What Is A Business Plan? (Types And Importance)

By Indeed Editorial Team

Updated 28 September 2022

Published 12 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Planning is key to attaining success for a business. A business that considers all of its functions and aspects, delineates the goals and the steps to follow to achieve them, is more likely to prosper. With the rising number of startups, it is becoming important for every business, new or old, to create and update its business plans. In this article, we discuss what a business plan is, why it is important, and different types of business plans.

What Is A Business Plan?

If you are wondering "What is a business plan?", it is a document that includes studies, strategies and achievable goals and targets for a business with specified time frames. Some business plans also mention who is responsible for which tasks to accomplish the set goals. A good business plan may also consider the potential problems and challenges of a business at various stages and the suggested steps to combat them.

They also specify key performance indicators (KPIs) which determine if and how well the business can achieve its objectives. These are quantifiable values and ensure the concerned personnel stay strive to achieve the targets by eliminating ambiguity. Companies require a business plan to either start, grow, or maintain a business sustainably.

Why Is A Business Plan Important?

A business plan can determine the probability of success or failure and other possible future outcomes. Here are some reasons business owners, senior-level managers or directors want to have a good business plan in place before they work on a project:

To understand their market

The market is probably one of the most crucial elements of starting or running a business smoothly. Whether there is a market for the said product or not, how big or small the market is and other insights about it can help businesses penetrate it. These details may include their demographics such as their age, income and education, their unique problems, and why they may prefer your product over others. It can help you learn some unique advantages of your product that you may have been unaware of earlier.

To understand the competition

Unless you have a rare product for which you have already acquired a patent with no competitors in the market yet, the company is going to have other competitors. It is important to understand who these competitors are, what they are doing that is working for them and whether you can overtake or at least meet that competition or not. If the competitor has a monopoly, you may want a certain strategy, whereas if there are enough smaller players in the market and none who are truly remarkable, you can follow a different approach.

Related: How To Become A Market Research Analyst: A Complete Guide

To identify the key players in the organisation

Apart from defining the market, goals and strategies, a business plan also helps you to specify the people in leadership and management of the company. These are the people who are going to be more involved and accountable to meet different goals to achieve business objectives. Their credentials, careers and achievements are also present in the business plan for concerned persons, such as investors, to see if the team is capable enough to accomplish the business goals.

To devise effective strategies

It takes an effective marketing strategy to derive great results. The business plan clearly defines what these strategies are going to be and how they can help achieve the desired results. Each type of business, product or market requires a different type of strategy according to its competition, the mindsets of the target group, and sustainability. When the strategy is clear, the goals become achievable with focused efforts.

To determine the required capital

To practically put the plans into action, a business requires money, property, employees, equipment, and other operational apparatus. This means spending money to pay for the equipment, rents for office space and salaries. A business plan helps to understand these costs and how the business is going to meet them. Predicting and planning the costs in advance can also help businesses to mitigate them as and when required. It even helps them anticipate whether the business is going to be profitable. If the costs are higher than the expected returns, then the venture has less likelihood of succeeding.

To get funding

It is difficult for businesses to start and establish without financial backing. As businesses are no ordinary feats and require large amounts of cash and capital to run and scale, getting the support of investors is important. Investors are going to provide funds if they find the business has potential. You can prove this to them if you have an excellent and effective business plan that clearly defines your market potential, goals and strategies with quantifiable metrics to these investors.

Types Of Business Plans

There are various types of business plans and each is required at a specific stage of the business. You may create a business plan before commencing a business venture, but that is not the only business plan you are going to make. The involved factors may change as you go through the process, and requirements and strategies may also require alterations accordingly and, subsequently, new business plans. Here are some types of business plans that are commonly used in business:

Start-up business plan

This is the first business plan that one can make when trying to become an entrepreneur. This plan lays out all the initial steps, details of the company and its core teams, the product or service, and the desired outcomes for the near future, which can range from the next one to five years. The plan divides this period into several stages with set targets and steps to achieve them, along with people who would be accountable. This is also the business plan that can help gain the confidence of potential investors.

Internal business plan

These types of business plans are for the internal and relevant teams of the organisation. They may pertain to a specific department or project and define the objectives, tasks and strategies for those specific teams. For example, the marketing team may have a separate internal business plan that informs them about the marketing plan for the next phase. This may include details about the market share, outreach plans and marketing strategies.

Operations business plan

An operations business plan defines the operating procedures and policies for the business. It Indicates the projected costs and revenues, objectives of each department, employees responsible, strategies to carry out the operations, deadlines and timelines. It includes steps to follow to achieve realistic projections and business goals. The operations business plan also specifies how the employees are going to perform their duties. Whether they work from home or an office, their working hours and if they require specialised assistance to do their duties, such as specific devices or access to certain applications.

Related: A Quick Guide To Operations Management Responsibilities

Strategic business plan

A strategic business plan helps connect the business objectives with suitable strategies to achieve those objectives. This involves an in-depth study of the niches within the market that have potential, the current industry trends and a plan to capitalise on these factors. Creating a strategic business plan requires deep insights into the current and potential markets, competitor analyses, challenges and opportunities for growth. Having a strategic business plan helps businesses scale in a sustainable manner and attain a larger or previously unexplored market share.

Feasibility business plan

A feasibility business plan is concerned with the viability of a proposed business or project. It assesses the profitability and the future potential of a project by SWOT analysis, which includes studying the strengths, weaknesses, opportunities and threats. By providing detailed financial projections, it can help investors to gauge the reliability and potential of the business idea. It can help make strategic business decisions by gauging the market conditions along with competitors and their potential advantages or disadvantages.

Related: SWOT Analysis Guide (With Examples)

Growth business plan

Eventually, a business may want to expand or grow their market share, or explore completely new markets and meet relevant customer demands. This is where a growth business plan can be helpful.

Growth can be of different types. A company may decide to introduce a new product that caters to a different or existing market. They may create related products or introduce new features that meet the demands of their current customers. They may go from serving domestically to expanding internationally. These plans can entail higher sales targets and returns. It may also mean increasing the operational scope and employing more human resources and capital.


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