The Purpose of a Business Plan

A business plan is a carefully worded statement of business goals. Whether written on behalf of an established business or a startup, it includes reasons the goals are attainable, along with plans for achieving them. Most business plans include background information about the individuals, organizations, or teams who will be responsible for making these goals reality.

A business plan is essentially a decision-making tool. Its content and format is determined both by the business’s goals and by the intended audience. Such a plan for a nonprofit group, for example, might discuss the way the organization’s mission fits with stated goals. It is crafted in order to ask for a loan to start a new company or expand an existing one, on the other hand, focuses primarily on the business’s ability to repay the loan on or ahead of schedule.

These are just a couple of very different examples of the purpose of a business plan. What both have in common is that banks, venture capitalists, and others who have an interest in financing business endeavors are concerned about the potential for default that can happen when a poorly planned business fails.