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Organizing for the future: Nine keys to becoming a future-ready company

The prospect of successful vaccines for COVID-19 has given business leaders everywhere hope that the pandemic may be finally nearing a turning point. And not a second too soon: the organizational adrenaline that helped many companies get things done quickly and well during the pandemic’s early days has, in many cases, been replaced by fatigue.

Yet even as leaders take action to reenergize their people and organizations , the most forward looking see a larger opportunity—the chance to build on pandemic-related accomplishments and reexamine (or even reimagine) the organization’s identity, how it works, and how it grows.

The pressure to change had been building for years. Well before the COVID-19 pandemic, senior executives routinely worried their organizations were too slow, too siloed, too bogged down in complicated matrix structures, too bureaucratic. What many leaders feared, and the pandemic confirms, is that their companies were organized for a world that is disappearing—an era of standardization and predictability that’s being overwritten by four big trends: a combination of heightened connectivity, lower transaction costs, unprecedented automation, and shifting demographics (Exhibit 1). (For more about these forces, see “ Organizing for the future: Why now? ”) And if incumbents didn’t see the future in themselves they saw it clearly in the competition: digital upstarts that continue to innovate, and win, in bold new ways.

In this article, we’ll synthesize lessons from our experience and from new research on the organizational practices of 30 top companies to highlight how businesses can best organize for the future. While no organization has yet cracked the code, the experimentation underway suggests that future-ready companies share three characteristics: they know who they are and what they stand for; they operate with a fixation on speed and simplicity; and they grow by scaling up their ability to learn, innovate, and seek good ideas regardless of their origin. By embracing these fundamentals—through the nine organizational imperatives that underpin them—companies will improve their odds of thriving in the next normal.

The bad news? Companies have zero time to lose. In an increasingly winner-takes-all business environment in which McKinsey research  finds that up to 95 percent of economic profit is earned by the top 20 percent of companies, any organization that isn’t seeking new approaches is on borrowed time.

The good news? Not only do these same top performers offer hints at what a better organization could look like, but companies everywhere are recognizing that the pandemic offers a once-in-a-generation opportunity for change. Indeed, the much-anticipated—and yes, inevitable—transition from today’s COVID-19 crisis mode to the next normal offers senior executives a unique unfreezing opportunity. By seizing the initiative, companies can discover organizational “unlocks” and create new systems that are antifragile, 1 Author Nassim Taleb’s concept of antifragility is instructive. “The resilient,” Taleb writes, “resists shocks and stays the same; the antifragile gets better.” For more, see Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder , New York, NY: Random House Trade Paperbacks, 2012. more flexible, more organic, more interconnected, more purposeful—and simply more human. 2 These ideas have a long history. For example, consider the notion of open, dynamic organizational systems versus closed, static, mechanistic systems articulated by Daniel Katz and Robert L. Kahn in “Evaluating the application of theories of open systems thinking,” 1978.

Reinvention needed

Ask executives about their company and you can expect to be shown an organization chart. No wonder. The management concepts that the org chart visualizes—coordination, hierarchy, a matrixed organization—are the ones leaders grew up with and know best, as did generations before them. The original org chart  hails from 1854, and was introduced to help run the New York and Erie Railroad during the age of the steam locomotive.

Therein lies the challenge. Today’s organizations are set up as traditional hierarchies or matrix organizations with roots stretching back to the industrial revolutions of the 18th, 19th, and 20th centuries. In theory, these structures provide clear lines of authority from frontline employees up through layers of management. In reality, matrix structures have only grown more complex as business has—to the extent that in some companies they are so cumbersome they hardly function.

The takeaway? We shouldn’t expect these old models to be fit for purpose in today’s environment. They are mechanistic by design, built to solve for uniformity, bureaucracy, and control—goals that undercut what companies now prioritize: creativity, speed, and accountability.

The answer isn’t to modify the old models but to replace them with something radically better.

Organizing for the (winner-takes-all) future

To define “radically better” for organizations, we—along with our colleagues in McKinsey’s Organization Practice—embarked on a research effort in 2018 to understand how companies could successfully organize for the future. This work identified nine imperatives, highlighted in Exhibit 2, that we believe separate future-ready organizations from the pack.

Exhibit 3 shows the degree to which 30 top US companies are already making or considering bold moves across the imperatives. These companies—all among the top three in their industry as measured by total economic profit captured between 2015 and 2019—represent the vanguard of an increasingly winner-takes-all world (see sidebar, “The winner takes it all”).

Top-performing companies are taking bold action across all nine imperatives.

1 To acknowledge that industries have different market fundamentals and face different headwinds and tailwinds, we selected the top 10 industries as measured by their average economic profit between 2015–19. We then selected the top 3 companies from each industry by the same metric.

2 Bold moves defined as: 1) Company among the first to adopt a given practice; 2) the practice is unique and not copied elsewhere; or 3) the practice has been scaled across >50% of the company.

3 Bold plans defined as: Company is actively planning or piloting a bold move as defined above.

Source: McKinsey Organization Practice; McKinsey Strategy & Corporate Finance Practice

McKinsey & Company

The winner takes it all

To learn the extent to which the nine imperatives were being studied and pursued by leading organizations, we turned to groundbreaking research conducted by our colleagues in McKinsey’s Strategy & Corporate Finance Practice for their book, Strategy Beyond the Hockey Stick . There, the authors observed that company performance (as measured by average economic profit) demonstrates a power law—the tails of the curve rise and fall at exponential rates with long “flatlands” in between. The implications of the power law are stark: companies in the top quintile capture no less than 90 percent of economic profit, and the gap appears to be widening .

As part of our own research, we looked to this top quintile, selecting the top three companies from each of the ten highest-scoring industries on average economic profit from 2015 to 2019. We then conducted expert interviews and outside-in analysis to determine the degree to which the companies were acting on—or exploring—the nine organizational imperatives that form the heart of this article.

Three of the imperatives proved notable pockets of bold action: taking a stance on purpose (83 percent of companies we studied), establishing ecosystems (83 percent), and creating data-rich tech platforms (73 percent).

Further, when we looked across the three categories (“who we are,” “how we operate,” “how we grow”) that together comprise the nine imperatives, we noted that top-performing companies didn’t concentrate their efforts on any single category but instead tended to act across all three. This could suggest that all three areas are viewed as important to future organizational performance.

Indeed, in an increasingly winner-takes-all economy in which even above-average performance won’t guarantee returns above the cost of capital, we would expect the bar on organizational innovation to only rise.

As our colleagues in McKinsey’s Strategy & Corporate Finance Practice demonstrated in their 2018 book, Strategy Beyond the Hockey Stick , companies in the top quintile for economic profit capture almost 90 percent of it. A more recent analysis  shows this share has increased to 95 percent—basically all excess returns over the cost of capital.

Clearly, the case for reimagining an organization and taking bold actions has never been clearer. To see how companies can do both, let’s turn to the organizational imperatives and examine the ways in which they help organizations answer three core questions: Who are we? How do we operate? How do we grow?

Who we are: Strengthen identity

In his seminal 1937 essay, “The nature of the firm,” 3 Coase’s essay, described by him as “little more than an undergraduate essay,” is nonetheless widely cited as contributing to his 1991 Nobel Prize for economics. For more about Coase’s life and career at the University of Chicago (where he taught until his death in 2013 at the age of 102), see Sarah Galer, “Ronald Coase still stirs debate at 101,” University of Chicago, April 23, 2012, uchicago.edu. the economist and eventual Nobel laureate Ronald Coase argued that corporations exist to avoid the transaction costs of the free market. Yet with transaction costs plummeting (spurred by rising connectivity) this rationale no longer holds up. Why, then, do companies exist?

The answer is identity. People long to belong, and they want to be part of something bigger than themselves. Companies that fixate only on profits will lose ground to organizations that create a strong identity that meets employees’ needs for affiliation, social cohesion, purpose, and meaning.

Future-ready organizations accomplish this in three ways: they get clear on their purpose; they know how they create value and why they’re unique; and they create strong and distinct cultures that help attract and retain the best people.

Imperative 1: Take a stance on purpose

Top-performing organizations know that purpose is both a differentiating factor and a must-have. A strongly held sense of corporate purpose is a company’s unique affirmation of its identity—the why of work 4 For more, see Simon Sinek, Start with Why: How Great Leaders Inspire Everyone to Take Action , New York, NY: Penguin Group, 2009. —and embodies everything the organization stands for from a historical, emotional, social, and practical point of view.

Future-ready companies recognize that purpose helps attract people to join an organization, remain there, and thrive. Investors understand why this is valuable, and factor purpose into their decision making: the rise of environmental, social, and governance (ESG)–related funds is just one of the ways they acknowledge that purpose links to value creation  in tangible ways.

Nonetheless, few companies harness purpose fully. In a McKinsey survey of employees at US companies, 82 percent said organizational purpose is important , but only half that number said their purpose drove impact. How to bridge the gap? Take action to set the company’s purpose in motion ; help make it real for people. This only happens when employees identify with and feel connected to their company’s purpose. While such connections can be encouraged and reinforced through meaningful, symbolic action—for example, Amazon leaves an empty chair at meetings to represent the customer’s role in decisions 5 For more, see George Anders, “Inside Amazon’s idea machine: How Bezos decodes customers,” Forbes , April 4, 2012, forbes.com. —purpose must also be forged in tangible choices and behaviors. Consider CVS Health’s choice to stop selling tobacco products to more fully achieve a purpose of “help[ing] people on their path to better health.” 6 For more, see Eileen Howard Boone, “An insider look at CVS’s decision to quit the cigarette business,” Guardian , June 18, 2014, theguardian.com.

It’s often said that “where your talents and the needs of the world cross, there lies your vocation.” Indeed, employees aspire further (and even live longer) when their energies are channeled to purpose. McKinsey research finds that people who say they are “living their purpose” at work are four times more likely  to report higher engagement levels than those who say they aren’t.

When centered at the heart of work, purpose helps people navigate uncertainty, inspires commitment, and even reveals untapped market potential. Future-ready organizations will clearly articulate what they stand for, why they exist, and will use purpose as the glue to connect employees and other stakeholders in ways that inform their business choices.

In a McKinsey survey of employees at US companies, 82 percent said organizational purpose is important, but only half that number said their purpose drove impact.

Imperative 2: Sharpen your value agenda

While all companies have a strategy for how they create value, 7 For more, see C.K. Prahalad and Gary Hamel, “The core competence of the corporation,” Harvard Business Review , May–June 1990, hbr.org. few can show precisely how the organization will achieve it. Future-ready companies, by contrast, avoid this dilemma by creating a value agenda—a map that disaggregates a company’s ambitions and targets into tangible organizational elements such as business units, regions, product lines, and even key capabilities. Armed with such a depiction, these companies can articulate where value is created in the organization, what sets the company apart from the pack, and even what might propel its success in the future.

The key is to use the value agenda to focus the organization’s efforts and instill a sense of what really matters in every employee. When organizations can leverage this clarity—knowing exactly what differentiates them from everyone else—the results are powerful and hard to replicate. Consider how Apple rallies itself behind creating the best user experience. The company’s obsessiveness when it comes to pleasing customers includes obvious things like product design but extends to how products are packaged: the company has a small team dedicated just to packaging to ensure that the experience of opening the box elicits just the right emotional response. 8 For more, see Jamie Condliffe, “Apple’s packaging is so good because it employs a dedicated box opener,” Gizmodo, January 25, 2012, gizmodo.com.  

The power of a clear value agenda isn’t only that it helps a company better achieve its strategic priorities today but also that it gives the organization a line of sight into how to shift resources as priorities change. Top-performing companies, after all, reallocate their people aggressively, dynamically, and continuously against their core priorities, recognizing that this activity is both an economic engine and long-term competitive strength. According to McKinsey research, companies that frequently reallocate talent to high-value initiatives  are more than twice as likely to outperform peers on total returns to shareholders.

While all companies have a strategy for how they create value, few can show precisely how the organization will achieve it.

Imperative 3: Use culture as your ‘secret sauce’

In addition to having a clear why (purpose) and what (a value agenda), companies that thrive in the next normal will distinguish themselves by their cultures—the how of any organization. Culture is that unique set of behaviors, rituals, symbols, and experiences that collectively describes “how we run things.” Among the most successful companies, culture forms the backbone of organizational health and fuels sustained outperformance over time: companies with strong cultures achieve up to three-times higher total returns to shareholders  than companies without them.

Telltale signs of a strong culture of performance include leaders who consistently carry out the behaviors the company aspires to, work practices that stand out and feel fresh to outsiders, and innovative approaches to important moments—everything from employee onboarding to how meetings are run. Amazon, for example, famously enforces its “two-pizza rule” mandating that no team should be larger than two pizzas can feed. The rule supports the company’s idiosyncratic approach to meetings: keep them small, no PowerPoint, and start with silence to give participants time to reread the required premeeting memo (time that CEO Jeff Bezos refers to as “study hall” ). These approaches might seem like quirks, but, in fact, they directly support a valuable business goal: helping the company reach faster, better decisions.

Leaders hoping to create a robust performance culture need to start by cooking up their organization’s own unique “secret sauce.” The main ingredient: specific, observable behaviors that employees at all levels of the company adhere to.

Broad themes won’t cut it. Instead, behaviors must be made an integral part of core business activities and specific work tasks, especially for the moments that matter. A global manufacturer, for example, wanted shop-floor workers to view operational discipline as everyone’s job. To promote this, the company encouraged frontline teams to briefly huddle at the start of every shift to review the company’s “golden rules of safety.” Ultimately, the manufacturer created tailored interventions for different groups  of employees based on their respective roles, goals, and even particular mindsets that might otherwise have held employees back.

Culture can’t just exist in slogans painted on the walls or in catchy email signature lines. Defined principles and ways of working are critical to creating a cohesive, long-lasting organization. And culture plagiarists be warned—culture is devilishly hard to copy and should ultimately be unique to each organization. When leaders choose—and build—the kind of culture they want the organization to embody, they create a virtuous cycle, attracting the right talent that will thrive in their culture, unlock their value agenda, and “turbocharge” performance.

How to strengthen your company’s identity

Learn more about how companies can strengthen their identity (“Who we are”)

Igniting individual purpose in times of crisis

Creating strong links to an individual purpose benefits individuals and companies alike—and could be vital in managing the postpandemic uncertainties that lie ahead.

Linking talent to value

Getting the best people into the most important roles does not happen by chance; it requires a disciplined look at where the organization really creates value and how top talent contributes.

Establish a performance culture as your “secret sauce”

Companies with strong cultures achieve up to three-times higher total returns to shareholders than companies without them.

How we operate: Prioritize speed

Visit a future-ready organization and you’ll observe that speed is both a preoccupation and a cultural bias. You’ll even hear it in the company lexicon, in expressions such as “increasing the clock speed,” “metabolic rate,” or “a bias for action.” While the COVID-19 crisis has made speed a priority for many organizations , it has also reinforced how difficult speed is to harness. Once organizations galvanize identity, they need to optimize for speed. Operating models need to be fast, nimble, and frictionless to create ways of working that foster agility and simplicity. They need to enable a network of empowered, dynamic teams to find pockets of value, including at the company’s “edges” where employees are closest to customers.

Imperative 4: Radically flatten structure

As the business environment has become more complex and interconnected in recent years, many companies have mirrored these changes in their organizational structures, creating an ever-more convoluted matrix. Unwittingly, they are betting on organizational complexity to solve market complexity.

This is a losing bet. Future-ready organizations, by contrast, structure themselves in ways that make them fitter, flatter, faster, and far better at unlocking considerable value. Their goal isn’t to eradicate hierarchy so much as make it less important as an organizing mechanism. They flatten the organization and adopt the simplest P&L structure possible, reinforcing business objectives with clear, strong performance management and other mechanisms.

Consider Haier, the China-based multinational maker of appliances and consumer electronics that shifted away from traditional hierarchical structure and toward emergent, agile teams. Employing one of the more intriguing approaches we’ve come across, Haier is an organization with no layers, no traditional bosses, and no middle management; yet the company is anything but a free-for-all.

Future-ready organizations structure themselves in ways that make them fitter, flatter, faster, and far better at unlocking value.

Instead, thousands of independent “microenterprises”—small, flexible teams that form by mutual selection—collaborate over networks of platforms and people to accomplish the company’s goals. Microenterprises come in three forms : transforming units that aspire to reinvent existing products; incubating units that create entirely new products; and node units that support the others with component products and services. 9 For more, see Gary Hamel and Michele Zanini, “The end of bureaucracy,” Harvard Business Review , November–December 2018, hbr.org.

Another intriguing approach is the “ helix organization .” In this model, reporting is split into two separate, parallel lines of accountability—one focused on stability, the other on speed. To achieve the former, a function-oriented capabilities manager oversees an employee’s long-term career path and skills development. For the latter, a market-facing “value manager” sets priorities and provides day-to-day oversight, ensuring that people can be deployed as flexibly as needed to meet priorities. This model allows for nimble reallocation of people while avoiding the confusions of traditional dual reporting.

The vision of the future that these examples suggest is one in which organizational structure no longer focuses on boxes and lines. Instead, it centers on connectivity—on who works on what with whom. Future-ready organizations require models that are designed, nurtured, and grown around people and activities. Furthermore, advances in digital technology mean that bosses in the years ahead can become true coaches and enablers—not micromanagers—across larger spans of control (1:30 ratios of manager to employee are imaginable, versus much smaller ratios). When companies have a strong identity informing their priorities and ways of working, responsibilities and clear decision rights can empower frontline staff to make decisions in real time.

Finally, rethinking structure means rethinking teams. Many companies have established networks of teams that are empowered to operate outside current structures, take over some critical operations, and deal with rapidly evolving situations. Companies such as Google follow a “non-zero-sum” management approach in which the development of lines of communication running in all directions is more important than reporting relationships. 10 For more, see James L. Heskett, W. Earl Sasser, and Joe Wheeler, The Ownership Quotient: Putting the Service Profit Chain to Work for Unbeatable Competitive Advantage , Boston, MA: Harvard Business School Publishing, 2008. Such teams bring together cross-functional skills and a wide range of experience while avoiding the usual baggage that comes with more hierarchical mindsets. The teams can act fast because they are flexible. They form, disband, reshape, and experiment as they learn lessons, make and correct mistakes, and try new approaches.

Imperative 5: Turbocharge decision making

A recent McKinsey survey found that organizations that make decisions quickly are twice as likely as slow decision makers to make high-quality decisions. Organizations that consistently decide fast and well are, in turn, more likely to outperform their peers. However, only one in three survey respondents said their organizations consistently make fast, high-quality decisions .

Achieving quality and speed in tandem takes work. It requires a system that properly allocates decisions to the right executives, teams, individuals, or even algorithms. The top team needs to focus its time and energy on the core business decisions that only it can make, such as those initiatives central to the value agenda. Other leaders, meanwhile, should spend more time deciding on resource and talent allocation for those initiatives. Top of mind for everyone should be who is working on what. Through managing the backlog of resources from the top of the house, organizations will speed up and increase the quality of decisions.

Many decisions and processes require less than half the steps executives imagine are necessary.

To prepare for the future, many companies will need to reset their default mode by developing a bias for action and the ability to differentiate between crosscutting and delegable decisions. The great majority of decisions should be delegated to the lowest levels possible, giving employees at the company’s edges agency and accountability for decisions they are equipped, and best placed, to make. For example, most of Alibaba’s operating decisions are made by small teams informed by machine learning and creative applications of data. 11 For more, see Ming Zeng, “Alibaba and the future of business,” Harvard Business Review , September–October 2018, hbr.org. The company’s C-level executives focus on crosscutting decisions, including resource allocation for top initiatives. Many decisions and processes require less than half the steps executives imagine are necessary. This kind of streamlining is vital to increasing decision speed.

Leading organizations also rightsize the number of decision makers and critical voices involved in a decision. Each participant should be purposefully included, with a clear eye to removing decision “spectators” or others without a critical role in the process. Who has a vote? Who has a voice? Notably, clarity on this does not necessarily mean limiting the number of people involved or removing diverse perspectives. It just means ensuring that there is a strong reason for each participant to be present.

The COVID-19 crisis has forced companies to “turbocharge” decision making out of necessity. For example, Sysco, the largest US food distribution company, pivoted its core business in only a few weeks to provide services to the retail grocery sector by leveraging its supply-chain expertise. 12 For more, see “Sysco pivoting support to help US retail grocers keep shelves in stock,” Warehouse Automation, March 25, 2020, warehouseautomation.ca. As an executive at another company confided during the early days of the pandemic, “We are making a month’s worth of decisions every day at the moment.” Such examples suggest that companies do have the muscles to accelerate decision making. Now they must strengthen and flex those muscles, embedding what they’re learning from the crisis into redesigned decision-making processes for the future.

Imperative 6: Treat talent as scarcer than capital

The world of work is changing fast. Some jobs are being replaced by automation while others, facilitated by technology platforms, are becoming more globally dispersed. These changes are leading many companies to rethink their talent strategy. Top companies will anchor the effort to a bedrock principle: our talent is our scarcest resource. Then they’ll zero in on three core questions: What talent do we need? How can we attract it? And how can we manage talent most effectively to deliver on our value agenda?

Thirty-nine percent of survey respondents said they have turned down a job because of an organization’s perceived lack of inclusion.

Answering the first question (What talent do we need?) will be devilishly hard for companies that haven’t yet taken the time to create a value agenda. Our research finds that a substantial amount of value in organizations is linked to as few as 25 to 50 roles, many of which aren’t at senior levels of the company. Leaders must know what those roles are. If they don’t, they may be wasting top talent on roles that can’t deliver outsize value.

Creating an attractive destination for top talent means fostering an inclusive employee experience. This influences whether employees stay and thrive, which in turn affects the company’s bottom line. A recent McKinsey global survey  found that 39 percent of respondents said they have turned down a job or decided not to pursue one because of an organization’s perceived lack of inclusion. And other McKinsey research finds that companies in the top quartile for racial/ethnic diversity and gender diversity at the executive level are 36 and 25 percent more likely  to have above-average profitability, respectively, than companies in the bottom quartile.

When it comes to performance management, senior executives can learn from companies such as Netflix, which says it prioritizes having “stars” in every position and at every level. While this statement might sound like an empty motto at another company, for Netflix it serves a valuable need: the company’s highly autonomous culture would suffer with the wrong people in place. To decrease the odds of this happening, Netflix actively counsels out “adequate” performers .

Finally, future-ready companies see that talent ecosystems often allow for the best management and allocation of top talent. In some cases, companies rely on tech-enabled marketplaces to better match skills to projects. Such talent ecosystems can even reach beyond traditional corporate boundaries. For example, Cisco’s Networking Academy offers self-paced IT training and skills development to prepare students for a range of tech-related roles and then connects them to job opportunities, including with external partners. Participants benefit from greater opportunities for career advancement. But Cisco wins, as well, by tapping into a larger pool of talent empowered with specific skills the company prioritizes.

How to operate faster (and flatter)

Learn more about how companies can redesign the way they operate—and optimize for speed.

The helix organization

Separating people-leadership tasks from day-to-day business leadership can help organizations strike a better balance between centralization and decentralization, reduce complexity, and embrace agility.

To weather a crisis, build a network of teams

This dynamic and collaborative team structure can tackle an organization’s most pressing problems quickly. Here are four steps to make it happen.

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Effective meetings produce better business decisions. Yet too many decision meetings are doomed from the get-go. You can do better.

Three steps to create more value through talent

Companies that manage talent the same way they do financial capital can gain a competitive advantage.

How we grow: Build for scale

Organizations cannot simply hardwire decisions about their identity or operating models and declare victory. As connectivity and automation increase, and as the expectations of younger generations change, businesses must be prepared for nimble and constant adaptation if they hope to grow with any consistency.

Doing so entails constant interaction with stakeholders, technology, and employees. The best way to ensure this is by harnessing a vibrant ecosystem of partners outside the company’s traditional boundaries, building data-rich technology platforms that support growth and innovation, and accelerating learning to fuel the talent engine they’ll need to succeed.

Imperative 7: Adopt an ecosystem view

In 2014, Tesla made the seemingly radical decision to open source its patents and encourage other companies to use its intellectual property. In retrospect, that choice is a brilliant model of the ecosystem-oriented decisions that all future-ready companies must make. Tesla recognized that it couldn’t grow without partners that would build charging stations and offer services to create the infrastructure to support electric vehicles. By putting itself at the center of a burgeoning ecosystem of partners, Tesla laid the groundwork for its own explosive growth.

A substantial amount of value in organizations is linked to as few as 25 to 50 roles.

Future-proof organizations will take such examples to heart, recognizing that traditional understandings about what an organization is and where its boundaries lie are being upended. The old thinking was all about gaining leverage and controlling the supply chain. Increasingly, however, value is created through networks where partners share data, code, and skills; where communities of businesses create value and antifragility together.

The underlying recognition that top companies embrace (and that laggards struggle to accept) is that the sources of value will be constantly changing—in ways that can’t be tapped solely by a company’s traditional, core business. Successful companies need to excel at blurring boundaries, taking a systems view rather than a mechanistic one, and embracing fluidity over fixed plans.

Future-ready organizations view partners as extensions of themselves. These relationships feature porous boundaries and high levels of trust and mutual dependence to share value and let each partner focus on what it does best. For example, Amazon encouraged the formation of new delivery start-ups by launching a last-mile delivery program that offered top-performing employees seed money, leased vans, and training. While these delivery-system partners are self-employed, Amazon views them as both an extension of their logistics ecosystem and a new form of homegrown partnership. 13 For more, see Sarah Perez, “Amazon offers employees $10K and 3 months’ pay to start their own delivery businesses,” Tech Crunch, May 13, 2019, techcrunch.com.

Partnerships should be cultivated for the long term to better develop the antifragility that helps partners weather shocks. For example, Johnson & Johnson’s JLABS provides support and resources on compliance, markets, science, and other topics to promising start-ups. By doing so, the company supports and develops relationships with entrepreneurs on the “fragile front lines of innovation.” 14 For more, see Amirah Al Idrus, “J&J, BARDA pick 7 startups to back in fight against COVID-19—and beyond,” FierceBiotech, August 27, 2020, fiercebiotech.com. Instead of transactional, win–lose relationships, models such as this one embrace partnerships motivated by shared success.

Imperative 8: Build data-rich tech platforms

Future-proof companies take data seriously. For them, data isn’t simply about reporting what is happening in the business or answering a business question. Data is the business.

The rise of Netflix is a case in point, as demonstrated in its transformation from a small, mail-in provider of DVDs to a multifaceted global platform, streaming service, and content creator. Netflix achieved its growth by leveraging its user data in the powerful algorithms that created its recommendation engine. 15 For more, see N. Venkat Venkatraman “Netflix: A case of transformation for the digital future,” Medium, April 16, 2017, medium.com. The company’s recommender system now accounts for 80 percent of time customers spend streaming Netflix content. 16 For more, see David Chong, “Deep dive into Netflix’s recommender system,” Towards Data Science, April 30, 2020, towardsdatascience.com. Future-ready companies understand that data can continually empower decisions and the value agenda in unexpected, yet promising, ways.

To make the most of data, leading organizations must tackle a complex set of tasks. They must create compelling approaches to data governance , redesign processes as modular applications, tap the benefits of scalable cloud-based technology, and support all this through variable-cost technology budgets that are reallocated dynamically. By seizing upon data’s ability to connect and scale, these companies will be able to develop new products, services, and even businesses in fast release-and-upgrade cycles—much as Tesla updates its products over the air several times a year. 17 For more, see Marci Houghlen, “How often does the Tesla Model 3 update itself?” MotorBiscuit, May 4, 2020, motorbiscuit.com.

Imperative 9: Accelerate learning as an organization

Capitalizing on new approaches to data requires modern DevOps skills, as well as other capabilities that will be new to most leaders. This underscores the urgency of the final organizational imperative, the one that helps make the others go: accelerate learning. Companies need to get learning right to fuel their talent engine and create an empowered workforce that’s fluent in the art of “fail fast, learn, repeat.” 18 The world needs it too. The calls for massive workforce reskilling have never been this palpable—according to the OECD, almost one-third of all jobs worldwide will be transformed by technology in the next decade. For more, see Saadia Zahidi, “We need a global reskilling revolution—here’s why,” World Economic Forum, January 22, 2020, weforum.org. High-performing companies promote a mindset of continuous learning that encourages and supports people to adapt and reinvent themselves to meet shifting needs.

Experiment-and-learn environments encourage accelerated personal growth and improvement for employees.

Getting to this level requires instilling a growth mindset, curiosity , and an openness to experimentation and failure. Microsoft CEO Satya Nadella describes it as hypothesis testing. “Instead of saying ‘I have an idea,’” Nadella observes, “what if you said, ‘I have a new hypothesis, let’s go test it, see if it’s valid, ask how quickly can we validate it.’ And if it’s not valid, move on to the next one.” 19 Krzysztof Majdan and Michal Wasowski, “We sat down with Microsoft’s CEO to discuss the past, present and future of the company,” Business Insider, April 20, 2017, businessinsider.com. This approach, and the company’s underlying push to shift its collective mindset from “know it all” to “learn it all,” is emblematic of a learning organization.

Experiment-and-learn environments encourage accelerated personal growth and improvement for employees. They can fuel beneficial innovation, as evidenced by Google’s famous “20 percent time” policy that encourages employees to work on their own ideas for Google 20 percent of the time (this approach contributed to the creation of Gmail and Google Maps, among others). 20 For more, see Bryan Adams, “How Google’s 20 percent rule can make you more productive and energetic,” Inc., December 28, 2016, inc.com. The real value in such programs is that they signal to the organization that learning, experimentation, and innovation are part of everyone’s day job, not something that gets done in a “skunkworks” or other specialized group.

Since traditional educational institutions alone cannot deliver the skills companies will need, organizations need to look inward. Rather than create monolithic centralized programs that people attend before returning to their day job, forward-looking companies will develop learning journeys that have a mix of core and individualized content, delivered when people need it and at requisite scale. 21 For example, see Aaron Pressman, “Can AT&T retrain 100,000 people?,” Fortune , March 13, 2017, fortune.com. And in keeping with the lessons learned during the pandemic, these programs must work in today’s virtual working environments .

How to grow, adapt, and learn

Learn more about how organizations grow with scale in mind.

Organizing for the future

Platform-based talent markets help put the emphasis in human-capital management back where it belongs—on humans.

Emerge stronger from the COVID-19 crisis by reskilling your workforce now

Adapting employees’ skills and roles to the post-pandemic ways of working will be crucial to building operating-model resilience.

Rethinking the boundaries of your organizational (eco)system

In today’s world, common understandings about what an organization is and who is part of an organization are being upended.

How will your team fare in the future of work?

Automation will leave few roles untouched. Here’s what leaders can do now to give their talent, and their organizations, the best opportunity to thrive in an uncertain future.

Into the future

For most organizations, the COVID-19 pandemic and its aftermath have upended life as we knew it. The resulting pain, grief, and economic dislocation will be felt long into the future. The first priority for leaders, therefore, is to lead with empathy and compassion as they revitalize, and reenergize, their exhausted teams and organizations.

As companies face up to an uncertain, postcrisis landscape, we urge them to recall Albert Einstein’s encouragement that “in the midst of every crisis, lies great opportunity.” As organizations move from a mindset of coping to one of competing , the best companies will seize the unique unfreezing opportunity before them to imagine—and create—new systems and modes of organization that are more flexible, integrated, resilient, and ultimately, more human. These organizations will view themselves as interconnected systems that seek to constantly experiment, fail, learn, grow—and start the process anew when the world invariably changes again.

Aaron De Smet is a senior partner in McKinsey’s New Jersey office, Chris Gagnon is a senior partner in the Austin office, and Elizabeth Mygatt is an associate partner in the Boston office.

The authors wish to thank Selin Neseliler, Richard Steele, and Jessica Zehren for their contributions to this article.

This article was edited by Tom Fleming, deputy editor in chief in the Chicago office.

Explore a career with us

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Overcoming pandemic fatigue: How to reenergize organizations for the long run

Purpose, not platitudes: A personal challenge for top executives

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Prepare a business plan for growth

Planning is key to any business throughout its existence. Every successful business regularly reviews its business plan to ensure it continues to meet its needs. It's sensible to review current performance on a regular basis and identify the most likely strategies for growth.

Once you've reviewed your progress and identified the key growth areas that you want to target, it's time to revisit your business plan and make it a road map to the next stages for your business.

This guide will show how you can turn your business plan from a static document into a dynamic template that will help your business both survive and thrive.

The importance of ongoing business planning

What your business plan should include, drawing up a more sophisticated business plan, plan and allocate resources effectively, use targets to implement your business plan, when and how to review your business plan.

Most potential investors will want to see a business plan before they consider funding your business. Although many businesses are tempted to use their business plans solely for this purpose, a good plan should set the course of a business over its lifespan.

A business plan plays a key role in allocating resources throughout a business. It is a tool that can help you attract new funds or that you can use as a strategy document. A good business plan reveals how you would use the bank loan or investment you are asking for.

Ongoing business planning means that you can monitor whether you are achieving your business objectives . A business plan can be used as a tool to identify where you are now and in which direction you wish your business to grow. A business plan will also ensure that you meet certain key targets and manage business priorities.

You can maximise your chances of success by adopting a continuous and regular business planning cycle that keeps the plan up-to-date. This should include regular business planning meetings which involve key people from the business.

To find out more, see our guides on how to review your business performance and how to assess your options for growth .

If you regularly assess your performance against the plans and targets you have set, you are more likely to meet your objectives. It can also signpost where and why you're going astray. Many businesses choose to assess progress every three or six months.

The assessment will also help you in discussions with banks, investors and even potential buyers of your business. Regular review is a good vehicle for showing direction and commitment to employees, customers and suppliers.

Defining your business' purpose in your business plan keeps you focused, inspires your employees and attracts customers.

Your business plan should include a summary of what your business does, how it has developed and where you want it to go. In particular, it should cover your strategy for improving your existing sales and processes to achieve the growth you desire.

You also need to make it clear what timeframe the business plan covers - this will typically be for the next 12 to 24 months.

The plan needs to include:

• The marketing aims and objectives , for example how many new customers you want to gain and the anticipated size of your customer base at the end of the period. To find out about marketing strategy, see our guide on how to create your marketing strategy .
• Operational information such as where your business is based, who your suppliers are and the premises and equipment needed.
• Financial information , including profit and loss forecasts, cash flow forecasts, sales forecasts and audited accounts.
• A summary of the business objectives, including targets and dates.
• If yours is an owner-managed business, you may wish to include an exit plan . This includes planning the timing of your departure and the circumstances, e.g. family succession, sale of the business, floating your business or closing it down.

If you intend to present your business plan to an external audience such as investors or banks, you will also need to include:

• your aims and objectives for each area of the business
• details of the history of the business, including financial records from the last three years - if this isn't possible, provide details about trading to date
• the skills and qualifications of the management involved in your business
• information about the product or service, its distinctiveness and where it fits into the marketplace

If your business has grown to encompass a series of departments or divisions, each with its own targets and objectives, you may need to draw up a more sophisticated business plan.

The individual business plans of the departments and separate business units will need to be integrated into a single strategy document for the entire organisation.

This can be a complex exercise but it's vital if each business unit is to tread a consistent path and not conflict with the overall strategy.

This is not just an issue for large enterprises - many small firms consist of separate business units pursuing different strategies.

To draw up a business plan that marries all the separate units of an organisation requires a degree of co-ordination. It may seem obvious, but make sure all departments are using the same planning template.

Objectives for individual departments

It's important for each department to feel that they are a stakeholder in the plan. Typically, each department head will draft the unit's business plan and then agree on its final form in conjunction with other departments.

Each unit's budgets and priorities must be set so that they fit in with those of the entire organisation. Generally, individual unit plans are required to be more specific and precisely defined than the overall business plan. It's important that the objectives set for business units are realistic and deliverable. However complex it turns out to be, the individual business unit plan needs to be easily understood by the people whose job it is to make it work. They also need to be clear on how their plan fits in with that of the wider organisation.

The business plan plays a key role in allocating resources throughout a business so that the objectives set in the plan can be met.

Once you've reviewed your progress to date and identified your strategy for growth, your existing business plan may look dated and may no longer reflect your business' position and future direction.

When you are reviewing your business plan to cover the next stages, it's important to be clear on how you will allocate your resources to make your strategy work.

For example, if a particular business unit or department has been given a target, the business plan should allocate sufficient resources to achieve it. These resources may already be available within the business or may be generated by future activity.

In practice this could mean recruiting more office staff, spending more on marketing or buying more supplies or equipment. You may want to provide funds through current cash flow, generating more profit or seeking external funding. In general, it is always better to fund future growth through revenue generation.

However, you should do some precise budgeting to decide on the right level of resourcing for a particular unit or department. It's important that resources are prioritised, so that areas of a business which are key to delivering the overall aims and objectives are adequately funded. If funding isn't available this may involve making cutbacks in other areas.

A successful business plan should incorporate a set of targets and objectives.

While the overall plan may set strategic goals, these are unlikely to be achieved unless you use SMART objectives or targets, i.e. S pecific, M easurable, A chievable, R ealistic and T imely.

Targets help everyone within a business understand what they need to achieve and when they need to achieve it.

You can monitor the performance of employees, teams or a new product or service by using appropriate performance indicators . These can be:

• sales or profit figures over a given period
• milestones in new product development
• productivity benchmarks for individual team members
• market-share statistics

Targets make it clearer for individual employees to see where they fit within an organisation and what they need to do to help the business meet its objectives. Setting clear objectives and targets and closely monitoring their delivery can make the development of your business more effective. Targets and objectives should also form a key part of employee appraisals, as a means of objectively addressing individuals' progress.

Once you've drawn up your new business plan and put it into practice, it needs to be continually monitored to make sure the objectives are being achieved. This review process should follow an assessment of your progress to date and an analysis of the most promising ways to develop your business. To find out more about these stages see our guides on how to review your business performance and how to assess your options for growth .

This process is called the business plan cycle . In some businesses, the cycle may be a continuous process with the plan being regularly updated and monitored. For most businesses, an annual plan - broken down into four quarterly operating plans - is sufficient. However, if a business is heavily sales driven, it can make more sense to have a monthly operating plan, supplemented where necessary with weekly targets and reviews.

It's important to keep in mind that major events in your business' target marketplace (e.g. competitor consolidation, acquisition of a major customer) or in the broader environment (e.g. new legislation) should trigger a review of your strategic objectives.

Regardless of whether or not there are fixed time intervals in your business plan, it must be part of a rolling process, with regular assessment of performance against the plan and agreement of a revised forecast if necessary.

Original document, Prepare a business plan for growth , © Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business ) Adapted for Québec by Info entrepreneurs

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What Makes a Company “Future Ready”?

• Jialu Shan,
• Angelo Boutalikakis,
• Lawrence Tempel,
• Zuriati Balian

Takeaways from an analysis of 86 companies across four sectors.

What makes a company “future ready”? The author analyzed top companies by revenue across four sectors, measuring seven equally weighted factors, then analyzed what leading companies were doing differently. They discovered industry specific insights, which also informed more universal lessons. First, don’t play zero-sum games with disruptors. Looking at the financial industry, companies that explored new tech early were able to develop partnerships and exploit that tech more quickly. Second, when everyone is digitizing, only going deep sets you apart. Learning aggressively, with a strong viewpoint, helped retail companies find opportunities to differentiate. Third, in a high-speed sector, you have to branch out fast. Looking at the tech sector, the author saw the importance of knowing what kind of decision you’re making, so you can make it quickly.

The pandemic put companies under a tremendous amount of stress. It revealed who is ready for the many changes the near future will bring — and who is not. In times of crisis, this type readiness doubles as a source of resilience. It reflects how companies can adapt, the robustness of their internal capabilities, and how capable of finding new sources of growth they really are. And the more uncertain the world seems to be, the more important for companies to become future ready.

• HY Howard Yu  is the author of  LEAP: How to Thrive in a World Where Everything Can Be Copied (PublicAffairs, June 2018), LEGO professor of management and innovation at the IMD business school in Switzerland, and director of the Advanced Management Program ( AMP ).
• JS Jialu Shan is the Research Fellow for IMD’s  Center for Future Readiness .
• AB Angelo Boutalikakis is the Research Associate IMD’s  Center for Future Readiness .
• LT Lawrence Tempel is the Research Assistant IMD’s  Center for Future Readiness .
• ZB Zuriati Balian is the Data Science Intern IMD’s  Center for Future Readiness .

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Writing a Business Growth Plan

Table of Contents

When you run a business, it’s easy to get caught in the moment and focus only on the day in front of you. However, to be truly successful, you must look ahead and plan for growth. Many business owners create a business growth plan to map out the next one or two years and pinpoint how and when revenues will increase. 

We’ll explain more about business growth plans and share strategies for writing a business growth plan that can set you on a path to success. 

What is a business growth plan?

A business growth plan outlines where a company sees itself in the next one to two years. Business owners and leaders apply a growth mindset to create plans for expansion and increased revenues.

Business growth plans should be formatted quarterly. At the end of each quarter, the company can review the business goals it achieved and missed during that period. At this point, management can revise the business growth plan to reflect the current market standing.

What to include in a business growth plan

A business growth plan focuses specifically on expansion and how you’ll achieve it. Creating a useful plan takes time, but keeping your growth efforts on track can pay off substantially.

You should include the following elements in your growth plan:

• A description of expansion opportunities
• Financial goals broken down by quarter and year
• A marketing plan that details how you’ll achieve growth
• A financial plan to determine what capital is accessible during growth
• A breakdown of your company’s staffing needs and responsibilities

Your growth plan should also include an assessment of your operating systems and computer networks to determine if they can accommodate profitable growth .

How to write a business growth plan

To successfully write a business growth plan, you must do some forward-thinking and research. Here are some key steps to follow when writing your business growth plan.

1. Think ahead.

The future is always unpredictable. However, if you study your target market, your competition and your company’s past growth, you can plan for future expansion. The Small Business Administration (SBA) features a comprehensive guide to writing a business plan for growth.

2. Study other growth plans.

Before you start writing, review models from successful companies.

3. Discover opportunities for growth.

With some homework, you can determine if your expansion opportunities lie in creating new products , adding more services, targeting a new market, opening new business locations or going global, to name a few examples. Once you’ve identified your best options for growth, include them in your plan.

4. Evaluate your team.

Your plan should include an assessment of your employees and a look at staffing requirements to meet your growth objectives. By assessing your own skills and those of your employees, you can determine how much growth can be accomplished with your present team. You’ll also know when to ramp up the hiring process and what skill sets to look for in those new hires.

5. Find the capital.

Include detailed information on how you will fund expansion. Business.gov offers a guide on how to prepare funding requests and how to connect with SBA lenders.

6. Get the word out.

Growing your business requires a targeted marketing effort. Be sure to outline how you will effectively market your business to encourage growth and how your marketing efforts will evolve as you grow.

7. Ask for help.

Advice from other business owners who have enjoyed successful growth can be the ultimate tool in writing your growth plan.

8. Start writing.

Business plan software has streamlined the process of writing growth plans by providing templates you can fill in with information specific to your company and industry. Most software programs are geared toward general business plans; however, you can easily modify them to create a plan that focuses on growth. 

If you don’t have business plan software, don’t worry. You can create a business growth plan using Microsoft Word, Google Docs or a similar tool. For each growth opportunity, create the following sections: 

• What is the opportunity? Is your growth opportunity a new geographic expansion, a new product or a new customer segment? How do you know there’s an opportunity? Include your market research to demonstrate the idea’s viability.
• What factors make this opportunity valuable at this time? For example, your growth opportunity could utilize new technology, take advantage of a strategic partnership or capitalize on a consumer trend.
• What are the risk factors for this opportunity? Identify factors that may make this growth opportunity challenging to execute. For example, challenges may include the state of the overall economy, intense competition or supply chain distribution issues. What is your plan for dealing with these challenges?
• What is your marketing and sales plan? Identify the marketing efforts and sales processes that can help you seize this growth opportunity. Detail the marketing channel you’ll use ( social media marketing , print marketing), your message and promising sales ideas. For example, you could hire sales reps for a new geographic area or set up distribution deals with relevant brick-and-mortar or online retailers .
• What are the costs involved in this growth area? For example, if you add a new product, you may need to buy new manufacturing equipment and raw materials. While marketing costs are a given, remember to include incremental sales costs like commissions. Outline any economies of scale or places where your existing operations make the new growth area less expensive than a stand-alone initiative.
• How will your income, expenses and cash flow look? Project your income and expenses, and prepare a cash flow statement for the new growth area for the next three to five years. Include a break-even analysis, a sales forecast and all projected expenses to see how much the new initiative will add to the bottom line. Include how the new growth area will positively (or negatively) impact existing sales. For example, if you sell bathing suits and you decide to grow by adding cover-ups and sunglasses, you will likely sell more bathing suits. 

A cash flow statement will indicate if you must secure additional financing, and a break-even analysis will let you know when the growth opportunity will stop being a drain on the company’s financial resources and start turning a profit.

After completing this exercise for each growth opportunity:

• Create a summary that accounts for all growth areas for the period.
• Include summarized financial statements to see the entire picture and its impact on the company. 
• Evaluate the financing you’ll need to implement the plan, and include various options and rates. 

Why are business growth plans important?

These are some of the many reasons why business growth plans are essential:

• Market share and penetration: If your market share remains constant in a world where costs consistently increase, you’ll inevitably start recording losses instead of profits. Business growth plans help you avoid this scenario.
• Recouping early losses: Most companies lose far more than they earn in their early years. To recoup these losses, you’ll need to grow your company to a point where it can make enough revenue to pay off your debts.
• Future risk minimization: Growth plans also matter for established businesses. These companies can always stand to make their sales more efficient and become more liquid. Liquidity can come in handy if you need money to cover unexpected problems.
• Appealing to investors: For most businesses, a business growth plan’s primary purpose is to find investors . Investors want to outline your company’s plans to build sales in the coming months.
• Concrete revenue plans: Growth plans are customizable to each business and don’t have to follow a set template. However, all business growth plans must focus heavily on revenue. The plan should answer a simple question: How does your company plan to make money each quarter?

Motivate your employees by sharing your growth plan. When employees see an opportunity for increased responsibility and compensation, they’re more likely to stay with your business.

What factors impact business growth?

Consider the following crucial factors that can impact business growth:

• Leadership: To achieve your goals, you must know the ins and outs of your business processes and how external forces impact them. Without this knowledge, you can’t direct and train your team to drive your revenue, and you will experience stagnation instead of growth.
• Management: As a small business owner, you’re innately involved in management – obtaining funding, resources, and physical and digital infrastructure. Ineffective management will impact your ability to perform these duties and could hamstring your growth.
• Customer loyalty: Acquiring new customers can be five times as expensive as retaining current ones, and a 5 percent boost in customer retention can increase profits by 25 percent to 95 percent. These statistics demonstrate that customer loyalty is fundamental to business growth.

What are the four major growth strategies?

There are countless growth strategies for businesses, but only four primary types. With these growth strategies, you can determine how to build on your brand.

• Market strategy: A market strategy refers to how you plan to penetrate your target audience . This strategy isn’t intended for entering a new market or creating new products and services to boost your market share; it’s about leveraging your current offerings. For instance, can you adjust your pricing? Should you launch a new marketing campaign?
• Development strategy: This strategy means looking into ways to break your products and services into a new market. If you can’t find the growth you want in the current market, a goal could be to expand to a new market.
• Product strategy: Also known as “product development,” this strategy focuses on what new products and services you can target to your current market. How can you grow your business without entering new markets? What are your customers asking for?
• Diversification strategy: Diversification means expanding both your products and target markets. This strategy is usually best for smaller companies that have the means to be versatile with the products or services they offer and what new markets they attempt to penetrate.

Max Freedman contributed to this article.

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Business Plan: Everything You Need to Know

A business plan is a written description of your small business's future.It shows what you intend to do and the way you intend to do it. 3 min read updated on February 01, 2023

What Is a Business Plan?

A business plan is a written description of your small business's future. It shows what you intend to do and the way you intend to do it. Business plans are inherently strategic. Your plan reveals how you're going to start and grow your business.

Executive Summary

This defines the marketing strategy. The executive summary ought to inform the reader of what you plan to accomplish overall in your business. Clearly state what you are expecting. Typically, it's advisable that you simply write the executive summary after you have completed the rest of the document. Ideally, this section can act as a stand-alone page that covers the highlights of your detailed plan.

It’s quite common for investors to ask for only the executive summary when they're evaluating your small business. If buyers like what they see within the abstract, they’ll usually request the whole business plan , a pitch presentation, or additional information about your small business. Ideally, your abstract will be one to two pages at the most. It should be designed to give quick information that sparks curiosity and makes your investors interested in hearing more.

The Critical Components of a Winning Executive Summary

Create a one-sentence overview of your small business that sums up the essence of what you might be doing. Doing so is usually more practical if the sentence describes what your organization truly does. This is often known as your value proposition. Describe the issue you might be fixing for your intended customer.

Present a short overview of your staff or proposed staff, and include a brief clarification of why you and your staff are the best individuals to take your idea to market. If your small business method (i.e., “the way you generate income”) needs further clarification, then say you will describe it in more detail in later sections of the business plan. In case you are generating cash to start out or to further develop your small business, you could include a small statement of what you want within the main summary. Don’t include comments on possible additional  funding , however, since that can all be negotiated later.

Company Overview

The corporate overview will most certainly be the shortest part of your marketing strategy. The corporate overview should show your mission statement, an assessment of your organization’s structure and possessions, a short history of the business, if it’s an established one, and a mention of the business location. Your organization mission statement needs to be brief—one or two sentences at most—and it ought to embody what you are attempting to provide.

Business Structure

Your company overview also needs to embody a summary of your organization’s present  business structure . Are you an LLC ? A C-corp? An S-corp ? A sole proprietor? A partnership ? Potential investors will want to know the structure of the enterprise before they'll consider funding.

Business History

In case you are writing a plan or marketing strategy for an existing firm, it’s acceptable to  incorporate  a short history of the business and spotlight the main achievements. Keep the business history part brief, though. The business history section is very helpful in providing context for the remainder of your plan.

Business Description

The business description often begins with a brief description of the trade. When describing the trade, talk about the current outlook in addition to future prospects. You also need to give info on all the competitors and the market along with any new merchandise or developments that can bring profits or that can have a negative effect on your small business.

Products and Services

The products and services section is where the bulk of your plan should be. The services section is where you'll describe the issue that you are fixing, your resolution, and how your services or products match the present market. You’ll also use the services section to reveal what sets your business above others and how you intend to broaden your services or products later.

Using Your Plan

Your business plan is one thing you will use to pitch for funding, and you must keep it updated as your company develops.

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• Example of a Good Executive Summary for Business Plan
• Creating a Business Plan
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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

These 6 trends are shaping the businesses of the future

Business will transform in 2022. Image:  REUTERS/Satish Kumar

.chakra .wef-1c7l3mo{-webkit-transition:all 0.15s ease-out;transition:all 0.15s ease-out;cursor:pointer;-webkit-text-decoration:none;text-decoration:none;outline:none;color:inherit;}.chakra .wef-1c7l3mo:hover,.chakra .wef-1c7l3mo[data-hover]{-webkit-text-decoration:underline;text-decoration:underline;}.chakra .wef-1c7l3mo:focus,.chakra .wef-1c7l3mo[data-focus]{box-shadow:0 0 0 3px rgba(168,203,251,0.5);} Johnny Wood

.chakra .wef-9dduvl{margin-top:16px;margin-bottom:16px;line-height:1.388;font-size:1.25rem;}@media screen and (min-width:56.5rem){.chakra .wef-9dduvl{font-size:1.125rem;}} Explore and monitor how .chakra .wef-15eoq1r{margin-top:16px;margin-bottom:16px;line-height:1.388;font-size:1.25rem;color:#F7DB5E;}@media screen and (min-width:56.5rem){.chakra .wef-15eoq1r{font-size:1.125rem;}} The Digital Transformation of Business is affecting economies, industries and global issues

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Stay up to date:, the digital transformation of business.

• The pandemic and the technological revolution are fundamentally changing today’s business world.
• Organizations that rethink, reshape and reinvent themselves will be best placed for the future.
• Trends include learning from real-time data and integrating the physical and virtual worlds.

“This past year, business models have been reinvented. Supply chains have been restructured. Promises of new scientific breakthroughs have been suddenly realized. Productivity, we now know, can thrive virtually.”

So says a new report, Business Futures 2021: Signals of Change , from professional services company Accenture. It highlights how the transformations taking place in the business world are forcing companies to rethink the what, where and why of their operating models.

Here are the six key trends highlighted in the report.

1. Learning from the future

Look forward rather than back. Relying on historical analytics models and past performance data may not be fully relevant in today’s ever-changing business landscape.

New analytics approaches powered by artificial intelligence (AI) can identify data patterns in real time, helping to anticipate trends and inform decision-making.

Removing constraints created by existing mindsets and organizational structures is also needed to help firms stay one step ahead.

2. Pushed to the edge

Become an “edge” organization, where teams are part of a network but have autonomy to decide how best to optimize local performance while still meeting corporate goals. In effect, this means moving computing power, data storage and decision-making to the edge of operations.

Technological advances and the pandemic-induced switch to remote working have boosted connectivity and information flows, allowing organizations to collaborate efficiently over distance.

Operating at the edge promotes agility, speed to react to changing local preferences and frees up HQ to focus on strategic decisions.

3. Sustainable purpose

Build sustainability into everything. Companies that take social responsibility seriously create value for all stakeholders – staff, shareholders, customers, communities and the planet. But business leaders need to go beyond having good intentions and show that they are actually delivering on them.

Operating sustainably is also good for business. Companies with high ESG performance have operating margins on average 3.7 times higher than those with lower ratings, as well as annual returns 2.6 times higher, according to Accenture’s research.

A McKinsey survey shows that sustainability is moving beyond mission and value statements, with more than half of respondents integrating sustainability into functions such as strategic planning, marketing, internal communications and operations.

4. Supply unbounded

Break the physical limits of your supply chain. Throughout the pandemic, organizations have had to stay agile to meet changing consumer expectations on order fulfilment. And many of these changes are here to stay, Accenture’s report predicts.

Forward-thinking companies are restructuring their supply chains and moving production closer to the point of demand. This could include adopting micro-fulfilment centres to reduce delivery times and serve more customers from a smaller space, or using route-optimization algorithms to reduce delivery distances, avoid traffic jams and increase on-time drop rates.

5. Real virtualities

Integrate the virtual and physical worlds. Virtual reality will eventually expand to include all our senses, and these “real virtualities” will become part of everyday life.

Real virtualities will create opportunities for companies and individuals, allowing them to buy and sell virtual goods and services – something that is already happening on multiplayer gaming and other platforms. These could include using digital currencies, onboarding employees, creating virtual prototypes or digital twins of industrial processes.

The World Economic Forum was the first to draw the world’s attention to the Fourth Industrial Revolution, the current period of unprecedented change driven by rapid technological advances. Policies, norms and regulations have not been able to keep up with the pace of innovation, creating a growing need to fill this gap.

The Forum established the Centre for the Fourth Industrial Revolution Network in 2017 to ensure that new and emerging technologies will help—not harm—humanity in the future. Headquartered in San Francisco, the network launched centres in China, India and Japan in 2018 and is rapidly establishing locally-run Affiliate Centres in many countries around the world.

The global network is working closely with partners from government, business, academia and civil society to co-design and pilot agile frameworks for governing new and emerging technologies, including artificial intelligence (AI) , autonomous vehicles , blockchain , data policy , digital trade , drones , internet of things (IoT) , precision medicine and environmental innovations .

Learn more about the groundbreaking work that the Centre for the Fourth Industrial Revolution Network is doing to prepare us for the future.

Want to help us shape the Fourth Industrial Revolution? Contact us to find out how you can become a member or partner.

6. The new scientific method

Become a scientific company. Scientific-led disruption can help create better, cheaper and more sustainable products and services, opening up new markets.

AI and robots have enabled a stream of COVID-19 vaccines to be produced in record time. Similarly, some foods can now be generated in a lab rather than grown or reared in fields.

The Accenture report predicts that just as every company has already had to become a digital company, they will soon have to become a scientific company to benefit from innovation.

Have you read?

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License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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How to Analyze Future Prospects of a Company

by Robert Lee

Published on 26 Sep 2017

A review of financial documents, industry trends and the state of the current economy helps with analyzing the future prospects of a company. A key to the most accurate analysis is having access to complete financial data. People considering purchasing or investing in a business should not do so without a thorough review of profit-and-loss statements and related documents. Startup companies without an established track record are judged on their business plan and the overall opportunity based on the state of the specific industry and success of similar, established companies.

A SWOT analysis is a commonly used tool for evaluating businesses. SWOT stands for strengths, weaknesses, opportunities and threats. Create the SWOT by listing bullet points under each heading. For example, let’s say you’re analyzing the future prospects of a fast-food restaurant known for its inexpensive hamburgers. For that company, under strengths you might list popularity and low prices. Under weaknesses you might list limited menu items or low barrier to entry for future competitors, and so on.

Balance Sheets

A balance sheet is a financial document providing a broad look at a company's current position and its immediate prospects. Ohio State University reports that a balance sheet shows a company's ability to satisfy creditors; manage inventory, services and expenses; and collect receivables. People considering buying a company should review balance sheets and full financial information. That's often possible by signing a nondisclosure agreement allowing full access to the information. During the due diligence process, analyze future prospects for the company by tracking revenue versus expenses over the past three years. Future prospects for a company are usually good if revenue shows year-over-year growth and fixed expenses such as labor costs are relatively stable or declining. Also analyze the company’s debt and access to capital. A company with good revenue growth but heavy debt and little access to capital may not survive an economic downturn.

SEC Reports

Earnings reports offer excellent information on publicly traded companies. Publicly traded companies must file quarterly and annual financial reports with the Securities Exchange Commission. Analyze the future prospects of these companies by tracking quarterly results for cash flow, revenue and net income. Publicly traded companies must also report information such as legal proceedings and risk factors. This information is often invaluable in analyzing future prospects. For example, a newspaper chain rapidly losing print subscribers because of the Internet must make potential investors aware of the challenge and what the company is doing about it.

Other Options

Other information on companies is sometimes available by interviewing employees of the company. While this is not always possible, access to employees can reveal an insider's view about the state of the business and its prospects. Similar information is sometimes available from employees or owners of similar businesses competing in the same market. News reports for publicly traded companies may provide even more information.

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A Future Plan for Business: Think Ahead & Build Profits

This article is an excerpt from the Shortform summary of "Zero To One" by Peter Thiel. Shortform has the world's best summaries of books you should be reading.

Like this article? Sign up for a free trial here .

What makes a strong future plan for business? How do you form a future plan?

A future plan for business is exactly what it sounds like—creating a path forward for your business. But a future plan for business requires careful thought and planning, and you need to consider both short and long term goals.

Success Comes From a Strong Future Plan for Business

A future plan for business can be hard to create, since you don’t always know what drives success. Businesspeople debate whether success comes from luck or design. Some popular writers and leaders emphasize luck and downplay the importance of design or planning in contributing to success. This makes many people think planning—trying to shape the future—is pointless.

For instance, author Malcolm Gladwell writes in Outliers that success results from “lucky breaks and arbitrary advantages.” Warren Buffett notes that he was lucky to be born with certain qualities. Jeff Bezos and Bill Gates both claim luck played a role in their success.

It’s possible luck could play a role in an individual success, but luck isn’t sufficient to explain how the same person—for instance, Elon Musk, Jack Dorsey, Steve Jobs—could achieve a series of extraordinary, multibillion-dollar successes.

When Dorsey, the founder of Twitter and Square, tweeted in 2013 that “Success is never an accident,” most of the responses were dismissive, citing white male privilege over intelligent planning as the biggest factor in success. However, while connections, wealth, and experience—and luck—can be factors, in recent years, we’ve tended to ignore or overlook the importance of planning and forming a comprehensive company future plan.

In the past, people thought differently. From the Renaissance and the Enlightenment into the 20th century, people believed you made your own luck by working hard. Ralph Waldo Emerson wrote, “Shallow men believe in luck, believe in circumstances … strong men believe in cause and effect.” 

Today, your future business plan, and whether you think of the future as determined by chance or design, affects how you act in the present and whether you ultimately succeed .

A Future Plan for Business Builds Strong Profits

How do you create a future plan for business? One way is figuring out how to form a monopoly.

A monopoly by definition has avoided competition, but to be a great business, there’s more: it must last into the future.

A monopoly can be a part of building your company future plan. To understand how this works, compare the New York Times Company with Twitter. Each employs thousands of people and delivers news to millions. However, in 2013, Twitter was valued at  $24 billion, which was 12 times the Times’ market capitalization. Yet the Times earned $133 million in 2012, while Twitter lost money. How could the money-losing Twitter be worth more than the money-gaining Times? (Shortform note: market capitalization is the total value of a company’s shares of stock.)

The reason for the dramatic difference in value is cash flow— the hallmark of a great business is its ability to generate future cash flow . Investors expected Twitter to generate monopoly profits for the next 10 years, while investors believed the New York Times lacked that ability.

A business’s current value is the sum of the profits it will earn throughout its lifetime. Low-growth businesses are those like newspapers that aren’t expected to grow dramatically in the future—most of their value is near-term. They might retain their value and keep current cash flows for a few years, but competition will erode it in the future. A successful restaurant might be profitable today, but cash flows will dwindle in a few years as new restaurants open.

The pattern is the opposite for tech companies—they often lose money initially and require time to build value. Most of a tech startup’s value will be a decade or more in coming, which needs to be considered in your future business plan.

For example, by March 2001, PayPal hadn’t made a profit, but revenues were growing 100% year over year. Thiel calculated that 75% of the company’s current value would come from profits generated in 2011 and thereafter. However, he underestimated. At the time of this book’s publication in 2014, it appeared most of the company’s value would come from 2020 and beyond.

The Allure of Short-Term Profits

To be valuable, a company has to both grow and persevere. However, many entrepreneurs overemphasize short-term growth because it’s easier to measure than long-term potential. Focusing on short-term metrics, such as user statistics and revenue targets, can keep you from noticing issues affecting future viability. This also makes it difficult to develop a realistic company future plan.

For example, initial rapid growth at Zynga and Groupon distracted managers and investors from long-term challenges. While Zynga did well with the game Farmville at first, the company lacked the ability to produce a consistent stream of entertainment content. Groupon’s online deal website also grew initially as local businesses tried the product, but the company struggled to convert them into repeat customers.

In addition to short-term growth, entrepreneurs must build the business to ensure it will last for a decade or more .

Be a ‘Last Mover’

The “first mover advantage” means getting into a new market first and gaining a substantial share of the market before anyone else gets there.

But moving first is a tactic, not a goal, and should factor into your future business plan. ” Your goal is to generate cash flows for the future. You do this by starting with a small slice of the market (being the first mover) and gradually expanding, dominating each new slice until you own the ultimate market for your product. You want to be the last mover—the one who makes the last spectacular improvement in a market that ensures years of monopoly profits.  

Being a first mover puts you in position to be the last mover.

A future plan for business should cover your plans to maintain profit and to expand. In your future plan for business, you have to establish your goals and your existing business principles.

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Carrie Cabral

Carrie has been reading and writing for as long as she can remember, and has always been open to reading anything put in front of her. She wrote her first short story at the age of six, about a lost dog who meets animal friends on his journey home. Surprisingly, it was never picked up by any major publishers, but did spark her passion for books. Carrie worked in book publishing for several years before getting an MFA in Creative Writing. She especially loves literary fiction, historical fiction, and social, cultural, and historical nonfiction that gets into the weeds of daily life.

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Forecasting a Business’ Future

Financial planning and analysis certificate graduate meenal agarwal takes financial health seriously.

Meenal Agarwal grew up listening to her father talk about managing business activities, operations and finances for the transportation and logistics company he built from scratch in Mumbai, India. These daily conversations between Meenal’s parents, younger brother and herself were intriguing.

“I belong to a business family,” Meenal explains, “and my dad would always talk about how the business was going, the new deals he managed to crack, any issues being faced by the business, et cetera. He was always very quick with numbers and analysis.

“Being creative by nature, I always liked how my dad found new, creative ways to tackle issues, how he would find ways to manage finance and funds for business additions, how he would go about creating profit margins.”

So it’s no surprise that Meenal pursued a bachelor’s degree in business and finance from University of Mumbai .

“I knew I wanted to do something like my dad where I am managing the operations and finances of a company, and eventually even become a business owner.”

Slight Turbulence on Her Career Path

As Meenal can attest, though, life circumstances sometimes derail your well-thought-out plans.

“I got married very soon after I earned my undergraduate degree,” she says. “I was 21 and we moved from India to San José, California. But because I was on a dependent visa, I could not work at that point, and by the time my green card was processed, I was a mother of two kids.”

Meenal soon realized that her business skills needed to be updated, and she began to take courses to prepare for her entry into the U.S. workforce. Then she hit another roadblock as her family circumstances changed once again.

“I decided it was time for me to work and enrolled in some refresher finance courses in a community college nearby,” Meenal relates. “However, unable to get support from my now ex-husband, I was not able to work at that time. In the meantime, I spent time volunteering at my children's school; I even took courses in childhood development and had wanted to eventually open my own school. However, that did not work out either due to the time commitment required and family pressures.”

But in 2018, the time appeared to be right for our Certificate Program in Financial Planning and Analysis (FP&A).

“I kept researching to find the right path for me and found the financial planning and analysis certificate,” she says. “A friend of mine who was an engineer wanted to transition into finance and was thinking of enrolling in this certificate; they suggested it to me, as well. I reviewed the certificate details , the courses involved and the testimonials from students . The certificate courses focused on refreshing accounting skills , as well as understanding and analyzing financial statements of a company, which form the basis for understanding the financial health of a company.

“In addition, the certificate included knowledge areas like corporate finance , international finance , financial modeling and analysis ,” Meenal continues. “It would impart skills to understand the financial workings of an organization and to be able to make recommendations based on a well-informed and well-laid-out financial model with accurate assumptions.”

Building Knowledge and Connections

“One of the courses that stands out for me is Corporate Financial Analysis and Modeling ,” Meenal recalls, “which I took with instructor Ehab Saad .

“This course went in depth to help us analyze the financial statements of companies and understand their financial standing and investment strategy. After thorough analysis, we were required to make recommendations for the company's path forward. We chose real companies and then created a project based on the analysis of their financial statements and their future prospects in the market.

“Another course that stood out was the Basic Corporate Finance course,” she adds. “We were assigned a group project where we had to choose a company; create a complete analysis report and present it in front of the class; share whether we would recommend the students buy stocks in this company; and provide the future prospects of the company in the markets based on their investments, revenue and profit-margin graph.”

And how did her experience with fellow students aid her educational goal?

“Everyone was driven to learn and to gain the knowledge from real-life scenarios,” Meenal says. “As I was not working when I started this program, it was great to hear the questions posed by my fellow students regarding real-world issues that they faced while working. This gave me an understanding of the issues faced by other financial analysts, the mindset of the employees and company leadership and management, expectations from the employees and the general culture of companies.

“I also connected with a lot of people and learned from their experiences during class presentations. During brainstorming sessions, it was great to see the innovative and creative ideas that students came up with to solve problems.”

The certificate program gave Meenal the boost she needed to enter the field she wanted—including providing her with a new network .

“Soon after I started my coursework at UC Berkeley Extension, I started looking for a job,” she says. “And during my job search, I reached out to some of the students with whom I connected during the courses.”

It didn’t take Meenal long to get a foot in the door as a financial analyst for Illumio , a cybersecurity company.

“I was absolutely new, had no experience, but I was driven and wanted to start working and create value for the company and the team with my work,” Meenal says. “Soon enough, I was called for a junior-level financial analyst interview—and I cracked it! The lessons learned from my courses at UC Berkeley Extension greatly helped me.”

But it was more than just the connections with fellow students that Meenal benefited from. The certificate coursework played a big part of her on-the-job career growth.

“Illumio was an eight-year-old startup at the time I joined,” she explains. “The finance team was small, and as a result I was able to wear multiple hats and learn a lot—from accounting work, like vendor management and posting invoices, to creating profit and loss (P&L) statements based on sales and expense trends for past quarters, plus analyzing the business outlook of the company for the future.

“The Financial Accounting and Managerial Accounting courses helped with the accounting work. I believe it is essential to understand the basics of finance before you can make predictions about the financial health of a company. Furthermore, the experience and lessons learned during the coursework for the certificate helped me with forecasting and preparing reports.

“These courses gave me the confidence that I could understand and analyze the financial statements of a company and make recommendations,” she continues. “They most definitely prepared me for my role as a financial analyst , which required me to analyze financial statements and reports and derive data points, which I then used to create a forecast for the upcoming quarters and years. By studying the data of the P&L report and the general ledger (GL) report, I gather trends and data regarding the sales pattern of the company and its expenditure habits, and put together a complete forecast for the upcoming year.”

Analyzing Her Own Past, Present and Future

With the confidence Meenal had gained working at Illumio, she was ready to be part of a company and a team where she could work solely in financial planning and analysis.

“I got a wonderful opportunity at VMware !” enthuses Meenal. “I began in the bookings and sales divisions of FP&A and was given the responsibility of putting together weekly, monthly and quarterly forecasts for the bookings, sales and revenue of our business unit, which had several products in its portfolio.”

Meenal tapped into the knowledge gained from the certificate to succeed in analyzing data from multiple reports and deriving findings to make detailed forecasts.

“In that expanded role, I was given more responsibility and was the owner of multiple deliverables,” she says. “As I gained more experience, I moved to the expenditure budget management role within FP&A. I was responsible for headcount management, which is budget management of the entire business unit, putting together monthly and quarterly forecast reports and presenting in front of management.”

After working in that role for about a year, Meenal made another internal career step up to become a senior financial and operations analyst.

“I am now in charge of complete budget management,” she says. “That includes headcount management, working with the business folks—engineering, product, product management and product marketing teams—to make sure the company is equipped with resources to meet their product roadmap deliverables and objectives and key results (OKRs); doing in-depth analysis to understand the expenditure and find avenues for optimization; creating an annual operating plan and communicating with the product VPs and to make sure it aligns with their goals for the year; managing the projects expenditure of the business unit; and working with finance to get approvals for business needs and requirements.”

Along with everything she did before as a financial analyst and a business operations analyst, Meenal continues to grow in her skills and career.

“My role is not only to prepare a more accurate and realistic forecast for the business unit, but also to make sure the business has the resources that they need to deliver on the product features that they promised in the beginning of the year,” she says. “I have to create a balance between making optimizations but also making sure the company is able to deliver to the customers outstanding products to increase booking and revenue. I am the go-to person for all teams if they are facing any issues or need resources from finance. I analyze the requirements based on their importance for the company, then create forecasts to see how I can manage the monies for these requirements within the budget given. I work cross-functionally—budget management is not possible without a thorough knowledge of the finance of the company.”

And Meenal is not stopping the climb as she works toward her ultimate career goal in the financial planning and analysis field. “I am working to gain more knowledge in the financial planning and analysis area and to become a subject-matter expert—even a director of the business unit.”

“I highly recommend this certificate ,” Meenal tells me. “The program at UC Berkeley Extension has helped in every way possible: from understanding the financials of the company to putting together a forecast, creating a financial model and presenting ideas in front of top management.

“Not only have I gained a ton of knowledge from the courses, but I have also made contacts with and gained insights from fellow students and their work and experience . Additionally, the instructors are also very helpful and are always open to answering questions and discussions. The certificate courses are geared to help you get the knowledge required to work in real-world case scenarios, and the projects and presentations help boost your confidence and connect with other students.

“ UC Berkeley is well respected and a certificate from this university definitely is a highlight on your résumé. It has been a very positive experience getting this certificate, and it has set me on a path to success and to achieving my goals in life!”

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The Future of the Business Plan When things get rocky, what will keep you on point and on mission? What can you refer to, ensuring you aren't straying from your original vision? The right business plan can go a long way.

By Pieter Scholtz • Apr 11, 2019

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur South Africa, an international franchise of Entrepreneur Media.

Business plans are a lot like maps and GPSes. If the organisational journey is proceeding smoothly, you may believe you don't need one. Indeed, there's a school of thought — backed by certain research — that says starting out with a formal plan is no predictor of success and it's better to get out there and test your concept in a real-world environment.

These naysayers argue that most business plans are theoretical, unrealistic and go out the window the first time the entrepreneur encounters an unforeseen hurdle.

Refer to the original vision

But the pro-business plan lobby argues that, when market conditions unexpectedly change and you're thrown into disarray, it's important to refer to the original vision and belief system that you started out with. These will help to keep you grounded and avoid going off at tangents every time you hit an obstacle.

A plan also helps to prioritise your daily activities. Without it, everything becomes urgent and the resulting chaos will destroy your work/life balance and leave you feeling overwhelmed. If you are more than a one-person operation, a business plan enables company teams to align their activities to the overall vision and to work congruently to achieve the same goals.

William B. Gartner, an entrepreneurship professor at Clemson University in the US, believes business plans are essential.

After analysing data from a survey of more than 800 people starting businesses, he found that writing a plan greatly increased the chances of actually going into business.

"You're two-and-a-half times more likely to get into business," he observes. "That's powerful." Alyssa Gregory, an entrepreneur and writer for the likes of Forbes and the New York Times, says the process of putting together a business plan can help with new ideas, different approaches and fresh perspectives.

"An effective business plan is a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges," she says.

Keep the plan simple

However, the thinking around the required depth and complexity of a business plan has changed. A decade or two ago, management gurus advocated elaborate 40-page plans with detailed sections covering objectives, mission, organisational structure, target market, customer behaviour, competitive advantage, marketing strategy, sales forecasts and financial projections.

These days, unless you're seeking outside investors or looking for a bank loan that requires a detailed risk analysis, the move is towards shorter and simpler documents of no more than a page.

The reasons for this change are many. A lengthy document is likely to be unread — particularly by younger-generation employees with short attention spans. Even if it is read, it's unlikely to be remembered in detail because of its complexity.

So, opt for a one-page business plan that's easily digestible and lists only the important things like mission, vision, etc. Cut the fluff and keep the essence. If you've spent time preparing a longer plan, that's okay. Turn the key elements that will keep you focused on your goals and the bigger picture into short bullet points that will become your go-to business plan for regular use.

What should be in your one-pager? South Africa-based digital marketing and content strategist, Casandra Visser, suggests:

• Vision - What are you building
• Mission Statement - What you do, what your product/service is and who your customers are
• Objectives - Your business goals for the next week, month or year
• Strategies - How you plan to achieve your objectives
• Action Plan - Steps you will take to action your strategies, including dates/deadlines.

Finally, remember that your plan is a living, breathing document that needs to be meaningful in a constantly changing business environment. So, break up your annual plan into quarterly plans that take into account micro and macro changes in your specific operating environment. Keep it relevant, keep it simple — and your business plan will be an invaluable asset in navigating your business journey.

Master Licensee

Pieter Scholtz is the Master Licensee for ActionCOACH South Africa . ActionCOACH is the world’s largest executive and business coaching company with operations in 41 countries. It is also on the list of the top 100 franchises globally. As a highly successful Business and Executive coach, Pieter is a master of teaching business owners how to turn their businesses around and accelerate their growth. Email him at [email protected] or phone 082 8813729.

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Prospecting planning: how to establish an effective prospecting plan?

Prospecting is an essential step for any entrepreneur, manager or business leader who wants to boost sales and find new customers. In order to best reach its target and obtain prospects, a prospecting plan is to be defined. Indeed, it is a roadmap, a guide containing the list of steps that lead you to success. Developing such a plan is the guarantee to prospect intelligently so as not to waste time and energy.

What are the 7 essential steps to set up a relevant commercial prospecting plan and increase your turnover? We reveal them to you in this article so that prospecting will no longer have a mystery for you!

Why establish a prospecting plan?

Remember, commercial prospecting is the art of extending your sales opportunities by going out to meet potential leads and prospects. .

The prospecting plan is used to:

• organize commercial actions;
• establish a roadmap to guide your sales force;
• help salespeople in their daily lives by giving them the means: database, planning, sales script, etc. ;
• allocate resources well;
• attract more prospects into your sales funnel , in particular through your digital marketing strategy (website, blog articles, social networks, etc.).

Thus, it is easier to structure your canvassing activity as well as the actions around the sales cycle. This plan is therefore the roadmap that gives precise instructions to develop your customer portfolio and boost your commercial performance .

The 7 steps for an effective prospecting plan

1. set goals for your schedule.

Before you start prospecting, define precisely what goals you are aiming for.

Do you want to develop a branch of your business? Obtain more loyalty from your consumers? Boost your turnover? Increase your BtoB clientele? So many questions that must be answered when you establish your prospecting campaign.

Be aware that each objective must be ambitious, but accessible, in order to motivate the sales representatives in charge of customer relations. The SMART method is a tool that helps define attributes. With this method, you hit the mark by characterizing each goal as Specific, Measurable, Achievable, Realistic, and Time-bound. The missions are therefore adapted to each one and coherent in the face of the difficulties which may be encountered in the field.

Setting goals is step number 1 in order to establish a successful and relevant business prospecting plan.

According to a study, a sales team that organizes itself as it wishes to find new customers manages to set 3.6 weekly appointments, compared to 6 for one that is motivated by sales challenges offering rewards!

2. Know your target to set up an effective commercial prospecting strategy

As you know, your target represents your potential customers, the profiles who are likely to be interested in your products or your services. Knowing them well is better to reach them and therefore, promote the growth of your business thanks to an optimal strategy . This prior knowledge provides the basics for building your prospect file.

Then ? How do you create a composite portrait of your ideal prospects, the ones you have no trouble converting and with whom you love to work?

With the tool of persona !

In order to establish your model customer, focus on the following 3 components and ask yourself the right questions:

• demographic data: gender, age, marital status, occupation, place of life, geographical area, etc.
• psychological information: sport, social media, hobbies, interests, elements triggering decision-making, etc.
• needs, pains and frustrations: blockages, objectives, values, concerns, towards what the prospect is projecting himself, etc.

Once you have clearly identified your ideal client, you then establish a prospecting file that is precise and consistent with your offer. To centralize this, use dedicated software and equip yourself with a CRM (Customer Relationship Management) tool. This regularly updated IT tool helps your sales representatives in the overall management of customer relations. It provides contact details (name, e-mail, etc.), hot prospects to contact, appointments made and all other necessary information.

To set up a successful prospecting plan, it is essential to identify and understand your target in order to establish a prospecting file with several characteristics such as their age, social status, hobbies, concerns, values, etc.

3. Choose levers for commercial prospecting

Your commercial prospecting plan becomes concrete: your target is no longer a mystery, you know it by heart and that’s good, because you now have to choose which prospecting levers to activate to obtain maximum results . Find out the possible ways below.

The multiple tools of commercial prospecting:

The different prospecting techniques for lead generation that you can implement are:

• Cold calling : depending on your target and your offer, a cold calling campaign can yield excellent results. To do this, prepare your phoning script well in advance.
• Cold emailing : sending emails is a technique widely used in business development initiatives. It makes it possible to reach a lot of people.
• social selling : the use of social networks to make yourself known, to get in touch with your prospects and to support the sale.
• the’ inbound marketing and a natural referencing (SEO) strategy to position you in the first lines of search engine results pages (Google). The goal is to attract customers directly to your sales pages or to your email database.
• online or offline advertising (depending on your budget and target).
• direct meetings in the field during trade shows, seminars, conferences, etc.

Adjust your strategy according to your target and your means:

You know the best ways to contact your prospects. That is, where to go to find them, on what platform? For example, if your clientele is between 18 and 25 years old, you distribute your advertising campaign or your content on the web or social networks like Facebook ™, Instagram ™ or Tik Tok ™ to have more impact. You bet on emojis , interactions and fun content!

Of course, it is also a question of taking into account the budgetary aspect that you have!

However, there are a multitude of more or less expensive ways to reach your target and get appointments . Depending on your industry and your market, it’s up to you to find the most eye-catchers that appeal to it in order to convert it into leads then as a loyal customer.

Your objective and your target are your starting points to define your prospecting levers. Thanks to them, you know on which media to reach them and what marketing strategies to put in place to accomplish your mission. Make sure that your content is perfectly suited in terms of medium, message and even up to customizing colors that are attractive.

Do you want to generate customers every month, automatically, with a simple and well-tried routine? Take some time in the agenda of a Proinfluent expert who will make an audit of your commercial situation.

4. Define your sales arguments create a sales prospecting plan

Now you are getting to the heart of the matter, the decisive phase of your project: your sales arguments , in other words, your script . This is the content you deliver to your prospects. Whether you choose to make yourself known through canvassing, emailing, social media or sending flyers , it is imperative to study your approach.

To do this, keep in mind that it must contain certain essential criteria:

• Favor open questions: how can I help you? What are your needs ? It is a simple and effective method to initiate a conversation whether virtual, face to face or telephone.
• Tailor your query and advice if possible, depending on the person or company you are contacting.
• Anticipate the common questions of your leads to reflect an image of trust and expertise, and influence their decisions. Identify their needs in order to find solutions to their problems!
• Promote your products or services! This is the main objective for which you contact your target, do not miss it! You know your business better than anyone, so you know everything you need to demonstrate why your future customers need you to be successful!

Prepare your argument upstream and valuing your business is part of the implementation of a successful commercial prospecting plan. If you are the manager of a sales team , you transmit with precision and with the help of concrete examples, the axes to follow. To do this, rely on current prospecting models that work (almost) every time! If you choose telephone canvassing, also known as Phoning, discover our tips for prospecting using a foolproof business script ! Your team should benefit from training to understand exactly what are the steps to follow in the prospecting process.

5. Coordinate the actions of your prospecting plan

Now that all the points necessary for the success of your prospecting plan have been worked out, all you have to do is distribute the commercial prospecting actions . You or your salespeople must know absolutely what to do and what tools and software are available to them to carry out their missions.

If you are betting on multiple prospecting media, make sure the team is well trained and understands why it is beneficial to prospect this way. Salespeople are the elements that can bring you success, because they are the ones who communicate the image of your company to the public. They therefore deserve to benefit from meticulous learning of the brand they are going to promote.

No one is more convincing than a satisfied customer. To do this, invite your sales teams to test your products if possible, and convey to them the values that define the company. Transparency must be required so that your employees are also clear and concise in their prospecting efforts.

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6. Determine a deadline adapted to your objectives in your prospecting plan

Your actions must be part of a schedule. To do this, use software such as Excel, Google Sheets or Trello. It is important to always set a deadline that marks the end of a prospecting campaign. This allows readjustment as needed. For example, if your mission is to retain 200 customers in a month and you convert 400, your target is too low, too easy to achieve. On the contrary, if you only get 70, then you weren’t ambitious enough.

Setting a deadline also makes it possible to realize each action to be accomplished. This highlights what the company is really capable of and identifies its potential as well as its flaws.

When setting the timeframe for your business development plan, make sure it’s calibrated against your business goals. Indeed, too limited time causes a feeling of incomplete and frustration for your teams. The objective is obviously not reached (except if it is too accessible) which generates disappointment and a general demotivation.

On the contrary, too long a delay leads to weariness and monotony in the accomplishment of tasks. A slowdown in results is generally observed. Try to be as fair as possible when setting the deadline for achieving a goal, in order to gain productivity and performance.

7. Analyze the results and ensure follow-up

When the set deadline is reached, you reap the results obtained thanks to your commercial prospecting plan. Whether they are positive or not, there is one step that should not be overlooked: monitoring your customers and customer service.

You have found new customers and you can be proud of them, despite everything, even if the sale has already taken place, don’t let your buyer go back into nature without keeping in touch! For example, ask him through a personalized email if he is satisfied with his purchase and the customer relationship that your box provides.

In addition, keep him informed of your news and promotions that may be of interest to him! Be responsive to your customers’ requests. Pamper your customer relationship so that they make you the benchmark in your field of activity!

Prospecting planning: Conclusion

Carrying out an adapted and efficient commercial prospecting plan is one of the determining steps for the success of your business. Here are the points to remember to establish an effective prospecting campaign:

• First of all, define the main objective of your prospecting plan. The goal you are aiming for and which influences the rest of the program. This element must be determined with precision and as accurately as possible. Ideally, it is ambitious, but accessible.
• Next, make sure you know your target perfectly, also called a persona. It corresponds to the leads and your potential future customers who are interested in your products, your services. The more you know your persona, the easier it is to convert them into a customer!
• To continue, choose the most effective prospecting levers, in order to reach new prospects. To do this, ask yourself what and where? That is to say, what is your objective and where to disseminate your prospecting to reach your target? It also depends on the budget you have.
• Now move on to preparing your sales arguments. This is the content you deliver to your audience. It must be relevant and adapted as much as possible to your prospects. Ideally, the arguments are personalized according to the lead to convert.
• Distribute the prospecting actions of your prospecting plan among your sales team. Make sure everyone understands the importance of their role in the business, and that their mission is fully integrated.
• Set a deadline that marks the end of a prospecting campaign.
• Finally, follow up with your prospects and customers, in order to create a relationship of trust.

Prospecting plan: to summarize in 4 questions

C’est quoi un plan de prospection .

A prospecting plan is all the steps and commercial actions that make it possible to achieve an objective. It takes into account all the stages of the commercial prospecting cycle: prospect database, commercial script, prospecting planning, sales and follow-up.

Comment faire un bon plan de prospection ?

To set up a good prospecting plan, determine the end goal, choose the prospecting channels most suited to your target and your budget, prepare your sales arguments and then establish a follow-up.

Quelles sont les différentes phases à mettre en place pour le plan de prospection ?

• Define the main objective of the prospecting; • Know your target in order to create a file of qualified prospects; • Select the most relevant prospecting levers to put in place; • Prepare your sales arguments in order to anticipate the problems of your prospects; • Distribute the various prospecting actions within your sales teams; • Ensure commercial follow-up.

Comment faire un plan de prospection téléphonique ?

• Determine your telephone prospecting objective; • Target loyal customers or those likely to be interested; • Prepare a coherent and personalized script; • Design a clear and attractive message; • Offer real solutions to audience issues.

Source: Nomination.fr

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What Is a Prospect?

Definition & Examples of a Prospect

Mindy Lilyquist is an experienced marketing professional. She is the founder and creative director of Epiphany Marketing Management, serving small businesses since 2007.

What Are Prospects?

How prospects work, prospects vs. leads, organizing your prospects.

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A prospect is a potential customer who has been qualified as fitting certain criteria outlined by a company based on its business offerings. Determining if a contact is a sales prospect is the first step in the selling process. Once you've determined that the person meets the criteria, they're a prospect and can move into the next phase of the selling process.

Learn more about prospects to tune up your selling process and improve your customer relationship management.

Companies deem potential customers as prospects once they've been qualified as possessing predetermined characteristics. In most cases, a prospect fits your target market , has the means to buy your products or services, and is authorized to make buying decisions. Prospects don't have to have indicated an interest in buying; they just need to meet the mentioned criteria.

For example, if you sell virtual support services to small businesses, a prospect would be a small business manager who can afford your services and make the decision to hire you. If your contact doesn't have permission to make a buying decision, they're not your prospect.

• Alternate definition : In sports, a prospect is a scouted athlete who has yet to achieve rookie status as outlined by their respective professional leagues.

Prospecting  is the act of finding leads and turning them into prospects. Leads come from various places; you can buy lists, skim the phone book, search the internet, or talk to people while you're waiting in line at the store. In most cases, whatever form you use, your goal is to determine if the person could become a prospect.

You determine this by qualifying them on one criterion, usually your target market. For instance, you can buy lists based on demographics and interests; you can narrow a phone book or internet search on your target market's location; and while you're standing in line, you can strike up a conversation that would get you information about whether or not the lead was in your target market. 

Once you've determined that the lead could be a prospect, you then work to qualify them under the other criteria, which can be done in various ways, including a phone call, in-person meeting, online form, or email. Your goal is to determine if the lead is a good candidate for what you offer and has the money and ability to buy. 

Many home business owners end up wasting time on the sales process because they don't qualify leads before trying to sell to them or spend too much time on unqualified leads.

Like many industries or occupations, the business sales field has many words unique to its own language and use. Terms will often be used interchangeably, even though they don't mean the same thing. This is the case with the business sales terms "prospect" and "lead."

A prospect is often confused as a lead, but there's a fundamental difference. A lead is an unqualified contact; any potential client or customer you meet who hasn't been qualified as a prospect is a lead. In the sales process, you gather leads first, qualify them into prospects, and then move them through your sales funnel or process.

Sales prospects are a business's greatest asset and a future revenue stream. These are contacts that you've talked with and meet the criteria of your best potential customers. The best way to track your prospects and communications with them is with a customer relationship management  (CRM) database. There are many great inexpensive and free CRM tools available.

Prospect tracking allows you to keep information about your prospects, including notes on all your conversations. Noting a customer's questions and concerns is helpful for addressing them in the future if need be. You can also keep track of where they are in your sales process. For instance, a lead can become a prospect, and a prospect can become a sale, and hopefully, a repeat buyer.

Key Takeaways

• A prospect is a potential customer who has been qualified as fitting certain criteria.
• Prospects fit your target market, have the means to buy your product or services, and are authorized to make buying decisions.
• A lead is an unqualified contact, while a prospect has been vetted to fit the defined criteria.
• Prospect tracking is important for the sales process.

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Writing a successful business plan

All successful businesses start with a strong business plan. Also known as a business proposal, this document helps attract investors and customers alike by demonstrating your knowledge, passion and drive

Writing a business plan is essential when  starting your own business , but what is a business plan and why do you need one? Well, a business plan describes your company, what it aims to achieve and outlines how it'll achieve it. It helps you to clarify your ideas, identify potential problems with your business model, establish short and long-term goals and, over time, measure your company's progress.

A business plan is vital if you're looking to secure investment, but it can also convince customers and suppliers to support you. You should update your business plan regularly, tailoring it to its intended reader as you would a CV and cover letter. Here's a suggested business plan template to get you started.

Executive summary

After the title page - which includes the name and business address of the author, the date of publication, and details of the plan's circulation and level of confidentiality - you'll present your executive summary. Bear in mind that this is the last section of the business plan you'll write, because its job is to grab the reader's attention by summarising what will follow.

Over three to four pages, briefly highlight the key purpose of your business plan and summarise the capital requirements, financial projections, and management structure of your company. You should also provide details of your competitors.

When writing a business plan, your focus throughout should be on highlighting how your product or service takes advantage of a significant market opportunity.

The business

Begin this section by addressing your company's products and services, before going into greater detail about its aims and objectives. Expand on the history of your business and explain its ownership structure. You should also mention what  type of business  it is.

An overview and outlook of the industry should be included, covering details of any relevant regulations and specific markets of interest. However, this information will be expanded on in the market analysis section, so keep it brief.

Finally, address how your business can be developed to meet future needs or changes, and admit any weaknesses that it may have. Being open in this manner will inspire confidence.

Market analysis

Essentially a condensed marketing plan, this section focuses on several factors:

• Market research  - It's vital to know that you've got a group of buyers for your product or service. Become familiar with the market and  job sector  as a whole, so the company can be positioned appropriately in terms of price and quality.
• Target audience  - Discuss which market segments you're aiming to pursue, such as local customers or those of a particular age group. Indicate the key characteristics of your typical buyers.
• Competitors  - Summarise your competitors' strengths and weaknesses and consider how you can prevent others from entering your market space.
• Existing customers and sales  - Mention any customers that you've already lined up and address how you'll sell, whether it's over the phone, on your website, face-to-face or through an agent. In addition, if you have more than one product or service, consider the contribution of each to your turnover.
• Marketing strategy and goals  - Address how you'll promote your product. This may be through means such as advertising, public relations (PR), direct mail or email. Examine likely sales, growth, profit margins and costs.

Management and operations

This section explains how your business will function. You should detail the:

• Background, experience, and training of the management team  - Highlight individuals' roles and responsibilities, plus their relevant skills and experiences. You should also mention the financial contributions, salaries and company benefits of each member.
• Capital requirements  - Discuss the company's needs in terms of equipment, facilities, insurance, and personnel, before highlighting any potential limitations to production.
• Logistics  - Detail each division and their assigned tasks, addressing how you'll cover sales, finance, marketing, administration, stock control and quality control. You should describe the systems and procedures that will be involved in all aspects of production, from the customer's initial payment through to transport and delivery, including detailed information on your suppliers.

Financial forecasts

In this section, you must translate your company's aims and objectives into measurable goals. This means providing numbers including:

• the estimated costs of starting and running your business
• how much additional finance you require, plus what it will be used for
• sales forecasts for the first year
• profit and loss forecasts for the first three years
• cash flow forecasts, showing that you've considered key variable factors such as sales revenue and wages
• your budget and pricing strategy.

Be aware that you should justify any assumptions that you've made when reaching each forecast.

Risk management

Consider any risks associated with running your business, plus any legal obligations surrounding factors such as insurance, licences, and health and safety.

You should also create detailed 'what-if scenario' backup plans, documenting how you'll react to issues that may arise. Not only will this help you to minimise risk, but you'll enhance your credibility with potential investors by showing that you've thought about your business plan from every angle.

The appendix of a business plan features copies of essential supporting documents, such as:

• credit history information
• detailed cash flow plans
• detailed CVs of the management team
• market research results
• receipts and bank statements
• tax returns.

Much of the information contained within your business plan will be highly confidential. You should therefore tailor your appendix depending on who is receiving your plan - potential investors, for example, will expect to find out more than potential affiliates.

Overall, your business plan should be clear, concise, and realistic. If it's too long, or your objectives are too ambitious, it won't be read fully or taken seriously. Keep your audience in mind, using non-technical language where possible to be more readily understood, and ensure the points you make are logical, sound and backed up with explanation or evidence.

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The Prospects of Future Business Essay

Introduction, how the business will be like in 20-30 years from now, how will the economy, business, and society function, the type of jobs that will appear, what my role will be, my own question.

The prospects of the business, say in 20 or 30 years to come, will have to vary, especially with the current enormous impetus for economic growth. Besides economic growth, Gitman and McDaniel (2000, p. 115) opine that corporate futurists expect that businesses will actively pursue emergent opportunities capable of endearing them to economic growth strategies. The overriding prospects of the businesses will be to seek greater profitability to increase cash flow.

The business community also expects that the expansion of information technology will continue to influence the scope of business in the years to come. Moreover, efforts will be to create greater sales for both products and services that corporations offer to ensure that businesses can always guarantee competitive services and products to increase customer experience and to boost corporate efficiency.

Just like in any other endeavor, the business community expects greater demand for its products and services, and this point to greater need to improve operational systems while integrating their services to remain relevant to the emergent consumer needs (Hamel 2007, p. 56). Among the drivers that will shape the prospects of future business includes the need to embrace diversity, the need to improve environmental awareness, and the need to advance technology in the concept of doing business, among other things.

The world economic landscape keeps on shifting and rapidly becoming increasingly global, and in the next 20 or 30 years to come, it will be more diverse. Virtually, in every organization in the developing as well as in the developed economies, embracing diversity continues to be the hallmark of business survival. The greatest concern of the 21st century is rather how successful organizations are, especially at exploiting the evolving opportunities while tackling their underlying challenges as well (Hitt, Black, and Porter 2005, p. 56).

Achieving such a great feat will depend on how intelligent businesses are at observing as well as interpreting the dynamics of the societies under which businesses operate. Cultivating a global mindset, for instance, will be a key ingredient for nurturing corporate intelligence. The environment under which most organizations subsist will be more than ever before, complex, global, dynamic, extremely volatile and yet, highly competitive.

This trend is likely to expand, and even accelerate in the years to come, especially regarding the ever-changing market trends (Schirato and Webb 2003, p. 34). Apart from these external conditions, research documents that numerous businesses currently face many global challenges, especially those linked with talent flow, generational conflict – including the shortage of much-desired competencies (Fisher 2009, p. 348).

Business futurists hypothesize that among the major institutional challenges for most organizations is that their lifeline depends solely on their propensity and wish to be global. Within these facts, a business may have to outsource for a diverse employee base, which will, in turn, create jobs for prospective employees anywhere across the world (Gitman and McDaniel 2000, p. 145).

Moreover, businesses aspiring to be on the global map will have to be systematic, especially in managing their human resource capacities to infer greater economic appeal. Essentially, this aims at streamlining the organization in an attempt to improve the global household consumer experience. All these endeavors seek to secure organizational effectiveness and sustain a competitive advantage for businesses.

In every part of the world, businesses face an uphill task to conform to the laid down environmentally friendly practices. The increased economic activities in various parts of the world will result in the production of more energy to meet consumption demands. This massive production is responsible for environmental degradation experienced in various regions will continue to fuel fears that if things continue this way, the environment may not be able to sustain the demands of production.

The need for a sustainable approach to an organization’s environmental awareness, therefore, will continue to be the concern of environmentally friendly bodies that seek to perpetually remind organizations of their roles in making the business environments and our society safer (Perron, Cote and Duffy 2006, p. 557). Several businesses will have a duty to engage in environmentally friendly initiatives aimed at improving the quality of their environmental performance.

Organizational environmental awareness, according to King and Lawley (2013, p. 66), will help businesses to be mindful of the environment, thus assisting them in nurturing environmentally friendly practices. While this awareness is expected to inform the business of the numerous benefits to environmental awareness, the business will have no choice but to conform to the laid down environmentally friendly corporate ideals or face rejection from the authorities.

The benefits of environmentally friendly practices are varied, including reduced corporate liability and financial savings, among other factors, and business growth might be read on these lines in the future. However, Rollinson (2005, p. 50) opines that there several constraints might normally inhibit the full realization of responsible and environmentally organization, especially if there are no stricter jurisdictions to that effect. Some of the most notable constraints are concerns related to corporate culture, including change management.

According to Lussier (2006, p. 34), to overcome these concerns and succeed in the implementation of robust environmental conscious initiatives, the role of organizations in understanding the environmental needs will have to suffice above all other operations.

Moreover, there will be a great need for businesses to emphasize the importance of environmental awareness and training that seeks to produce responsiveness in business by training and popular participation that nurtures safer environmental commitment and understanding. Equipped with this awareness, organizations will amicably understand how their surroundings can affect and be, in turn, affected by their activities.

The world over, marketing professionals constantly adjust their business strategy and tact to exceptionally reach out to the ever-changing customer demands (Lamarre, Galarneau, and Boeck 2012, p. 1). From this aspect, businesses have no option but to keep within the technological advancements that continue to drive business operations.

With the modern-day shift to adoption of media services in the concept of marketing, Khalifa and Shen (2008 p. 112) opine that mobility is rapidly becoming an ordinary way of life as well as a concept of doing business. Innovative business mind-sets that have effectively integrated e-commerce within their marketing strategy will not relent in their choices but to view mobile social media marketing as the next best-exiting business opportunity that must be upped through technological advancements (Lamarre et al. 2012, p. 3).

Mobile social media marketing will grow in stature and differentiate itself from the contemporary media marketing concepts in the years to come. This arguably will further grow through the highly interactive nature supplied by web browser advantages and mobile device interface will continue to make it possible for businesses to offer continuous services and access to the prospective customers, anywhere, anytime (Davis, Sajtos 2009, p. 16).

Technological advancements will effectively do businesses to suffice as robust, dynamic while offering personal mediums that will further shape the future marketing and consumption trends (Jadhav, Kamble, and Patil 2012, p. 48). Mobile social media marking has had the ability to integrate several forms of mobile device technology and practices such as the Internet, VoIP, mobile SMS, Bluetooth, mobile e-mail.

Other than these concepts, such as SMS marketing, mobile gaming, mobile advertising, online exchange, as well as location-based marketing have been the face of modern business (Lamarre et al. p. 5). Much is expected to change with changes and improvements in technology, and business futurists do predict with a precision that businesses that embrace technology will have a fair share of their bargain.

From the foregoing analysis, the prospects for the future scope of business will vary significantly. Naturally, my role to partake in the rapid business growth will depend on many factors already outlined here above. I seek to embrace diversity in my professionalism. Moreover, I endeavor to improve my environmental awareness, as well as the need to advance my technological know-how, especially in the concept of business.

While businesses futurists may predict the possibilities of the prospects of business in these realms, it is prudent to pose one question: What must I do to do the business worth its progression? Being already aware of the drivers for change in the concept of business, I endeavor to play a significant role in making these predictions positive by nurturing the ideals that might bring forth greater corporate efficiency.

As an individual, I recognize my role in cultivating corporate ethics, capable of endearing my business orientation to acceptable production practices that guarantee safer environments. Moreover, I remain cognizance of the fact that technological advancements guarantee the future scope of businesses; hence, it becomes necessary to keep with the changes in technological concepts.

Davis, R., and Sajtos, L. 2009, ‘Anytime, anywhere: Measuring the ubiquitous consumer’s impulse purchase behavior,’ International Journal of Mobile Marketing , vol. 4, no. 1, pp. 15-23.

Fisher, E. A. 2009, ‘Motivation and leadership in social work management: A review of theories and related studies,’ Administration in Social Work, vol. 33, no. 9, pp. 347-367.

Gitman, L., and McDaniel, C. 2000, The future of business (Millennium ed.), South-Western College Publishers, Cincinnati, Ohio.

Hamel, G. 2007, The future of management , Harvard Business School Press, Boston.

Hitt, M., Black, J. S. and Porter, L. W. 2005, Management , Prentice Hall, London.

Jadhav, N., Kamble, S., and Patil, M 2012, ‘Social Media Marketing: The next generation of business trends’, Journal of Computer Engineering , vol. 2278, no. 8727, pp. 45-49.

Khalifa, M., and Shen, K. N. 2008, ‘Drivers for Transactional B2C M-commerce Adoption: Extended Theory of Planned Behavior,’ Journal of Computer Information Systems , vol. 48, pp. 111-117.

King, D., and Lawley, S. 2013, Organisational behaviour, Oxford University Press, Oxford.

Lamarre, A., Galarneau, S. and Boeck, H. 2012, ‘Mobile marketing and consumer behaviors current research trend’. Int. J. Latest Trends Computing, vol. 3, no. 201. pp. 1-9.

Lussier, R. 2006, Management Fundamentals: Concepts, Applications, and Skill Development (3 rd ed.), Thomson/South-Western. Mason, Ohio.

Perron, G., Cote, R., and Duffy, J 2006, ‘Improving environmental awareness training in business’, Journal of Cleaner Production , vol. 14, no. 6, pp. 551-562.

Rollinson, D 2005, Organisational Behaviour and Analysis (3 rd ed.), FT/Prentice-Hall, New York.

Schirato, T. and Webb, J 2003, Understanding Globalization , Sage Publications, New York.

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Mark Zuckerberg laid out 3 ways Meta will make money from its huge AI investments

• Mark Zuckerberg has become "more optimistic and ambitious" about Meta's ability to win in AI.
• The Meta CEO now plans to spend about $40 billion this year, largely on AI investments.
• He sees three ways AI can become a "massive business" for Meta in the next few years.

Mark Zuckerberg is now convinced that Meta is a top artificial-intelligence company, and he has even laid out how the technology will become a significant source of profit in the years ahead.

With the recent release of Llama 3 , Meta's latest AI model , Zuckerberg said he became "more optimistic and ambitious on AI" and his company's ability to deliver on the tech.

He made it clear during a Wednesday earnings call with analysts that he intended to "invest significantly more over the coming years to build even more advanced models and the largest-scale AI services in the world."

"With the latest models, we're not just building good AI models that are capable of building some new good social and commerce products," the CEO told analysts. "I actually think we're in a place where we've shown that we can build leading models and be the leading AI company in the world. And that opens up a lot of additional opportunities beyond just the ones that are the most obvious for us."

Heavy spending again

Such ambition doesn't come cheap. Meta increased its guidance on capital expenditure for this year, saying it now planned to spend between $35 billion and $40 billion, largely on AI investments. Its stock slumped 16% in after-hours trading.

The last time Zuckerberg got excited about a new technology — the metaverse — Meta spent wildly and freaked investors out. The stock collapsed and didn't recover until the company embarked on a "year of efficiency" marked by mass layoffs and a more business-minded CEO .

Zuckerberg on Wednesday made a concerted effort to head off Wall Street panic that his new AI enthusiasm is lacking in business acumen.

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He said he saw "several ways" generative AI could make money and laid out three specific paths to this becoming "a massive business" for Meta. Although he warned that getting there was a "long-term" prospect.

'Business messaging'

One of the ways AI can make money is by building up "business messaging" so that companies pay Meta for generative-AI tools, such as services that support automated interactions with users and customers. Zuckerberg envisions Meta's AI moving beyond just being a chatbot and becoming an AI "agent" that handles more complex tasks and processes multiple queries to solve user problems instead of coming back instantly with rote answers.

Zuckerberg said revenue from AI business messaging was "one of the nearer-term opportunities." While it may not become a reality this year, he said it was less than five years away. He explained that the immediate goal on this front was "getting many hundreds of millions or billions of people to use Meta AI as a core part of what they do."

Ads appearing in AI interactions

Another way generative AI could make money for Meta is by "introducing ads or paid content into AI interactions," as Zuckerberg said. Although brands and companies paying for products to show up in generative-AI results is not yet the standard for AI chatbots, Meta's entire business is effectively driven by selling digital advertising. Inserting ads into its social and messaging products is at the core of Meta as a company.

AI is already being more widely deployed by Meta in its newer "unconnected content" algorithm for social-media content recommendations, which Zuckerberg said was leading to more app engagement. That, in turn, leads to more people seeing more ads. He said that 30% of the content that Facebook users were seeing was recommended by AI, and the same applied to 50% of the content seen by Instagram users.

Selling access to AI models

A third distinct way Meta may make money from AI is by selling access to models as they get larger. "Enabling people to pay to use bigger AI models and access more compute," as Zuckerberg put it on Wednesday.

Right now, Llama 3 and Meta's other large language models are freely available to users and companies below a certain size threshold. Charging for access may be a move away from Meta's "open source" approach.

"So if the technology and products evolve in the way that we hope, each of those will unlock massive amounts of value for people and business for us over time," Zuckerberg said, adding, "I think it makes sense to go for it, and we're going to."

Watch: AI expert explains how to incorporate generative AI into your business strategy

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