What a business plan contains, why entrepreneurs write them, and the benefits and limitations of planning.
A business plan is a written document that sets out a new business's aims, the strategy for achieving them, and the financial projections that show whether it is viable. It is typically written by an entrepreneur before launch and used to secure finance from banks or investors.
Assess whether to grant a loan. They look at financial projections and whether the business can repay.
Venture capitalists and angel investors use it to decide whether to fund the business in exchange for a share.
Acts as a roadmap for decision-making and keeps the business focused on its goals.
Helps potential partners or key hires understand the vision and their role in it.
Around 60% of new businesses fail within three years. A well-written business plan forces the entrepreneur to think through potential problems before they arise, increasing the chances of success. It also makes it easier to identify what finance is needed and at what stage.
Now you know what a business plan contains — try making one for your own business idea using our AI Business Plan Generator. It produces a full GCSE-style plan with start-up costs, cash flow forecast, SWOT analysis, and marketing mix.
✨ Generate a Business Plan →A typical business plan contains all of the following sections. Examiners may ask you to identify or explain what should be included.
A brief overview of the whole plan — what the business does, its USP, and what finance is being sought. Usually written last but placed first.
What the business wants to achieve — short-term and long-term. E.g. "achieve profitability within two years" or "open three locations within five years."
What the business sells — description, features, USP, and how it meets customer needs. May include details on production or sourcing.
Evidence of demand — target market, market size, customer segments, and analysis of competitors. Shows the business is not entering the market blindly.
The 4Ps — how the business will price, promote, and distribute the product. Includes the promotional budget and key channels.
How the business will actually produce and deliver its product or service — suppliers, location, equipment, staffing levels.
Who is running the business and what experience or skills they have. Investors particularly care about this — backing the person as much as the idea.
Cash flow forecast, projected profit and loss, and break-even analysis. Shows whether the business is financially viable and when it will become profitable.
| Document | Purpose |
|---|---|
| Cash flow forecast | Shows predicted monthly inflows and outflows — identifies when the business may run short of cash |
| Sales forecast | Predicts revenue month by month based on market research |
| Break-even analysis | Shows how much the business needs to sell to cover all costs |
| Start-up costs | Lists all the one-off costs needed before trading begins |
Thinking through costs, competition, and demand in advance prevents surprises. Better to discover a flaw on paper than after launch.
Banks and investors will not typically lend or invest without seeing a credible plan. It demonstrates the entrepreneur has done their homework.
Objectives and financial forecasts give the business measurable goals to work towards and benchmark actual performance against.
Acts as a roadmap — when decisions arise, the entrepreneur can refer back to the plan to ensure they stay on course.
Forecasts rely on estimates. If market research is poor or conditions change, the plan may be inaccurate. Actual results often differ from projections.
Writing a thorough business plan takes significant time — time that could be spent developing the product or speaking to customers.
Markets change rapidly. A plan written six months ago may no longer reflect current conditions — competitors may have entered, or demand may have shifted.
Entrepreneurs are often overly optimistic about sales and underestimate costs. This can make the plan look viable when the actual business is not.
Not all businesses formally write a business plan, especially small sole traders. However, the thinking process — considering the market, costs, and viability — is valuable for all businesses regardless of size. Formal written plans are most critical when external finance is needed.
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