“The TikTok bill relies heavily on the control that Apple and Google maintain over their smartphone platforms because the bill’s primary mechanism is to direct Apple and Google to stop allowing the TikTok app on their respective app stores,” said Dean Ball, a research fellow with the Mercatus Center at George Mason University. “Such a mechanism might be much less effective in the world envisioned by many advocates of antitrust and aggressive regulation against the large tech firms.”

SHOULD I BE WORRIED ABOUT USING TIKTOK?

Lawmakers from both parties — as well as law enforcement and intelligence officials — have long expressed concerns that Chinese authorities could force ByteDance to hand over data on the 170 million Americans who use TikTok. The worry stems from a set of Chinese national security laws that compel organizations to assist with intelligence gathering - which ByteDance would likely be subject to – and other far-reaching ways the country’s authoritarian government exercises control.

Data privacy experts say, though, that the Chinese government could easily get information on Americans in other ways, including through commercial data brokers that sell or rent personal information.

Lawmakers and some administration officials have also expressed concerns that China could - potentially – direct or influence ByteDance to suppress or boost TikTok content that are favorable to its interests. TikTok, for its part, has denied assertions that it could be used as a tool of the Chinese government. The company has also said it has never shared U.S. user data with Chinese authorities and won’t do so if it’s asked.

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Would Trump Move to Control the Fed?

Allies of the former president are said to be devising plans to reduce the central bank’s independence if he is re-elected, a move that would have big consequences for monetary policy.

By Andrew Ross Sorkin ,  Ravi Mattu ,  Bernhard Warner ,  Sarah Kessler ,  Michael J. de la Merced ,  Lauren Hirsch and Ephrat Livni

An effort to give Trump more say on rates

This week, investors had planned to examine the latest inflation data, due out at 8:30 a.m. Eastern on Friday, for clues about when the Fed would start cutting interest rates. But they now have something potentially bigger to digest.

The Wall Street Journal reports that allies of Donald Trump are devising ways of watering down the central bank’s independence if he is re-elected president.

If true, that change would represent the biggest shake-up in U.S. monetary policy in decades. But it also raises questions about whether such a plan is possible — or whether Trump’s Wall Street supporters would back it.

Both big and small changes are on the table, according to The Journal, which cites unidentified sources. Among the most consequential would be asserting that Trump had the authority to oust Jay Powell as Fed chair before Powell’s term is up in 2025. While Trump gave Powell the job in 2017, he has since soured on his pick for raising rates, and has publicly said he wouldn’t give Powell a second term .

Smaller changes include allowing the White House to review Fed rules and using the Treasury Department to keep the central bank on a tighter leash.

The overall goal is to give Trump what he wants: more say on interest rates. Trump allies have discussed requiring candidates to lead the Fed to informally consult with him on such decisions and essentially act as the president’s advocate on the institution’s rate-setting committee.

We have questions about such a move, which could have huge consequences including raising the U.S. government’s borrowing costs because of investor worries about the Fed’s loss of independence.

Does Trump really support these nascent proposals? Representatives for the former president told The Journal that “no aspect of future presidential staffing or policy announcements should be deemed official” unless it came from him or an authorized official — but they didn’t dismiss the report entirely and he has long favored more powers to chip away at the authority of the Fed and other agencies.

Could Trump recruit a credible candidate for Fed chair under these circumstances?

Would Trump’s financial backers, including the hedge fund billionaire John Paulson, support these plans?

For context, remember that presidents have tried to influence the Fed before. See Andrew’s 2018 interview with Paul Volcker who led the central bank from 1979 to 1987:

Mr. Volcker recounts being summoned to meet with President Ronald Reagan and his chief of staff, James Baker, in the president’s library next to the Oval Office in 1984. Reagan “didn’t say a word,” Mr. Volcker wrote. “Instead Baker delivered a message: ‘The president is ordering you not to raise interest rates before the election.’” Mr. Volcker wasn’t planning to raise rates at the time. “I was stunned,” he wrote. “I later surmised that the library location had been chosen because, unlike the Oval Office, it probably lacked a taping system.”

HERE’S WHAT’S HAPPENING

Antony Blinken meets with President Xi Jinping of China in Beijing. The two sides were conciliatory in public, even as the U.S. secretary of state was expected to raise numerous concerns about the countries’ relationship and Xi warned Blinken about engaging in a “vicious competition.”

Anglo American rejects BHP’s $39 billion takeover bid. The offer from its mining rival “significantly undervalues” the company, Anglo American said, setting up a potential fight. BHP must now weigh improving its bid — and figure out how to win over the South African government , whose public pension fund is Anglo American’s biggest shareholder.

Elon Musk’s xAI is reportedly close to raising $6 billion. The fund-raising round, which would include investors such as Sequoia Capital, would value the artificial intelligence start-up at about $18 billion , according to The Information. It would be one of the biggest cash hauls in an A.I. start-up amid a heated innovation race, and shows investors are spreading their bets: Sequoia is already a big investor in OpenAI.

A.I. is still giving tech giants a boost

Maybe not all tech giants are being punished for their hefty investments in artificial intelligence.

Shares in Microsoft are up nearly 4 percent in premarket trading, while those in Alphabet are up a whopping 11 percent, after they announced their latest earnings. Both are soaring a day after Meta’s stock tumbled 12 percent — the parent company of Instagram had predicted bigger-than-expected spending on A.I.

The results show that investors are willing to be patient on A.I. — as long as they can see benefits on the horizon. (Getting extra payouts like a dividend helps, however.)

Like Meta, Microsoft and Alphabet are spending a lot. Microsoft reported $14 billion in capital expenses and leases in the first quarter, up 21 percent year-on-year, while Alphabet invested $12 billion — a 91 percent increase.

By comparison, Meta spent $22 billion in the quarter, up 6 percent.

All three said they planned to keep spending on A.I.:

“We’ll still grow our investment envelope meaningfully before we make much revenue from some of these new products,” Mark Zuckerberg, Meta’s C.E.O., told analysts.

Ruth Porat, Alphabet’s C.F.O., said spending would be “roughly at or above” current levels.

Amy Hood, Microsoft’s C.F.O., said investment would “increase materially.”

There are key differences: Meta also forecast lower-than-expected revenue. And investors are also still wary after the company’s multibillion-dollar investment in so-called metaverse technologies, despite no clear sign of a payoff.

Its rivals showed more tangible results from their spending sprees:

Microsoft reported a 31 percent jump in sales at its Azure cloud service, which powers many of its A.I. offerings like technology from its partner OpenAI. (Note: The Times has sued OpenAI and Microsoft, accusing both of copyright infringement of news content via their A.I. systems.)

Alphabet also reported a 27 percent rise in revenue at its Google Cloud business.

That said, Alphabet emphasized that it was cutting costs (which Meta did last year, to investors’ delight) and also introduced a dividend and carried out a $70 billion stock buyback.

Wall Street hasn’t written Meta off yet. Despite the company’s stock tumble on Thursday, analysts still think it’s poised to become a leader in A.I. Some agreed with Zuckerberg’s contention that the company had proved it could eventually make money from new technologies.

The other high-stakes N.B.A. contest

While the N.B.A. has already seen some thrilling playoff games , the league is also managing another contest worth billions.

The basketball league got $24 billion in its current contract with Disney, which owns ESPN and ABC, and Warner Bros. Discovery, which runs TNT. Now it’s looking to double that in a new deal — and the results could reshape the media landscape.

Streaming platforms are competing hard for a piece of the pie. The N.B.A. could split its game rights into two bundles: broadcast and digital.

Some games would be taken from the current package held by Disney and Warner to create a streaming offering that would show both nationally televised contests and some playoff matches, according to The Wall Street Journal. (That said, Disney and Warner would still be expected to pay more despite showing fewer games.)

The front-runner among streamers is Amazon, which has won plaudits for its handling of football games. The tech giant signed an $11 billion, 11-year deal to show Thursday night N.F.L. matches in 2021, and this year reportedly paid $120 million for exclusive rights to air a playoff game .

That said, YouTube is also in the mix, The Journal reported.

NBC also wants a big piece of the NBA broadcast pie. It’s vying for regular-season and playoff games to show on its broadcast network and its Peacock streaming service, as well as shared rights with ABC for the finals, according to The Journal.

Warner Bros. Discovery faces a dilemma. Some analysts and investors are worried about the company paying more for a new deal while it tries to pare its $44 billion debt load: Wolfe Research downgraded its shares to an underperform rating this week on those concerns.

But sports rights are among the most highly sought media assets for a reason: Live sports are a big draw for audiences, making them a valuable bargaining chip with cable and satellite companies as well as advertisers.

“Are you better paying up for less games and hurting your financials or juicing your financials but potentially destroying your long term?” Rich Greenfield, an analyst at LightShed Ventures, said to DealBook.

The not-so-new rules for the internet

Net neutrality is back. The Federal Communications Commission voted to reinstate rules designed to prevent internet service providers from slowing or blocking services from some websites, most likely setting the stage for another legal fight between business and regulators.

The F.C.C. restored Obama-era rules that were scrapped under Donald Trump. In a vote on Thursday, the agency classified internet service as a public utility.

The rule is supposed to ensure that broadband providers like Verizon and Comcast don’t charge some websites more than others or slow delivery of content by rivals, like Netflix or YouTube. “Every consumer deserves internet access that is fast, open and fair,” Jessica Rosenworcel, chair of the F.C.C. and a Democrat, said. “This is common sense.”

Critics say the rule is another case of regulatory overreach. Broadband providers worry that the F.C.C. could move next to regulate prices. (Some states have already capped the rate that low-income households can be charged.)

In a letter sent to Rosenworcel this week, dozens of Republicans argued that net neutrality would harm the growth of the telecom industry.

Both sides’ worst fears have never become reality. The Obama administration didn’t start setting broadband prices when it created the rules. When the Trump administration repealed them, broadband companies didn’t throttle or block websites and consumers didn’t notice big changes in how they reached the internet or how much they would have to pay for it.

Democrats say rules are still needed to protect consumers in the long term. Rosenworcel has also said that greater oversight of internet infrastructure would allow the F.C.C. to better protect networks from cybersecurity attacks.

THE SPEED READ

Shares in CVC Capital Partners rose 24 percent in their trading debut on Friday, after the private equity giant raised $2.15 billion in its long-awaited I.P.O. (Bloomberg)

The C.E.O. of Fisker, the embattled electric-vehicle start-up, told employees that the company was in talks with four potential buyers . (Business Insider)

The F.D.I.C. delayed plans to limit the influence of big shareholders in banks after neither of two rival proposals for doing so gained support. (FT)

“A Chinese Firm Is America’s Favorite Drone Maker — Except in Washington ” (NYT)

Best of the rest

New York’s highest court overturned the 2020 felony conviction of Harvey Weinstein on sex crime charges, citing a lower court judge’s error during the disgraced movie mogul’s trial. (NYT)

The Democratic Republic of Congo accused Apple of using minerals illegally exported from the war-torn eastern half of its territory in its iPhones, Macs and other products. (FT)

We’d like your feedback! Please email thoughts and suggestions to [email protected] .

Andrew Ross Sorkin is a columnist and the founder and editor at large of DealBook. He is a co-anchor of CNBC’s "Squawk Box" and the author of “Too Big to Fail.” He is also a co-creator of the Showtime drama series "Billions." More about Andrew Ross Sorkin

Ravi Mattu is the managing editor of DealBook, based in London. He joined The New York Times in 2022 from the Financial Times, where he held a number of senior roles in Hong Kong and London. More about Ravi Mattu

Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets. More about Bernhard Warner

Sarah Kessler is an editor for the DealBook newsletter and writes features on business and how workplaces are changing. More about Sarah Kessler

Michael de la Merced joined The Times as a reporter in 2006, covering Wall Street and finance. Among his main coverage areas are mergers and acquisitions, bankruptcies and the private equity industry. More about Michael J. de la Merced

Lauren Hirsch joined The Times from CNBC in 2020, covering deals and the biggest stories on Wall Street. More about Lauren Hirsch

Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously, she was a senior reporter at Quartz, covering law and politics, and has practiced law in the public and private sectors.   More about Ephrat Livni

EU Adopts Mandatory Rules on Corporate Sustainability Due Diligence That Will Apply to Many US Companies

On 24 April 2024, the European Parliament voted to adopt the Corporate Sustainability Due Diligence Directive (CSDDD), meaning it will now become law and necessitate a shift in corporate attitudes to responsible business conduct. The CSDDD will apply to European Union (EU) and non-EU companies with activities in the EU meeting the thresholds outlined below. For the first time, it will introduce comprehensive mandatory human rights and environmental due diligence obligations, with significant financial penalties and civil liability for companies that do not fully comply. It also will create a new obligation for companies to adopt and put into effect a climate transition plan, as well as a requirement for companies to report on their due diligence processes. This will likely be a heavy lift for most in-scope businesses, as these requirements reframe existing international soft laws [1] as mandatory obligations. Companies not in scope but in the value chains of businesses that are in scope also will feel the effects of the law, and can expect increasing sustainability-related information requests, contractual requirements and climate-related transition requests.

The new due diligence obligations created by the CSDDD will apply in addition to other more specific due diligence obligations introduced under the EU’s Conflict Minerals Regulation , the EU’s Batteries Regulation , the EU’s Deforestation Regulation and the new procedures companies will have to adopt to ensure compliance with the EU’s ban on products made with forced labour , which also was approved by the European Parliament this week.

Which companies does the CSDDD apply to?

The CSDDD applies to EU and non-EU companies, including most regulated financial undertakings, that satisfy the turnover and employee thresholds. It also applies to ultimate parent companies of groups that satisfy the same thresholds on a consolidated group basis.

The EU has adopted a phased-in approach for the CSDDD with the obligations applying between three and five years from the date the law enters into force.

The CSDDD only applies to those companies that meet the relevant thresholds for two consecutive years. 

We also will be closely tracking national implementation of the CSDDD into the laws of the EU member states, since EU member states are permitted to bring additional companies in scope of the CSDDD and/or require compliance sooner.

Franchisors and licensors

Lower financial thresholds apply to companies that rely on franchise or license models where the company’s or group’s agreements with third parties ensure a common identity, a common business concept and the application of uniform business methods.

What does the CSDDD require in-scope entities to do?

Mandatory climate transition plans.

The CSDDD will require all in-scope companies to adopt and put into effect a climate transition plan which aims to ensure, through best efforts, that the business model and strategy of the company is compatible with all of the following:

• Limiting global warming to 1.5 degrees Celsius in line with the Paris Agreement.
• The EU’s objective of achieving climate net zero greenhouse gas (GHG) emissions by 2050, including all related interim targets for 2030 (i.e., a reduction of net GHG emissions by at least 55% compared to 1990 levels) and 2040.
• A transition to a sustainable economy.

A company’s climate transition plan must include, amongst other things, science-based, time-bound targets covering Scope 1, 2 and 3 GHG emissions for 2030 – and every five years after until 2050. The transition plan needs to be updated annually and must contain a description of the progress the company has made towards achieving its targets. For those companies in scope of the Corporate Sustainability Reporting Directive (CSRD), their plan will be subject to audit. The 2030 emissions target will, in practice, require many companies to take steps to comply before the CSDDD fully applies to them, otherwise they risk not being able to achieve the target set.

Critically, this is an obligation of means and not of results. While the CSDDD recognizes that specific circumstances may lead to companies not being able to reach their targets, for traded companies, in particular, there remains a risk of securities litigation where targets disclosed in regulated filings go unmet. Even for nonlisted companies, there are risks of claims being brought under new EU green claims rules if reported targets are known to be unachievable (and therefore potentially misleading).

Mandatory human rights and environmental due diligence

Under the CSDDD, companies also will be required to identify and, where necessary, prioritize, prevent, mitigate, bring to an end, minimize and remediate potential and actual adverse human rights and environmental impacts whilst engaging in stakeholder consultation throughout. Companies will need to refresh their mandatory human rights and environmental due diligence assessments at minimum every 12 months and, where not already required to report on their processes under the CSRD, they will be required to publish an annual statement on their due diligence processes.

In-scope companies’ due diligence efforts must cover their own operations, the operations of their subsidiaries, and operations carried out by direct and indirect business partners in their ‘chain of activities’. A company’s ‘chain of activities’ covers the upstream activities connected to a company’s product or service – including design, extraction, sourcing, and manufacture of raw materials and products. It also covers certain downstream activities, including the distribution, transport and storage of products, but not their disposal or end use.

As the downstream impacts of services are entirely excluded, regulated financial undertakings are therefore only subject to due diligence obligations for the upstream part of their chain of activities. However, the CSDDD envisages the possible introduction of sustainability due diligence requirements for the financial services industry as early as 2026. 

What does mandatory human rights and environmental due diligence require in practice?

In practice, this means companies will need to:

1. Integrate mandatory human rights and environmental due diligence into their policies and risk management systems at all relevant levels of operation.

These policies must be developed in consultation with the company’s employees and representatives and must be updated periodically.

2. Identify and assess actual and potential adverse human rights and environmental impacts.

Adverse human rights and environmental impacts include, for example, forced labour, pollution and biodiversity loss, and must be assessed throughout a company’s own operations, those of its subsidiaries and, where related to its chain of activities, those of its business partners. This will require companies to map their chain of activities and carry out in-depth assessments in those areas where adverse impacts are most likely to occur and/or are most severe. Mandatory stakeholder consultation is a critical part of this identification and assessment process.

3. Prevent – or, where not possible, mitigate – potential adverse impacts and where impacts are identified, bring them to an end.

The CSDDD provides for risk-based due diligence, aligned with the UNGPs’ focus on severity and likelihood. These obligations are not obligations of result but obligations of means (i.e., companies are not expected to guarantee that adverse impacts will never occur or that they will always be stopped). Companies must nevertheless take appropriate measures that are capable of effectively addressing adverse impacts identified in a manner commensurate to the nature of the adverse impact. Measures might include cascading contractual clauses or targeted support for small and medium-sized enterprises (SMEs) in the form of training or even targeted financial aid. As a last resort, where efforts to prevent or mitigate have been unsuccessful, companies may be required to terminate their business relationship. Stakeholder consultation will play an important role in each instance to inform and support a company’s decisions and actions.

4. Provide remediation where the company causes or causes jointly with subsidiaries or business partners (e.g., by facilitating or incentivizing) an actual adverse impact.

Remediation here means the restitution of affected persons, communities or the environment to a situation equivalent to or as close as possible to the position they would have been in had the adverse impact not materialized. Where a company neither causes nor contributes to the impact arising in its chain of activities, the company is nevertheless expected to use its influence to bring to an end or minimize the extent of the impact.

5. Prioritize where necessary.

Companies should prioritize adverse impacts based on their severity and likelihood without regard to business-related factors, such as the company’s potential liability or the leverage the company might have. Once the most salient adverse impacts have been addressed, companies must then address those less salient.

6. Engage in stakeholder consultation.

The CSDDD mandates ‘meaningful’ stakeholder engagement throughout the due diligence process. Stakeholders include individuals and communities whose rights or interests are or could be impacted, as well as civil society organizations. Companies are expected to pay particular attention to the needs of vulnerable stakeholders and must address barriers to engagement.

7. Establish and maintain a notification mechanism and complaints procedure.

These processes must be publicly available and transparent, and they must enable impacted persons, trade unions and civil society to submit legitimate concerns regarding actual or potential adverse impacts.

8. Do more than rely on contractual assurances alone.

Companies will not be able to rely on cascading contractual assurances alone to satisfy their due diligence obligations under the CSDDD. Where used, contractual assurances must be accompanied by ‘appropriate measures’ to verify compliance and should be designed to ensure that responsibilities are shared appropriately by the company and the relevant business partner and avoid the complete transfer of due diligence obligations. The European Commission is expected to publish voluntary model contract clauses before the end of 2026.

Enforcement

The CSDDD will be enforced nationally by the authorities of the EU member states. Companies that do not comply with the CSDDD may face sanctions from national administrative authorities – including fines of up to 5% of their global turnover.

New civil liability regime

The CSDDD introduces a civil liability regime whereby companies could be liable for damages where they ‘intentionally or negligently’ failed to prevent, mitigate, bring to an end or minimize an adverse human rights impact which led to damage. The civil liability is subject to a five-year limitation period and excludes damage caused solely by the activities of a company’s business partners. Civil society and nongovernmental organizations will be able to bring claims for collective redress on behalf of victims. National courts also are expected to implement mechanisms to address procedural barriers for claimants.

Exclusion from public tenders

It also is possible that national authorities will make compliance with the CSDDD a criterion for the award of public contracts and concessions.

Next steps?

The CSDDD enters into force 20 days after its publication in the Official Journal of the EU. Prior to publication, the CSDDD will need to be formally approved by the European Council (expected 23 May). This means that the CSDDD will likely enter into force during Q3 2024. Member states will have two years after entry into force to transpose the legislation into national law, and the requirements will start to apply to companies three, four and five years after entry into force, depending on the size of the company.

We will be closely tracking national implementation of the CSDDD and how it impacts existing national due diligence regimes in the EU – e.g., the German Supply Chain Due Diligence Act (LkSG) and the French law on the duty of vigilance – already in force, along with proposed regimes – e.g., the Dutch Child Labour Due Diligence Act. Member states have discretion under the CSDDD to expand the scoping thresholds, the downstream activities in scope and the measures available for remediation.

If you have any questions or would like support understanding the implications of this new regime, please contact a member of  Cooley’s international ESG and sustainability advisory team .

[1] The CSDDD is broadly aligned with the United Nations’ Guiding Principles on Business and Human Rights (UNGPs) and the Organisation for Economic Co-operation and Development’s Guidelines for Multinational Enterprises (OECD guidelines).

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UMC live updates: United Methodists remove ban on LGBTQ+ clergy

CHARLOTTE, N.C. — With three days remaining at the United Methodist Church’s top policymaking assembly, the 700-plus delegates from across world are set to take up the most contentious legislative proposals starting Wednesday.

The most high-profile of those proposals facing the UMC General Conference in Charlotte deal with LGBTQ+ rights and likely an expired policy allowing United Methodist churches to leave the denomination, also known as disaffiliation.

The UMC, which is the nation’s largest mainline Protestant denomination, has dealt with a splintering following disagreements over church policy and theology, including dealing with LGBTQ+ rights. A quarter of the denomination’s total U.S. churches disaffiliated between 2019-2023, many to join a more conservative breakaway denomination called the Global Methodist Church.

A policy allowing churches to disaffiliate expired at the end of 2023 , so traditionalists are supporting legislative efforts at this UMC General Conference to extend and expand the disaffiliation policy. Delegates have so far supported a legislative priority commonly called “regionalization,” which many consider a counter to disaffiliation.

The assembly is also expected to take up additional proposals , called petitions, seeking to remove anti-LGBTQ+ restrictions.

Follow along for live updates.

Yesterday's UMC news: UMC live updates: United Methodists take first steps toward removing LGBTQ+ restrictions

What lifted ordination ban means for one Ohio pastor

For Ohio pastor Rev. Angie Cox, there are immediate and tangible implications with the newly lifted ban on ordaining LGBTQ+ clergy. Cox, a lesbian and married, has sought to take the first step toward UMC ordination, called commissioning, six times in the past five years. Each time, the West Ohio Conference’s board of ordained ministry has rejected her candidacy.

“I know I’m called to ministry and know I’m called to be here,” Cox said in an interview. The decision to remove the ban on LGBTQ+ ordination is “an affirmation of the call by our official policies,” Cox said.

Cox already pastors a church in Columbus, but her inability to receive ordination credentials is both a symbolic gesture against her personhood and a limit on her participation in United Methodist life.For example, she's barred from serving as a clergy delegate in the regional legislative assembly or at the UMC General Conference.

The West Ohio Conference board of ordained ministry could reconsider supporting Cox's commissioning as early as May, potentially positioning her for commissioning in June. Similar to her situation, Cox knows others who have waited to pursue ordination until the UMC removed the ordination ban.

Cox said her sexuality has always been the “elephant in the room” in her repeated pursuit of candidacy for commissioning.

With Wednesday’s decision to remove the ordination ban, “there’s an aspect of people finally seeing the goodness in the whole person,” said Cox. “Not just me, but for any LGBTQ+ person to finally be seen as whole in official structures is freeing."

Last regionalization petition passed, finalizing full legislation restructuring of church

The one outstanding petition to finalize legislation seeking to restructure the United Methodist Church's system of regional oversight received approval Wednesday, marking a major milestone for the denomination’s top legislative assembly.

The 700-plus delegates approved all eight regionalization-related petitions starting last week, when the body voted on a constitutional amendment that still requires ratification by United Methodist regional conferences.

The last regionalization-related petition spurred a brief yet passionate debate, a display of broader divisions that regionalization inevitably brought out.

Progressives and many centrists supported regionalization, while traditionalists opposed the plan. Part of that divide is related to regionalization’s potential to allow the American church to move in a more LGBTQ-affirming direction, while allowing regional bodies outside the U.S. to maintain more traditional policy positions.

“You can have your train, you can ride your train and go where you go,” said Liberian delegate Jerry Kulah during a floor debate Wednesday, speaking against the regionalization petition. “Regionalization is only a platform to strengthen the American UMC.”

Conversely, proponents of the legislation say regionalization elevates the status of and gives more autonomy to regional United Methodist bodies outside the U.S.

Regionalization in essence eliminates a regional hierarchy that the Methodist church originally created in 1939 to racially segregate Black clergy and laity in the U.S. from the white population,  according to the UMC General Commission on Archives & History .

Before taking up the last regionalization petition, delegates approved a new policy that allows churches that disaffiliated from the UMC to rejoin the denomination.

Disaffiliation policy lifted in final blow to splintering

Delegates approved a petition removing a section of the UMC Book of Discipline allowing churches to disaffiliate, settling a high-profile debate and in many ways the denomination’s splintering.

The policy allowing churches to disaffiliate, often called Paragraph 2553, received approval in 2019 and expired in 2023. But the official language of the policy remained in the denomination’s compendium of policies and practices. Wednesday’s petition removed that existing language.   

“(Paragraph) 2553 has been a wrenching experience for the church,” said Lonnie Chaffin in an address to delegates, presenting the petition on behalf of an administrative committee. “Congregations have been in conflict, conferences have had to divert attention away from our mission and spent considerable time and energy on disaffiliation.”

Disaffiliations — there were ultimately 7,500-plus U.S. congregations that left the denomination using this policy — led to court battles between churches and regional United Methodist leadership, and split church membership when a congregational vote didn’t go a certain way.  

Disaffiliation was the major legislative priority that traditionalist groups and leaders sought to advocate for at this UMC General Conference, a shift from their typical lobbying for policies dealing with sexuality and marriage.

A petition submitted to the UMC General Conference sought to expand Paragraph 2553 for churches outside the U.S., which were barred from disaffiliating. But the decision on Wednesday to remove Paragraph 2553 altogether yielded the opposite result.

Pension-based retirement plan replaced

In yet another sign of the downward trends affecting the UMC, general conference delegates approved on Wednesday a new clergy retirement plan that replaces a pension-based system to a contribution-based one.  

Instead of churches being solely responsible for contributing to a clergy’s retirement savings, the new plan shifts some of that burden to the clergy.

“A defined benefit, a pension the risks are on the church completely,” said Andrew Hendren, chief executive of Wespath, which is the United Methodist retirement and benefits agency, in a presentation to delegates on Monday. “In an account-balanced plan, the participant bears some of the investment returned risk.”  

Wespath’s proposal to mothball the pension-based system follows declining membership in UMC churches due to shrinking and aging membership, a phenomenon compounded by the recent wave of disaffiliations.  

“There are fewer church members to support the pensions supporting retired pastors,” said Hendren in his presentation to the delegates. “To make these plans sustainable for the long-term, we need to shift to a different design.”

The new retirement plan only affects future retirees, not those who already on a pension plan.

Though in different ways, declining membership and church giving is affecting other United Methodist agencies . A proposed budget to the UMC General Conference would drastically cut funding for 10 UMC agencies. The assembly will vote on the proposed budget Friday.

Emotional celebration breaks out following removal of ban on LGBTQ+ clergy

A large crowd spontaneously broke out in celebration on Wednesday following the UMC General Conference’s decision to remove a 40-year-old ban on LGBTQ+ clergy.

Delegates and observers, including people who identify as LGBTQ+ and their allies, embraced each other across a fence and sang hymns. Many in the crowd, including a few United Methodist bishops, were tearful as the crowd sang, drawing an increasingly large group of spectators.  

United Methodist Church removes ban on LGBTQ+ clergy

The United Methodist Church struck down a 40-year-old ban on LGBTQ+ clergy Wednesday morning, the most pivotal step the denomination’s legislative assembly has taken so far toward LGBTQ+ inclusion.

In addition to two other petitions aimed at removing anti-LGBTQ+ restrictions, the UMC General Conference approved as part of a consent calendar an amended policy that previously barred “self-avowed practicing homosexuals” from ordination. The three petitions that received swift approval early Wednesday followed nine other LGBTQ+ inclusion-related petitions the 700-plus delegates approved on Tuesday.

Originally implemented in 1984, the ban on LGBTQ+ ordination encapsulated the broader conversation about LGBTQ+ rights in the nation’s largest mainline Protestant denomination. The specific policy was central to an intensified debate in 2016 that eventually led to the exodus of mostly conservative churches out of the UMC.

In 2016, more than 100 United Methodist clergy came out as LGBTQ+ in a joint letter and then Colorado Bishop Rev. Karen Oliveto became the first (of eventually two) openly gay United Methodist bishop.  More regional conferences in the U.S. also began ordaining openly LGBTQ+ clergy, a decision left to those regional conferences’ delegates.  

Another petition in Wednesday’s consent agenda adds a policy barring local UMC officials from penalizing clergy or churches for blessing same-sex unions. But that change isn’t the same as removing the prohibition on clergy and churches blessing same-sex unions. A petition seeking to remove the latter is set for a floor debate potentially later Wednesday. 

Liam Adams covers religion for The Tennessean. Reach him at [email protected] or on social media @liamsadams.