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Developing a Franchise Business Plan: Key Elements to Include

Aug 15, 2023 | Blog

When embarking on the franchising journey, a well-crafted business plan is essential to guide your expansion and attract potential franchisees. A comprehensive franchise business plan outlines your vision, market analysis, financial projections, and operational considerations. In this article, we will explore the key elements to include in your franchise business plan and provide tips for creating a compelling document that captures the attention of potential franchisees.

Executive Summary:

Begin your franchise business plan with a compelling executive summary that provides an overview of your franchise concept, target market, and growth potential. Highlight the unique selling points of your franchise and emphasize the benefits for franchisees. This section should grab the reader’s attention and set the stage for the rest of the plan.

Franchise Concept and Market Analysis:

Detail your franchise concept, including your brand’s unique value proposition, target market, and competitive landscape. Conduct a thorough market analysis to identify your ideal customer profile, market trends, and potential demand for your franchise. This section should demonstrate your understanding of the market and why your franchise stands out among competitors.

Franchisee Support and Training:

Outline the support and training programs you will provide to franchisees. Describe the initial training process, ongoing support, and any resources or tools available to help franchisees succeed. Highlight your experience in franchising and how you will assist franchisees in achieving their goals.

Financial Projections:

Include detailed financial projections that outline your franchise’s potential revenue, expenses, and profitability. Provide a breakdown of the initial investment required, including franchise fees, equipment costs, and working capital. Project future sales and expenses based on market analysis, industry benchmarks, and historical data. This section should demonstrate the financial viability of your franchise opportunity.

Marketing and Advertising Strategy:

Detail your marketing and advertising strategy to attract potential franchisees and support franchisees’ growth. Identify the target audience, channels, and tactics you will use to generate brand awareness and drive sales . Discuss how you will support franchisees in local marketing efforts and provide marketing materials, campaigns, and digital strategies to help them succeed.

Operations and Systems:

Describe the operational aspects of your franchise, including your business model, supply chain management, quality control processes, and technology systems. Explain how you will ensure consistency across franchise locations and maintain high operational standards. Highlight any proprietary systems, software, or processes that set your franchise apart.

Legal and Compliance:

Address the legal and compliance requirements of franchising, including franchise disclosure documents , franchise agreements, and regulatory obligations. Ensure your franchise business plan reflects your commitment to all legal and industry regulations. Consider consulting with legal professionals experienced in franchising to ensure compliance and mitigate any potential risks.

Tips for Creating a Compelling Business Plan:

• Clearly articulate your unique value proposition and competitive advantage.
• Use data and market research to support your claims and projections.
• Include visual elements such as charts, graphs, and images to enhance readability.
• Keep the document concise, focused, and well-organized.
• Use a professional tone and language to convey credibility and expertise.
• Tailor the plan to address the needs and interests of potential franchisees.

Developing a comprehensive franchise business plan is a critical step in attracting potential franchisees and guiding the growth of your franchise. By including key elements such as market analysis, financial projections, operational considerations, and a compelling executive summary, you can present a clear and enticing vision to potential franchise partners.

Remember to continuously update and refine your business plan as your franchise evolves and new opportunities arise. With a well-crafted business plan, you are better positioned to attract and engage franchisees who share your passion and vision for success.

If you need assistance developing a franchise business plan or want expert guidance in the franchising process, contact Accurate Franchising, Inc today . Our team of experienced consultants is ready to help you achieve your franchising goals.

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7 key elements of a good franchise business plan.

Writing a business plan is essential for any entrepreneur. However, creating one for a franchise business is different from another business type. You have to be aware of the needs of the franchisee and the franchisor. Once you have signed the franchise agreement , the franchisor will provide you with a marketing plan and other related materials. Below are the seven essential elements of a successful franchise business plan.

1. Executive Summary

This section summarizes the entire franchise business plan, including the key points and objectives. As it explains your business, the executive summary should answer these questions:

• Which product, service, or need does your business provide? 
• Is your business unique? 
• How will you guarantee your company’s success? 
• What skills do you possess that will help you achieve your objectives?

As the first part of the plan, it should leave a positive impression of you and your business to your readers. In short, it’s a written version of your business pitch. That said, the executive summary section should clearly define your business and lay down everything that makes your business proposition unique. 

2. Franchise Description

The following section presents the description of the franchise business model. This section should contain the following:

• Company Structure
• Mission Statement
• Fiscal Projections

Although you don’t need to provide detailed financial data, you should include an overview of your business, financial projections, and critical business facts. Likewise, you should share the goals and objectives for your business with your readers. Ensure your business goals are quantifiable and avoid vague terms that will only confuse your readers.

3. Market Analysis

The third section provides a detailed analysis of the industry and market trends. To analyze your competitors in the business, you need to do the following steps:

• Select ten direct and indirect competitors for comparison.
• Research their marketing strategies and product features.
• Compare the gathered details to business data. 

4. Marketing Strategy

You should also write a detailed marketing plan that includes market research, marketing goals, pricing strategies, advertising activities, and sales forecasts. This section will discuss your plan for implementing the said strategies and activities. You can use the information from the franchise training or the detailed information stated in Item 11 of the Franchise Disclosure Document .

5. Operations and Management

This section highlights your business’s strategy for maintaining a customer base and demand for your franchise business. You need to explain how you plan to advertise, your current advertising, and the background of your strategy. It also highlights the daily operation of your business. It covers the business operations and emphasizes the franchise owner’s responsibilities and tasks. This section also includes the company’s staffing, logistics, and solutions to potential challenges during the business operation. 

6. Financial Plan

The financial plan includes projected revenue, expenses, profits, and cash flow for the first few years of the franchise operation. If you’re starting your business with a franchisor, you can reference your Franchise Disclosure Document for this information. 

7. Pro Forma

You should also add a pro forma that focuses more on the three main accounting statements, such as the balance sheet, cash flow, and profit of loss. You can create your pro forma by following these steps:

• Create a chart of accounts.
• Calculate your business projected income.
• Project your liabilities and cost.
• Estimate cash flows

Consider talking to an accountant or financial advisor to confirm your estimates and validate your proposal to lenders or investors. 

Appendix (Optional)

Technically, the appendix is separate from the business plan but an additional section to present items that would enhance your document. Include items necessary to give the lender or investor a complete view of your franchise business. For example, you can include the resumes of management team members, tax returns, media clippings, etc.

A franchise business plan is a critical piece in accessing capital. A well-crafted business plan helps the franchise to clearly define the objectives, strategies, and techniques for a successful business operation. Also, this document allows entrepreneurs to identify potential risks and challenges associated with the franchise operation. It provides methods for mitigating or managing those risks. More importantly, this plan helps reduce the possibility of financial losses or other adverse outcomes for the franchisee. We hope this guide will inspire you to start drafting a detailed plan for the franchise business you have in mind now.  

Remember to continually update your business plan to reflect your business’s developing needs. At the minimum, it should be updated when something in your business changes.

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The Rise of Paris Banh Mi Franchise

Are you gearing up for a new business in 2024? Forget the next big tech start-up -the latest trend in town might be a perfectly toasted baguette. Take Paris Banh Mi Cafe and Bakery, for instance. This Vietnamese sandwich shop is rapidly growing, with locations popping up from coast to coast, from California to Florida. 

But what’s the secret behind their success? Explore why the Paris Banh Mi franchise has snowballed in the last two years and be inspired to start your own business .  

About Paris Banh Mi

The French baguette was introduced in Vietnam in the mid-19th century when the country was still a part of French Indochina. In the 1950s, Saigon saw the birth of a unique Vietnamese sandwich, “bánh mì,” which quickly became a favorite food of a large part of the population.

The story of Paris Banh Mi started in Orlando, Florida, at 1021 E Colonial Drive in 2019. Hien Tran and Doan Nguyen , a married couple passionate about food, opened the first Paris Banh Mi location. Their concept was simple: bring the delicious flavors of Vietnamese banh mi sandwiches, traditionally baguettes filled with savory meats and pickled vegetables, to a broader audience. 

The customers quickly fell in love with the fresh ingredients, bold flavors, and convenient fast-casual setting. Now,  Paris Banh Mi Cafe and Bakery promises to bring their customers the best “Baguette Banh Mi” taste.

In just two years, the laid-back cafe and bakery in Florida multiplied into a chain of stores in the  county. Today, Paris Banh Mi is serving customers in 46 locations all across the USA . The company plans to expand to 100+ locations by 2026. 

Each Paris Banh Mi Cafe and Bakery has a clean and spacious dining area, fast service, friendly staff, and a selection of delicious food and pastries. Take a peek at some of their mouth-watering baguette sandwiches filled with authentic Vietnamese ingredients.

Source: Paris Banh Mi website

For those craving something sweet, the bakery indulges you with a variety of French pastries. Check out their sandwiches, pastries, and beverages on the Paris Banh Mi Cafe and Bakery menu page.

Why Own a Paris Banh Mi Franchise

Paris Banh Mi is a franchised quick-service restaurant offering exciting opportunities for aspiring business owners. Many nail salon owners and aspiring entrepreneurs are switching to buying a Paris Banh Mi franchise. The main reasons why they love Paris are:

• It opens a great opportunity and is more profitable. 
• Seamless franchising process and fewer things to worry about
• Required low capital to open
• Higher end-of-year profits

The benefits extend beyond operational efficiency. Paris Banh Mi boasts a surprisingly low-cost entry point compared to other franchises. 

The initial franchise fee is manageable at $60,000. The total investment for opening a Paris Banh Mi can range from $200,000 to $500,000. This amount reflects the option to acquire a pre-existing, equipped location (second generation) for a lower investment cost or a complete build-out from scratch option. 

Regardless of the chosen route, the investment is significantly lower than that of building a business from the ground up, making Paris Banh Mi an attractive option for many entrepreneurs.

Licensing Information

Owning a Paris Banh Mi franchise is not just about delicious food! The company is looking for dedicated individuals who can run their restaurant full-time. They will provide a multi-day training program for new franchisees. In addition, Paris Banh Mi offers ongoing support for franchisees, guiding them to make informed decisions and thrive in this exciting industry.

You’re a good fit for a Paris Banh Mi Cafe Bakery franchise if you are: 

• Passionate about food, especially fresh baguettes and pastries
• A self-starter with a proven track record in business
• Financially responsible with a focus on results
• Ready to fully commit to building the Paris Banh Mi brand

If you have what it takes, don’t hesitate to contact them through the franchise hotlines on their franchise opportunities page . 

Buying a restaurant franchise is one of the most attractive routes in the world of franchising. Paris Banh Mi makes owning your own business a lot easier. Forget the high costs and headaches of starting from scratch. Their low investment and comprehensive training program mean you can be your own boss with a delicious product.  If you are ready to take a bite out of success, contact Paris Banh Mi today!

Chick-fil-A Franchising Opportunities in 2024

Buying a franchise from Chick-fil-A is an excellent money-making and healthy option. The fast-food chain has been serving hungry consumers the most delicious chicken sandwiches unmatched by other fast-food restaurants. Buying a Chick-fil-A franchise means investing in a good business and your future. It also lets you continue the culture behind the popular food chain. Here are Chick-fil-A franchising opportunities that will give you entrepreneurial freedom in 2024. 

Company Overview

Founded in 1946 by Truett Cathy, Chick-fil-A is deemed one of the longest-running chicken sandwich chains in the United States. The founder opened his first chain in Hapeville, Georgia, and has become a favorite soul food for many. Truett had worked in restaurants seven times a week and knew the importance of rest. That’s why he vowed to close Chick-fil-A every Sunday. He values rest and worship, so he sets aside one day of the week for his employees—a practice that Chick-fil-A still upholds today. 

Chick-fil-A also selects franchisees that uphold their values and passion. The company takes great care in selecting who they do business with, which includes getting to know candidates through a lengthy and intensive selection process. The founder’s vision is to influence the people and communities they serve. Chick-fil-A also seeks franchise candidates in Puerto Rico, Canada, and the United States. 

Chick-Fil-A candidates are required to show personal financial integrity and stewardship. They also need to have proven experience in leadership and a strong business acumen. Chick-fil-A ensures that candidates showcase entrepreneurial spirit, a strong character, and a growth mindset. This is to uphold the vision and values that Truett started in 1946. 

Franchise Training Details

• The initial on-site training programs last three to four weeks. However, the duration and actual location of the training will vary. 
• The training program primarily covers operational aspects, such as food preparation, service, customer relations, accounting, communications, purchasing, planning, maintenance, policies, management styles, and marketing. 
• The franchisor may require franchisees to attend various conferences and seminars occasionally. This is on top of the initial training program.
• The franchisor may also offer various programs that operators can use in advertising products or hiring staff, which aren’t stipulated in the Franchise Agreement. 

Franchise Territory

• The franchisor will grant franchisees one Chick-fil-A restaurant at the franchisor’s designated location. 
• Franchisees will not get exclusive or protected territory, so they may face competition from other operators. 

Franchise Obligations and Conditions

• Franchisees must devote their time and effort 100% to operating their Chick-fil-A restaurant. 
• The franchisor only allows franchisees to sell products approved by Chick-fil-A. This also applies to franchisees with a Chick-fil-A-associated food truck. 

Franchise Term and Renewal

The franchise term expires on early December 31, the year the agreement is signed or whatever the lease expiration is. Franchisees may apply for one-year extensions unless written notice is given 30 days before the franchise term expires. 

Financial Assistance

• The franchisor designates locations, leases, and subleases the store’s premises to franchisees. The lease and sublease terms will vary depending on the type of Chick-fil-A restaurant and location. 
• The franchisor also engages in concession agreements that oversee the utilization of non-traditional satellite unit locations with the proprietors or administrators of said satellite unit spaces.
• The franchisor offers extended payment periods for specific pre-opening costs stipulated in the Franchise Agreement. Additionally, the franchisor leases equipment to operators, charging a monthly rental fee based on the fair market rental value established by Chick-fil-A using its singular and exclusive business judgment. It’s important to note that neither the franchisor nor any affiliated entities provide any financing arrangements to operators, either directly or indirectly.

Did You Know?

Here are some fun facts about Chick-fil-A you need to know!

• Did you know that Chick-fil-A only uses peanut oil for frying? That’s what makes the chicken its unique flavor! Chick-fil-A is also the single most significant purchaser of peanut oil in the United States. They also believe peanut oil is a healthier option.
• The best Chick-fil-A promotional gig was the “First 100,” where the first 100 customers inside a new Chick-fil-A restaurant would get free chicken for a year. 
• Did you know that the founder, Truett Cathy, invented the chicken sandwich? He worked for a restaurant in Atlanta, and the newly delivered chicken breasts were too big to serve as airline food. He turned this into a meal for the staff. 
• You can get a free ice cream cone by walking up to the counter and trading your toy when ordering the kid’s meal. 

Franchise Cost

Your investment.

Here are the Chick-fil-A franchise costs:

If you’re looking for another investment opportunity, visit Franchise How’s website for more information. 

Zoom Sewer and Drain Cleaning Franchise Cost

Taking care of your home’s plumbing system is an essential part of being a homeowner. However, not everyone has the skill and patience to do it, and so franchises such as Zoom Sewer and Drain Cleaning are some of the most lucrative. Here’s what you need to know if you’re thinking of getting it:

Franchise Description

Zoom Sewer and Drain Cleaning provides drain cleaning, maintenance, sewer inspections, repair and replacement services for residential and commercial customers. The business began in 1995 and had been franchising since 2013. They have their headquarters in Norristown, Pennsylvania, and Zoom Franchise Company, LLC is the franchisor.

Training for the franchisee’s principal owner and personnel will be provided by the franchisor or its representatives and agents. Before starting your franchise, Zoom Sewer and Drain Cleaning will require you to complete their training program. It comes in two phases:

• Phase 1: 2 to 3 days training at the Franchise Business
• Phase2: 2 to 3 days in Norristown, PA

The franchisor may also require you to attend additional training during the length of your term agreement. The franchisor is planning to hold a 2 to 3-day national Zoom Fest yearly. This will be held in Norristown, PA, or any location it designates. They will require franchisees to attend, but their managers will be welcome.

The franchisor will designate a protected territory where the franchisees will operate their business. Before signing any Franchise Agreement, both the franchisor and the franchisee will agree on a geographic territory. 

The franchisor will base the protected territory on contiguous zip codes that will consist of approximately 500,000 individuals. This will be based on the most recent U.S. Census data at the time of signing the franchise agreement. This means that as long as the deal is taking effect, the franchisor or its affiliates will not locate, operate, or grant a franchise for another Zoom Sewer and Drain Cleaning business within the protected territory.

Obligations

The franchisor requires the franchisee or its principal owner to exert every effort to take responsibility for the management of the business. They will do this on a daily basis unless they agree on an alternate arrangement. With the franchisor’s discretion, the franchisee can hire a manager to handle the operations of the business.

Franchisors will also require you to sell products and services that have their approval. On the other hand, franchisees aren’t allowed to sell unauthorized products or services in compliance with the franchise agreement. Franchisees are also not allowed to solicit business outside of the protected territory. They are, however, permitted to serve customers outside of the protected territory as written in the FDD.

Term of Agreement

The initial franchise will take ten years after the signing of the agreement. You can renew the contract for another ten years, for four times, if you continue to meet the requirements.

Zoom Sewer and Drain Cleaning doesn’t offer direct or indirect financial assistance to its franchisees. In addition, they will not guarantee a franchisee’s note, lease, or obligation.

Get to know more about Zoom Sewer and Drain Cleaning before you get that franchise. Here are some facts about the business:

• They have very little competition in the niche. Most of their competitors are independent plumbers and contractors
• According to the company’s co-founder and COO, Ellen Rohr, this is a recession-resistant business, and the Covid-19 pandemic has proven this
• They have a reported $12 million in revenue with 53 employees and 15 franchisees 

The table below shows the estimated cost of a Zoom Sewer and Drain Cleaning franchise. Take note that these numbers may change without any prior notice.

Other Costs

For other franchising information, check out more articles here at Franchise How !

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Developing a Business Plan for Your Franchise: When and How to Do it

Creating a business plan is a critical step toward the launch of any new business, including a franchise. It’s a step to take earlier in the process than you may think. Will you be seeking financing from a third party? If so, your business plan should be complete before you even ask. And that’s a good thing, because the process of preparing a business plan is very useful. It forces you to anticipate and answer a number of questions about your expectations for the new business. You’ll identify the challenges ahead and be ready to tackle them.

Developing a business plan for a franchise is much easier than for an independent business start-up. You’ll have a good deal of information already at your fingertips or readily available. You can find much of the verbiage you’ll need for the narrative portions of the business plan within the franchisor’s documents. Look to any earnings representations in the franchisor’s disclosure documents to find the financial information you need.

5 Key Sections to Include in Any Business Plan

Each business plan is unique to the particular business it describes. Nonetheless, there are several sections common to any business plan. Franchise business plans will have an additional section outlining the track record, personnel, and support available from the franchise company. You can also include items like the franchise company’s sales brochure or Franchise Disclosure Document (FDD) as attachments to your business plan. This additional section will give lenders (and others you may be trying to impress) a great degree of confidence going forward.

Five key sections contained in a typical business plan, whether for a franchise or independent business, are:

Introduction

This section describes the business in detail. It specifies the product or service involved, the size and characteristics of the market, and the degree of competition present in the market. It also sets forth the operational approach for taking the business to market, as well as any associated challenges and risks.

This section lists key management roles for the new business. It names the people who will fill each role and provides background information about each one. Each bio should emphasize prior experience that’s relevant to the new business. For a franchise business, this section will also include information about the franchisor’s staff who provide support to franchisees.

This section defines the target market: who is your customer and how will you attract them to to the business? It explains advantages your business will offer over competitors and details marketing and advertising plans.

Pro Forma Financial Projections

This section includes projected income statements, cash flow statements, and balance sheets that show the anticipated financial performance of the business. It discloses all material assumptions that are used to prepare the projections. Make sure to prepare these projections on a very  conservative basis. There will always be delays and challenges that you can’t anticipate.

Financing Needs

Be sure to prepare this section even if all funding is coming from your savings. It includes a complete analysis of all start-up costs, including working capital to cover initial marketing plans and operating losses until the projected breakeven point. Even if you are not borrowing, the process of carefully detailing this information will better prepare you for whatever might happen as you get the business up and running.

Don’t be overwhelmed as you consider the information above. Remember, for a franchise business, most of this information will be readily available from the franchisor. Check out the franchise company’s website for information that will help you complete the Introduction and Marketing sections. The franchisor’s FDD will help you with the section on Financing Needs. And, if the franchisor’s FDD includes Item 19 earnings representations , you’ll be on your way to completing the Pro Forma Financial Projections section.

Preparing a Franchise Business Plan: The Early Bird Gets the Worm

Some franchise companies require franchisee candidates to begin work on (or substantially complete) their business plan before they can be approved as a new franchisee. Even if they have no such requirement, it’s a good idea to prepare your business plan relatively early on. The process will help you identify a number of questions that may not have otherwise occurred to you. You’ll then have a chance to contact the franchise company and get answers. Make certain you have a clear understanding of all aspects of the franchise prior to making your final decision.

Finally, remember to update and finalize your business plan after you complete the franchisor’s initial training for new franchisees. You will have a deeper understanding of operations, marketing plans, and many other aspects of the business after you complete the initial training. And many franchisors will supply pro forma financial models that you can use to double-check or even replace the financial projections in your business plan. Take the time to carefully review your entire business plan based on your new knowledge. That way, you’ll be fully prepared to get your new franchise business successfully up and running.

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Advice and Ideas for UK Small Businesses and SMEs

Five good reasons why franchisees should develop a business plan

You will need to put together a business plan when buying a franchise

Here are five reasons why all franchisees should consider the franchise business plan as a crucial part of their franchising journey.

You’ve chosen the perfect brand to invest in, you’ve completed your due diligence and are well on your way to setting up a franchise. So, what next? Well, the first thing you should do is write your franchise business plan .

Many entrepreneurs believe that a business plan is not needed when buying a franchise, but this couldn’t be further from the truth.

Even though you’re investing in a tried and tested operating system and will have access to comprehensive training and support from an experienced franchisor, it’s still your business. The most successful franchises will have started with a plan to develop and grow; and the responsibility for your business plan lies with you.

1. Focus on what’s important

A business plan is a great way to ensure you focus on the key details of your franchise. As well as consideration being given to controllable factors, such as the operating model and growth strategy, it also compels you to think about external influencers.

Who are your competitors? How will the economic climate affect your franchise? Will developments in technology impact your business model? Contemplating how your business will evolve over time just as you’re setting up a franchise allows you to better prepare to run an effective and profitable business.

2. Identify challenges early

The process of writing a business plan makes you reflect on some fundamental questions about the challenges you may encounter whilst building your franchise. Giving these potential issues some consideration before you start your franchise is a good investment of your time and effort. Overcoming a problem that hasn’t been previously deliberated will be much more difficult than coming across a situation where you’ve already thought of the solution.

3. Have a better understanding of how your franchise will perform

The financial projections for your franchise will form the main part of your business plan. It will document how much investment is required to start and run your business; the cash flow. It will also include financial projections for the next three years with an indication of when the break-even point will be achieved.

Not only will it contain profit and loss forecasts and cash flow projections, it will also provide you with a good understanding of how your franchise will perform. This should enable you to confirm to your lenders how you are going to pay them back.

Setting up a franchise compared to starting an independent business means that you’re already at an advantage when it comes to the finances. You’re investing in a business that already has experience of trading, and so the financial element of the plan is based on actuals rather than estimates.

4. You’ll find it easier to secure funding

A franchise business plan has many benefits, but none more so than the role it plays when you approach your bank to secure funding. Banks will almost definitely request confirmation that you’ve fully reviewed the opportunity before they’ll support you to finance your franchise purchase.

Most banks regard franchises as less risky than independent businesses from a financial perspective, as there is a much better understanding of when the franchise will become profitable. Even if finance isn’t required at the beginning of your franchise journey, you may need funding to grow your business in the future.

And so, it’s important to remember, that your business plan is a constantly changing document and should be updated often. If you then decide to expand your business and need to approach your bank for money later, you’ll have all the necessary documentation to hand.

5. Enables you to recruit quality employees

A well-composed plan is also an effective way to attract talent. Recruiting employees with the right characteristics will improve your ability to retain consistency within your franchise; which is a crucial element of the most successful franchises.

Many employees will aspire to own a franchise themselves at some point in the future. Joining a business where they can learn the ropes and develop the skills required of a franchisee will be an appealing opportunity.

So, if your objective is to become amongst the most successful franchises; get planning. There are heaps of books, websites, templates and software to help you write your plan. And remember, there’s no one better to support you then your franchisor , so don’t be afraid to ask.

Further reading

What franchise support should you get from a franchisor.

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Why is a business plan important and what should it include?

Posted: Tue 12th Mar 2019

How do you go from a bright idea to a successful business? Planning. It's easy to imagine successful entrepreneurs played it by ear and got lucky. People often change direction but planning's a crucial part of testing a start-up idea and building a business.

This guide examines why you should write a business plan, what it needs to include and how to use it. We've also highlighted additional resources that can help you go through the process.

Why write a business plan?

Business plans provide accountability. They allow business owners to sense-check what they're doing and why. They provide an opportunity to get ideas out of your head and start working on them.

"Not having to report to anyone is attractive when you start up. As you grow it can be tricky not to have a sounding board. A business plan can be useful for that," said Jonathan Bareham , co-founder of accountancy firm Raeden.

He highlights the role of goal setting in the planning process. Why are you starting a business? Is it because you want a good work-life balance? Do you want to make an environmental impact? It's likely a combination of factors. Writing down your motivation provides a reference for big decisions and makes sure you don't lose focus.

Business plans help explain what you're doing to other people. The process of writing everything down makes sure you can answer key questions about what you're doing.

Hiring people, opening a premise or buying equipment requires significant investment. Planning and justifying what you're going to spend is important. Sharing them externally helps reassure partners, whether you're looking to borrow money or win over a mentor.

What basic things should a business plan include?

Whatever format and length you decide on there are several common topics to cover in a business plan. Bareham outlines five points to include:

A summary of what you're going to do

Details of the market you're going into

What you have that other businesses don't (your unfair advantage)

A cash-flow forecast

Personnel needed

Business owners need to think about the strengths and weaknesses they have, he added. Be honest and make sure you identify where you will need help.

Your cash-flow forecast is crucial. It shows the money coming into your business from customers and what you're spending. This includes costs like buying raw materials, office space, marketing and paying employees. This plan will evolve into a document you look at regularly when the business is up and running.

Enterprise Nation founder Emma Jones compares having a business plan to a route map and uses the acronym 'I'm off' as a memory aid on what to include:

Operations: What kit do you need?

Friends: A support network

You can tailor your business plans to specific audiences and we'll go into the main formats in the next section.

Watch this detailed video with Enterprise Nation adviser and accountant Jonathan Bareham sharing tips on business plans, cash flow, accounts and more.

What business plan format should I use?

There are several formats you can use to create a business plan. It's important to pick the one that's right for your situation. The key considerations are what you know so far and how you're going to use the plan.

You'll generally cover the sections we outlined in the section above but the amount of detail can vary.

If the plan's for the benefit of the business owner you need to think about how much you can know at this point. There are lots of assumptions around sales and costs that you won't know until they're tested. This will limit the level of detail you can include.

The audience is important too. You could write a five-page summary if the business plans just for you. If the business plan's for raising investment or applying for a loan it's going to require more detail and might be 15-20 pages long.

Organisations like the Prince's Trust and Start Up Loans , which offer start-up funding, have templates that they prefer or require applicants to fill out.

David Abrahamovitch, founder and CEO of London café-bar and restaurant company GRIND, told Enterprise Nation  that his founding team didn't create a business plan until they needed to borrow money. He believes a formal business plan doesn't provide much value at the concept stage.

"Business plans absolutely have their place but I see people who are spending months writing a business plan. They're worried about who's going to copy their idea about trademarks. All of these things are important, but at the moment you don't have a business. You don't have a brand to protect. You're worried about the wrong things. "You have to get to the minimum viable form of that business as quickly as possible and just test it."

Abrahamovitch added that things like pop-up stores and online tools mean the barriers to entry are lower than ever, reducing the risk of testing an idea.

What a traditional business plan looks like

What we're calling 'traditional business plans' are A4 documents that cover the key elements of your business. These include five main elements:

The executive summary: Summarise the main points of your business plan. Showcase what you're doing and sell your vision to the reader.

Opportunity analysis: Describe the business opportunity. Look at the size of the market, customer segments, competitors and the key trends.

Marketing: Highlight the key messages you want to communicate to customers and detail the channels you will use to reach them (telemarketing, social media etc.). Provide an idea of cost for this activity and, if possible, the level of business you expect to generate.

Logistics: Plan where and how you are going to operate your business. Include plans for manufacturing, transportation, office costs, staff needed etc.

Finance: Make sure that you detail all your associated costs - both your estimated start-up costs as well as your running costs. Include a cash-flow forecast that shows how your business will become sustainable.

Additional information like the founders' CVs can be included in your appendix. This often depends on what evidence your audience requires and may not be relevant for a document that's used internally.

Presentation is important because it provides credibility. Think about adding company logos, a cover page and other touches that make the document look professional.

Abrahamovitch said writing a business plan is useful to examine what's working, how much energy things take up and the margin of different products when you've tested ideas.

"Distill that down into its simplest form and put that in a business plan," he said. "Talk about how you're going to scale it. That's where it really adds value."

The lean canvas model

The length of traditional business plans can be intimidating. You may also lack the information to complete the document if you haven't started trading yet.

Lean canvas and business model canvas allow you to create a business plan on a single page. The structure examines whether a business idea is viable. The nine boxes capture entrepreneurs' key assumptions, covering topics like metrics and marketing channels.

Lean canvas is designed to provide a snapshot of your idea and challenge the assumptions you've made. It's not meant to be perfect. The inventor of lean canvas model suggests taking 20 minutes to fill everything out.

Test your assumptions through research

Launching and growing a small business is really exciting because you don't know what's going to happen. However, writing a business plan can be daunting as there are so many things you don't know yet.

Make phone calls and search the internet to strengthen your assumptions. It's possible to find information on standard services like accountants, renting desks or buying raw materials.

There are other aspects that are more difficult to predict. Projecting sales, for example, is one of the trickiest parts of forecasting. You love your product but will customers flock to the business?

One opportunity to solve this problem is to do a small amount of test trading. Paying for a market stall may cost you a thousand pounds after you pay for the stock and a location. But the investment may pay dividends if it gives you a reality check on what customers are willing to pay and how popular your offering is. What's the least you can spend to learn the most?

Research competitors offerings too. What are people paying for related products?

Service-based business can have the opportunity to trial their offering part-time. Perhaps you can take on a client while still working your day job.

Make sure you justify any forecasts in your business plan and provide a logical explanation of how you came to your conclusions.

Will a business plan guarantee success?

No. But business plans will help crystallise your goals and test your assumptions. The framework is really useful to develop ideas, particularly if they've been rattling around in your head for some time.

Make sure you return to your business plan regularly. Reinforcing your original goals will help keep you on track. Forecasting is a skill. Check your projections against performance and try to figure out what assumptions were correct and where there were issues.

The way you use business plans will evolve over time. Filling in a lean canvas might work if you have an idea and haven't started working on it yet. Eventually, you might need to create a business plan to land investment or it can provide an opportunity to reassess what you do.

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Do I Really Need a Business Plan for My Franchise?

Published October 13, 2017 by John Moser | Blog , Business Management , Restaurant Franchising

Developing a business plan takes some planning and forethought and entrepreneurs often wonder if one is really necessary. There are a lot of benefits to it though. Here are some reasons developing a business plan from your franchise is a good idea.Developing a business plan takes some planning and forethought and entrepreneurs often wonder if one is really necessary. There are a lot of benefits to it though. Here are some reasons developing a business plan from your franchise is a good idea.

The most important reason to develop a business plan is that it forces you to think about every detail of your franchise and anticipate any problems or issues that might come up. In addition, it highlights for you the importance of having enough money and resources on hand to not only handle the daily running of the franchise, but all the other expenses that might pop up.

Also often times not only does the franchisor require you to submit a business plan, but so does the bank if you are applying for a business loan. Before they hand over any cash, they are going to want prove that you have a successful business venture that is well thought out and that your financial projections are solid.

The good news is that creating a business plan for a franchise is usually easier than if you are starting your own company from scratch. Your franchisor will be providing you a lot of the information, including financial documentation , that will be needed for your plan so that means at least a little less research on your end.

When developing your business plan, make sure you include the following sections:

• An introduction that includes a description of the business in which you highlight the products and services you will provide, a description of the marketplace you will be operating, as well as any risks or challenges you anticipate.
• There should also be a section where you lay out all the key management roles you will need in your franchise. If you already know who will fill these roles, then include a little bio of each of them and/or a resume which highlights their experience related to the running of a franchise.
• A marketing section is also important. Here is where you will lay out the competitive advantages your franchise unit will have as well as give as much of a sense as possible what your marketing and advertising strategies will be.
• You should also include Pro Forma Financial Projections which basically means any income statements, cash flow statements that are relevant to the business as well as balance sheets that project what the financial performance of the business will be once it open. Always make sure your estimates are on the conservative side because you don’t know what kind of delays or obstacles you will face, especially that first year.
• Even if you are funding this whole venture out of your own pocket, in your business plan you should still meticulous list all your startup costs including the money you will need to survive on until your franchise starts turning a profit. Don’t forget to factor in a budget for marketing and advertising and leave yourself a little cushion for lean times or unexpected emergencies or repairs.

Whether or not you have to submit your business plan to the franchisor before being approved to join their system or you just need it for the bank, it is a good idea to develop it as soon as you know which franchise you want to join and before you sign any final paperwork. This way if there are going to be any warning signs on the path you are about to embark on.Before you officially sign off on anything ask to talk to current franchisees and ask the following questions:

Here are the most important franchisees questions to ask:

• How would you rate the franchisor ? Make sure to ask if the franchisee is satisfied with their relationship with the franchisor and what they are like to work with. Specifically ask how much support they give. Are they pretty much hands-on or do they just give minimum training in the beginning and then just collect their fees?
• Have you made the profit you expected to make? Don’t be afraid to talk frankly about numbers. See if they are comfortable being totally transparent with you about their unit’s gross revenues and cash flow. Ask if they have made the profit they expected to make. Also be sure to ask what their pre-tax profits have been for the last three years. These numbers will help give you a better picture of whether these franchises are profitable.
• How much training did you receive? All franchisors give some training to their new franchisees, but it tends to vary across the board. If this is your first time owning a business, then you especially will want a lot of support up front. Ask the franchisees what type of training they had, how long it lasted and if they are given a mentor they can reach out to when they have questions. Ask them to be honest on whether they felt the training was effective or not and if they thought there was enough training.
• What is the supply chain process like? Ask the franchisees you are able to talk to about logistics as well. Find out what supplies and services you are expected to buy from the franchisor and what that process is like. Does the franchisee feel like he or she gets enough supplies in an adequate fashion? Are the products and services you are expected to sell of good quality? Is there a positive customer reaction? Also don’t forget to ask if they feel like they are getting a good price from the franchisor or if they feel like they could getter a better price on their own?
• What are daily operations like? Other good questions to ask include questions about the effectiveness of operational procedures? Are there a lot of rules to follow? Will you be given any operational manuals to follow? Are they well-written and easy to understand? How much freedom are you given to make your own decisions? Is there room for you to implement your own ideas?
• How much assistance do you receive for advertising and marketing? Some franchisors will offer you assistance with advertising and marketing. Many will even have national and regional campaigns that you can participate in. Find out how this franchisor handles advertising and marketing and whether their franchisees feel it is effective or not? Get a good idea of how much it will cost you a month and whether what they provide will be enough to help you attract new customers.

As with any big business decision, make sure you have thought it through very carefully and have done all the research and planning to ensure that your new venture is a success.

Want to learn more about developing a business plan for your franchise? Contact MBB Management today.

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• Business Plan

Why Is a Business Plan Important?

In this article we answer the question: ‘Why is a business plan important?’ In other words, find out how it can shape a business and drive its success.

A carefully crafted business plan is a key element of any successful business – including franchises. Business plans should outline the business’ strategies and your intended method of achieving company goals. It should be a declaration of targets and financial forecasts and include details about you, your background and experience. In developing it, you should think about the types of obstacles and opportunities that you could encounter when running the franchise. But exactly why is a business plan so important? Let’s find out.

Why is a business plan important?

1. helps you make important decisions.

Business plans organise all of your ideas in one place. They highlight where your priorities are and so less important ideas can be left out, saving time and money.

The reality of being an entrepreneur is that it involves making tough choices, considering all the possible ramifications and effective crisis management. As a result, one of the most useful purposes of a business plan is that it helps you make smarter decisions.

Before you start your business, it’s wise to sit down and think about all of its main components, for instance the products and services you will offer and your marketing strategy. A business plan helps you make sure your business idea is feasible by outlining how it will materialise over the coming years. You might find that when writing up your ideas into the structure that it isn’t realistic and that you need to head back to the drawing board.

2. Shows you if your business is feasible

Lots of businesses are born out of passion, but you need to make sure that your idea can turn from concept to reality successfully. Business plans are a great way to prove that your business idea is financially viable and realistically likely to succeed.

>> Read more:

• 5 Advantages of Franchising for Young People
• Becoming a Franchisee: 8 Things You Must Know Before Getting Started
• Mythbusters: Common Misconceptions About What Makes a Successful Franchisee
• 5 Great Reasons to Become a Franchisee
• Franchising 101: Are You Ready to Become a Franchisee?

3. Sets clear objectives and benchmarks

You can set goals and discuss how they will be achieved in your plan. It’s important to look far into the future, including the financial return you are expecting to make. Setting objectives also helps you to be accountable for your long-term vision and realise if you are actually achieving what you set out to.

4. Highlights any gaps in your business strategy

Creating a business plan involves asking yourself lots of tough questions and spending time coming up with the answers. Once everything is organised in an easy-to-read structure, it will be quicker to notice any gaps or factors you haven’t yet considered. Even if you hardly use the document once it has been completed (this is quite unlikely) just writing it up is a very helpful way to iron out the kinks, see how realistic your vision is and decide if they is anything missing in your strategy.

Without this, there’s a chance that problems will arise further down the line, and after investing so much time and money into your new venture this is the last thing you want. Especially if it can be so easily avoided by taking the time to iron out your ideas in the early stages.

5. Gain a deeper understanding of your competition

Even if you think that you know your own business model inside out, it’s just as important to know what’s going on in the broader landscape. Creating your business plan should help provide valuable insights into your competition and the market terrain.

6. Significantly reduces the risks

There’s no denying that starting a business comes with some level of risk (considerably less when investing in an existing franchise), but this is much easier to manage when tested against a well thought-out business plan. Writing down your revenue and expense projections, understanding your market and devising operational plans can massively reduce the risk that is in some way inevitable with entrepreneurship.

7. Helps to secure funding

Lots of banks will want to see a detailed business plan with clear objectives, that answers their questions about profitability and revenue generation, before they decide if and how much they want to invest. As, ultimately, anyone that is considering contributing money to your venture will want to feel confident that its viable for many years to come.

Having a clear action plan will be invaluable in your start-up phase. It will guide you through this critical period and be referred back to frequently. Don’t be afraid to adapt the business plan whenever you feel necessary. It’s better to have an up-to-date business plan at all times so you can showcase the most accurate representation of your business to lenders, partners, recruits etc…

What’s next?

A strong business plan is an essential part of building your franchise business. The good news is that there is plenty of help out there. You can request a template from your franchisor or even download one from a business website. Business planning software can also help, but the entrepreneur community is split as to whether it is worth investing in costly software.

Write your franchise business plan today

Now you’ve got a better understanding of why a business plan is so important, you might be interested in the key elements of the living document. We also have sector specific advice for constructing business plans, including for a hair, beauty or cosmetic franchise and a sports, fitness or gym franchise.

If you haven’t already decided which franchise opportunity you’d like to invest in, we have over 200 that you can browse in our UK franchise directory . Just don’t forget to spend plenty of time working on your business plan before you approach investors. Some banks even prefer to you make your own unique structure rather than using a template, as they think it means you’ve put more thought into it, so that’s something to keep in mind too.

Becky Martin , Point Franchise ©

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The Importance Of A Great Business Plan

Posted: 10 Feb 2018 | 8 minutes read

Richard Holden, head of franchising at Lloyds Banking Group, explains the importance of a great business plan

Franchising is becoming an increasingly popular option for enterprising individuals who are setting up their own businesses, as it provides them with the reassurance of a tried, tested and proven model, as well as initial training and ongoing support.

Business owners looking to secure the financial backing for their franchise investment plans frequently turn to a bank for assistance. One way to guarantee that you receive relevant, sector specific support and funding is to approach a lender that has a dedicated franchise team, such as Lloyds Bank.

In doing so, your bank manager will have a solid understanding of the challenges franchise owners are likely to face and can tailor the most appropriate funding to fit your requirements.

Prospect franchisee certificate

Before your first meeting with the bank manager, it’s important that a comprehensive business plan is produced. If you’ve never written a business plan before, it’s advisable to complete the business planning section of the Prospect Franchisee Certificate, which has been jointly developed by Lloyds Bank and the British Franchise Association.

This modular training programme of informative videos is free and can be accessed via the bfa.trainme.tv website. In addition to covering the financial aspects of franchising, it also provides essential insight into what it takes to be a successful franchisee.

The plan should provide a detailed description of the service and products you’re looking to provide, while outlining your objectives and strategy to build a profitable franchise.

It should be punchy - a common mistake is to make it too detailed. Ensure that it grabs the bank manager’s interest. A bank isn’t looking for a 200-page document going into microscopic detail, however it will expect you to provide commentary on your skills and experience, business objectives, the franchise brand, local market, competitors, potential clients, suppliers, premises, staff, marketing strategy, financial requirements, available security and any contingency plans you may have considered.

Packing the winning punch

How do you ensure your business plan packs the winning punch? There’s truth in the saying: ‘If you fail to plan, you plan to fail’, especially when you’re starting a new business. Those who understand the benefits of business planning are more likely to be successful than those who react to day to day operational issues and are constantly fire fighting problems.

The initial objective of the document is to help you raise finance for the business. It will also help you understand what you wish to achieve and is an essential document to review your performance against your projections, alerting you to anything that’s not going according to plan, as well as identifying potential opportunities for the business.

The plan should demonstrate that you understand the business opportunity and the local market for your product or service. Most banks can provide a business planning template for you. Accountants can also provide advice in producing the plan, but remember it’s your document and is too important to leave to someone else to write.

Financial projections for the business are another vital assessment tool. Most franchisors will provide you with illustrations of possible trading performance, but it’s up to you to dig deeper. Find out what the financial projections are based upon and the assumptions that have been used.

A business plan is a useful tool to help gather thoughts and set objectives for the business. It should demonstrate there is sufficient demand for the product or service and that you have a good understanding of the market. It should also set out the competitive advantage or unique selling point your business may have.

Pitching your plan to your bank manager

Send a copy of your business plan to the bank manager a few days ahead of your appointment to allow them to become familiar with the content.

As your meeting approaches, you should have an excellent understanding of your strategy and it’s advisable to practice a script that briefly introduces your business proposal.

This projects a professional image and offers credibility to your proposition, while the depth of your research will allow you to comfortably answer any questions posed.

The bank manager will naturally be interested in the operational and financial aspects of your business and will expect you to be able to respond confidently and accurately.

Think of those entrepreneurs on BBC’s Dragons’ Den programme. From the outset, many don’t stand a chance of securing the investment they are seeking because their presentation is poorly conceived or they don’t have a good understanding of the key financial information. Consequently, they are unable to establish their own creditability and project confidence in their business.

Funding your franchise development plans

The level of finance available from a bank will depend upon the strength of the franchise system and brand, as well as the business plan you’ve produced. Typically, for well established franchises the bank will consider lending up to 70 per cent of the total set-up costs, including working capital. For newer, less established franchise systems the amount of finance available may be lower.

For lending in excess of £25,000, a bank will probably require security for the loan, which commonly will be a legal charge over a residential property with sufficient equity.

Don’t be put off if there isn’t any security to offer the bank. The government backed Enterprise Finance Guarantee scheme may be available for those who have a strong business proposal, but who lack security that the banks usually require.

It’s sensible to have a contingency reserve fund to fall back on in case the business takes longer to get off the ground than originally anticipated.

Once you’ve established a relationship with your bank and secured the necessary financial support, it’s important to build on this and keep regular communication channels open. Offering regular updates around your progress breeds confidence in your ability to manage the business.

Self-employment can be a daunting prospect, but hard work, determination and a large amount of common sense will take you a long way towards achieving your business goals.

If you set realistic goals and undertake a meticulous planning process, once you’ve delivered your business plan with confidence and answered all questions knowledgably you have the basis for a successful relationship with your bank manager as you look to expand into franchising.

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How to Write a Business Plan for Your Franchise

• September 2, 2022
• No Comments

Katie Fleming

Co-founder and COO of Owner Actions

• Disclosure: Owner Actions may be compensated for sales made through this article. Learn more.

When you apply for an SBA loan , a term loan , or another form of financing, you may need to present the lender with a business plan for your franchise. This plan will describe your business’s purpose and potential and explain how the capital you’re seeking can help it attain its goals.

Why is a business plan for a franchise important to lenders?

Lenders want to see that you have a viable idea and a sustainable plan worth funding. They also want to evaluate whether you have the means to bring your business plan for your franchise to fruition.

When compiled correctly, your business plan will help lenders learn about your business’s financial capacity, the competitive challenges it’s up against, the members of your team who can help you realize your vision, and other important details that can contribute to its success. These elements will help them make assessments about the business’s strength and the likelihood you’ll be able to repay any capital they provide.

What should my plan include?

Your plan should include the following elements:

How can I make my plan look professional?

Here are some tips:

• Use a professional font, like Times New Roman or Calibri, that’s easy to read on- and off-screen.
• Use a bold, slightly larger font for headings and subheadings that’ll help lenders find content quickly and easily as they review your document.
• Create easy-to-read charts that’ll help the lender understand your projections and forecasts.
• Use chart and text colors that are pleasing on- and off-screen.
• Embed color graphics of the facility, team, product, and parts of your processes into the appropriate sections of your plan.
• Ensure that your business’s name and contact information are included on every page of the document. You can insert this information into the document’s header and set it to appear on every page except the cover sheet .
• Run a spelling and grammar check on the document.
• Update the table of contents after finalizing every other change.

Before you submit the plan, you should print a hard copy and review it for typos and formatting issues. Once the document is ready, you can print it to a PDF file and submit it to your lender.

Can you help me write my business plan?

Yes! With our newest service, we can structure, draft, and polish your business plan. You can learn more about this done-for-you service here .

Looking for a DIY option? Try a service like LivePlan , which can help you pitch, plan, and track the success of your business plan. Many owners use this service to browse more than 500 sample plans, organize their ideas, build robust financial projections, and access professional guidance through the planning process.

Want a pro to look it over when you’re finished? We’re happy to consult and provide the expert feedback you need. Check out how we can help here .

Projectionhub is another great service that can help you take on the projection piece of your plan. This service offers 50+ industry-specific templates expertly prepared by a CPA for as little as $49. For a limited time, you can save up to 15% on this service with the code OWNERACTIONS (some restrictions apply; contact Projectionhub for details).

What’s next?

Securing financing is a major milestone in the acquisition process. After you write your business plan for a franchise, you’ll work through other tasks that’ll help you prepare for operations. Log into your owner’s portal for articles, checklists, and advice on finding a location, hiring your employees, preparing for opening day, and more.

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14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

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• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

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• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

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Reasons Why a Business Plan Is Important for Entrepreneurs

Editor's Note: This post was originally published in September 2018 and has been updated with new content that highlights the importance of proper business planning in 2021's economy.

What is a business plan? For people who are just starting out and forming their own company, whether it's a small freelance business at home or a new venture with an office and a starting pool of employees, there's a lot of importance to a business plan. It is a road map, an outline, a document that explains what your business is, what the goals of the enterprise are, and how exactly it will set about achieving those goals. So beyond being a document that identifies your business, what else does such a plan do for you?

1. Target Your Problems

2. Get Better Advice

The importance of a business plan to entrepreneurship can also be in the way it crystallizes just what kind of help you need. Merely telling a friend or potential business mentor you're aiming to start with ten employees, for example, is not an exceptionally detailed statement. Showing a business plan that outlines the exact duties, salaries, and expectations you have for employees gives far more information for people to provide advice about.

3. Organize Your Resources

A business plan is also essential as the primary guide for how you will structure and allocate your resources. It's here that you will see just how feasible it is to open an office, hire employees, and look at operating costs. The business plan can quickly show you whether you will be making a profit or running at a loss, and it shows how much those losses may be every month.

4. Approach Investors

For some, this may be critical. Investors want to know that you know what you’re doing. A business plan can often be the single most important document you can present to your investors that will provide the structure and confidence that they need to make decisions about funding and supporting your company.

5. Create Milestones

A business plan is also a plan of action. By laying out milestones, you now have targets to shoot for in the short, mid and long term. These goals also mean that you can "course correct" with greater agility if you have targets and realize that you may need to make some changes in order to meet them.

The importance of a business plan can be critical for entrepreneurs. Business may have some artistry to it, but real success comes from having a vision and being organized in the way you strive towards that vision. A business plan will help you immensely and in so many ways!

Template for a Business Plan for Entrepreneurs

To determine whether you have a solid business idea, you will need to do thorough research and create a business plan to see if your idea is feasible. Here is a simple business plan template that is broken into sections that include the key elements for what goes into each step of the process to help get you started.

Section 1: Executive Summary

Write an executive summary. The purpose of the executive summary is to give readers a high-level view of the company and the market before delving into the details. It appears first but is written last and provides a snapshot of your company explaining who you are, what you do, and why. The executive summary provides a short, concise, and optimistic overview of your business to capture the reader's attention and create a need to learn more.

Section 2: Business/Industry Overview

Describe your company and business model by summarizing what your company does, your mission statement, location details, business structure and business owner details, the marketplace needs that your business is trying to meet, and how your products/services meet those needs. Define your business's purpose (mission) and a statement based on your perception of the company's growth potential (vision). Include specific business goals and objectives. Provide background information about the company, including a brief history of the business and a list of fundamental company principles.

Section 3: Market Analysis and Competition

Analyze your market's conditions. The market will ultimately determine how successful your business will be. You will need to demonstrate that you have thoroughly analyzed your target market and have a high-enough demand for your products/services to make your business viable. The competitive analysis should include a comprehensive assessment of your competition and how your business will compete in the sector. Describe the industry within which your business will operate, identify and provide a general profile of your target market, and describe what share of the market you currently have or anticipate. Include both an analysis of research done by others, along with primary research you have collected yourself — whether via customer surveys, interviews, or other methods. Outline the strengths and weaknesses of potential competitors and strategies that will give you a competitive advantage.

Section 4: Sales and Marketing Plan

Design a marketing and sales strategy. Here is where you can plan out your comprehensive marketing and sales strategies to cover how you plan on selling your product. Before working on your marketing and sales plan, you will need to have your market analysis completely fleshed out and choose your target client personas, i.e., your ideal customers. Talk about the competitive landscape. Describe how you intend to entice customers to buy your products or services, including advertising and promotion, sales and distribution, pricing strategy, and post-sales support.

Section 5: Ownership and Management Plan

Outline all operations and management roles. This section describes the ownership, legal structure, and your business's management and staffing requirements. Use this section to outline your company's unique organizational and management structure. Describe how your company is organized, including its legal structure (sole proprietorship, partnership, corporation); identify any special licenses or permits your business operates with; provide a brief bio of key managers within your company; include an organization chart.

Section 6: Operating Plan

The operating plan outlines your business's physical requirements, such as office, warehouse, retail space, equipment, inventory and supplies, and labor. For a one-person, home-based consulting firm, the operating plan may be short and straightforward. However, for businesses such as restaurants or manufacturers that require custom facilities, supply chains, multiple employees, and specialized equipment, the operating plan may need to be very detailed.

Section 7: Financial Plan

This section is the most crucial part of the business plan, especially if you need debt financing or want to attract investors. The financial plan must demonstrate your business' growth and profitability potential. To do this, you will need to provide projected income statements, cash flow statements, and balance sheets. For new businesses, these are forecasts. A golden rule of thumb is to underestimate revenues and overestimate expenses. Outline your financial model, including your business costs, revenue projections, and a funding request if you pitch to investors. Your start-up cost refers to the resources you will need to get your business up and running — and an estimate of how much each of those resources will cost.

Section 8: Appendices and Exhibits

Summarize the above with an appendix. The appendices and exhibits section should contain any detailed information needed to support other areas of the plan, including company brochures, resumes of key employees, a list of business equipment, copies of press articles and advertisements, pictures of your business location and products, any applicable information about your industry or products, key business agreements such as lease, and contracts.

Who Needs a Business Plan?

Start-up Businesses : The most classic business planning scenario is for a start-up, for which the plan helps the founders break down uncertainty into meaningful pieces, like the sales projection, expense budget, milestones, and tasks. When you realize you do not know how much money you need or when you need it without first laying out projected sales, costs, expenses, and payment timing, the need becomes apparent. And that is for all start-ups, whether they need to convince investors, banks, or family and friends to part with their money and fund the new venture. Existing Businesses : Established businesses use business plans to manage and steer their business strategies to address changes in their markets and take advantage of new opportunities. They often use plans to reinforce strategy, establish metrics, track results, manage responsibilities and goals, plan and manage critical resources such as cash flow, and set regular review and revision schedules. Business plans can be a powerful driver of growth for existing businesses.

Finding the Right Plan for You

Considering that business plans serve diverse purposes, it is no surprise that they come in various forms. But before you even start writing your business plan, you need to think about who the audience is and your plan's goals. While there are standard components found in almost every business plan, such as sales forecasts and marketing strategy, business plan formats can differ depending on the audience and business type. For example, if you are building a biotech firm plan, your plan will detail government approval processes. If you are writing a restaurant plan, details about location and renovations might be critical factors. The language you would use in the biotech firm's business plan would be much more technical than the language you would use in the restaurant plan. Plans can also differ significantly in length, detail, and presentation. Those that never leave the office and are used only for internal strategic planning and management may often use more casual language and might not have much visual polish. On the other end of the spectrum, a plan destined for a top venture capitalist's desk will have a high polish and focus on the business' high-growth aspects and the experienced team to deliver desirable results.

Elements of a Business Plan

While the plans may vary by type, certain key elements appear in virtually all business plans. These components include the review schedule, strategy summary, milestones, responsibilities, metrics (numerical goals that can be tracked), and basic projections. The projections include sales, costs, expenses, and cash flow. These core elements grow organically for the actual purpose needed for the business.

Developing a High Power Business Plan

The business plan development process described here can provide the guidance entrepreneurs require for developing a business plan best suited for their needs; a high power business plan.

The Stages of Development

There are six stages involved in developing a high-power business plan.

Essential Initial Research

This stage requires you to analyze the environment in which you anticipate operating at each of the societal, market, industry, and firm levels of analysis. In this planning stage, the essential initial research is a necessary first step for better understanding the trends that affect their business and their decisions to lay the groundwork for and improve their potential for success.

Business Model

Inherent to any business plan is a description of the entrepreneur's chosen business model that will best ensure success. Based upon your essential initial research of the setting in which you anticipate starting your business (your analysis from stage one), you should determine how each element of your business model might fit together to improve the potential success of your business venture. These elements include their revenue streams, cost structure, customer segments, value propositions, key activities, and key partners.

Initial Business Plan Draft

This stage involves taking the knowledge and ideas developed during the first two stages and integrating them into a business plan format. A suggested approach is to create a complete draft of the business plan with all the sections, including the front part with the business description, values, vision, mission, value proposition statement, a preliminary set of goals, table of contents, and lists of tables and figures set up using the software features enabling their automatic generation. Writing all the operations, human resources, marketing, and financial plans as part of the first draft ensures that all these necessary parts can be appropriately integrated. The business plan should tell the story of a planned business start-up in two ways: using primarily words, along with charts and graphs in the operations, human resources, and marketing plans, and through the financial plan. Both approaches must tell the same story.

Making Business Plan Realistic

The first draft of a business plan will seldom be realistic. As you write the plan, it will naturally change as new information is gathered. Another factor that commonly renders the first draft unrealistic is the difficulty in ensuring that the written section—in the front part of the plan and the operations, human resources, and marketing plans—tells the same story as the financial part does. This working stage involves making the necessary adjustments to the plan to make it as realistic as possible.

Making Plan Appeal to Stakeholders and Desirable to the Entrepreneur

A business plan can be realistic without appealing to potential investors or other external stakeholders, such as suppliers, employees, and needed business partners. It may also be realistic and possibly appealing to stakeholders without necessarily being desirable to the entrepreneur. During this stage, try to keep it as realistic as possible when adjusting the plan to appeal to potential investors and yourself.

Finishing the Business Plan

The final stage involves putting all the essential finishing touches on the business plan so it will present well to potential investors and alike. This step involves ensuring that the math and links between the written and financial sections are accurate. It also involves ensuring that all the needed corrections are made to the formatting, spelling, and grammar. The ultimate set of goals should be written to appeal to targeted readers and reflect what the business plan specifies. An executive summary should be written and included as the final step.

FAQs about Business Plans

What are the 4 types of business plans.

1. Mini-plan : A mini-plan may comprise one to 10 pages and include at least cursory attention to such critical matters as business concepts, financing needs, marketing plans, and financial statements, especially cash flow, balance sheet, and income projections. It is a great way to quickly test a business concept or measure the interest of a potential partner or minor investor. It could also serve as a valuable prelude to a full-length plan later on.

2. Working Plan : A working plan is a tool to operate your business. It should be lengthy in detail but may be short on presentation. As with a mini-plan, you can probably afford a somewhat higher degree of candor and informality when preparing a working plan.

3. Presentation Plan : If you take a working plan, with its low stress on cosmetic appeal and impression, and twist the lever to boost the amount of attention paid to its visual appearance, you will end up with a presentation plan. This plan is suitable for showing to financiers, investors, stakeholders, and others outside the company.

4. Electronic Plan : Most business plans are composed on a computer, then printed out and presented in hard copy. However, more and more business information transferred between parties only on paper can now be sent electronically, so you may find it convenient to have an electronic version of your plan available. An electronic plan can be useful for presentations to groups using a computer-driven overhead projector, for instance, or for satisfying the demands of discriminating investors who want to delve deeply into the underpinnings of complex spreadsheets.

What are the 3 main purposes of a business plan?

1. Establish a business focus : The primary purpose of a business plan is to establish your plans for your business's future. These plans should include goals and milestones alongside detailed steps on how the business will reach each step. Creating a roadmap to your goals will help determine your business focus and pursue growth.

2. Secure funding : One of the first things private investors, banks, and other lenders look for before investing in your business is a well-researched business plan. Investors and stakeholders want to know how you operate your business, revenue and expense projections, and how they will receive a return on their investment.

3. Attract executives : As your business grows, you will likely need to add executives to your team. The business plan helps you attract executive talent and determine whether they are a good fit for your company.

What are the 5 elements of a business plan?

1. Business concept : Describes the business, its products/services, and the market it will serve. It should point out exactly what will be sold, to whom, and why your business will hold a competitive advantage.

2. Financial features : Highlights the important financial points of the company, including sales, cash flows, profits, and return on investment.

3. Financial requirements : Clearly state the capital needed to start the business and expand. It should detail how capital will be used and the equity that will be provided for funding. If the loan for initial capital is based on security instead of equity, also specify the source of collateral.

4. Current business position : Furnishes relevant information about the business, its legal form of operation, the principal owners, when it was formed, and key personnel.

5. Major achievements : Details of any developments within the company essential to the business's success. Major achievements include patents, prototypes, location of a facility, any binding contracts that need to be in place for product development, or any test marketing results.

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About The Author

Daniel plays a fundamental role in WSI’s global franchise expansion and development. He has since overseen WSI’s franchise development process, and he is personally associated with the recruitment of 600+ global franchisees.

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More From Forbes

The five whys of franchising.

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CEO of  Dudan Partners , a published author, Forbes contributor, speaker, YPO Member, founder and consultant to emerging brands. 

It’s no secret that events as of late have inflicted massive damage on the global economy. Individuals facing unemployment through no fault of their own are now looking for a way to take control of their own lives, and I believe franchising can be the perfect avenue to do so. 

As a franchise executive and CEO of a company that provides franchise consulting services, I’ve found that franchising provides unique opportunities for personal, economic and career development. The five most important of these are: 

• Security 

• Problem-solving 

• Life transitions

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024.

• Entrepreneurial education

No matter what industry you are in, equity is one of the most valuable assets you can acquire. 

When you buy a franchise, you are paying the franchisor for the right to operate a well-developed and tested business model under an established and recognizable brand name. While there may be royalties and other fees associated with the operation of the business, you are still the business owner. This means that you own the business. And in most franchise models, you will be able to sell the business and turn your equity into real dollars. 

Security 

As a franchise owner, you are your own boss. Once you invest in a concept and become a franchisee, nobody can fire you from that position so long as you remain compliant with the franchise agreement.

For many people, this is the most attractive part of becoming a franchise owner. Some franchisees I work with come to me frustrated with their experience in the corporate world, whether it be that they were let go after years at a company, are frustrated with the lack of upward ascension or dealt with a number of other issues. Taking the leap to become a franchise owner means that you can take your life into your own hands and decrease the number of uncontrollables. 

Problem-Solving

Becoming a business owner through franchising is a strong method for solving financial problems. 

Maybe you have a couple of kids who need college funds. Maybe you’re trying to plan for a happy and secure retirement. No matter the situation, with the right franchise model, opening a franchise with a tried-and-true business model can provide you with quicker and larger returns than many salaried jobs or opening a de novo business from the ground up.

As many franchisees have found out, the more effort you put into your franchise, the larger the return you can earn. Work hard and you’ll find that your goals are much more achievable than you may have thought. 

Life Transitions

Maybe your desire for change isn’t due to economic issues or job instability. Perhaps you’re exploring franchising because you’re bored with your job or position in life. Franchising is often a lower-risk investment that allows you to expand your business horizons while taking your life into your own hands. 

One of the many great things about franchising is that you can buy a franchise in virtually any industry. If you’re passionate about fitness, you can invest in a gym concept and become your own gym owner. If you’re passionate about animals, you can invest in a dog-training concept and work with animals as a business owner. From hair cuts to environmental services to restaurants, there is a concept out there to suit your interests. 

Entrepreneurial Education

While there are many differences between starting your own business and owning a franchise, becoming a franchisee is a very good way to learn about how to start and run a business while decreasing the risk of failure. 

You can learn how to calculate start-up costs, market to a certain demographic, sell your service or product, manage a number of employees and learn about finance, accounting and insurance. 

Plus, as a franchisee, you have the opportunity to understand what it takes to franchise a concept. You can use this franchisee experience as a stepping stone to starting your own concept — and perhaps franchising it yourself one day. 

Getting involved in franchising is a great way to become an entrepreneur and take control of your own life. If you are frustrated with the corporate world and itching for personal, economic or career development, franchising just may be the answer. 

Choosing The Right Franchise

So you decided that franchising sounds like the next big step. How do you choose the right franchise for your needs? 

The first step is to identify the outcomes that are important to you. Are you looking for immediate cash flow, or are you willing to invest longer to ultimately get a larger return or build greater equity? Do you have specific financial goals, such as paying for a college education or retirement? Do you want to use a business to relocate? Are you looking for a business you can expand to multiple locations, or do you desire to operate one? How long is your commitment? Is there a certain industry you are passionate about and want to use franchising as a tool to get into? 

The next step is to be clear about your role in the franchise business. Do you want a model that you have to constantly be hands-on with, or are you looking for more of a passive investment? Is this a sales or operationally focused business? Do you want to deal directly with the public or customers?

Once you have answered these questions, you should then consider the amount of risk you are willing to take on in terms of your financial capacity and willingness to invest. 

Lastly, and perhaps most importantly, you should consider the experience and sustainability of the franchisor. Who are the leaders behind the franchise? How much experience do the leaders or does the company have in franchising? Do they have a good reputation in the franchise industry?  

Answer these questions and you’ll be on your way to freedom through entrepreneurship and financial happiness via franchising. 

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Advantages and Disadvantages of Franchising

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If you’re looking to start a business, one of the considerations and questions you need to ask yourself is whether you want to start an independent business or a franchise. There are many advantages of franchising, as well as disadvantages—for both franchisees and franchisors.

When considering if you want to get involved with a franchise, you need to weigh all the benefits of franchising, but also all the potential risks you might face. In this guide, we’ll outline these pros and cons so you can decide if franchising is the right move for you.

Advantages of franchising for the franchisee

The franchisee is the third-party buyer who purchases the brand rights from the franchisor (the owner of the brand). The franchisee pays an initial franchise fee to the franchisor for the rights to use their brand in addition to ongoing franchise fees for marketing, royalties, and more.

There are several advantages of franchising for the franchisee, including:

1. Business assistance

One of the benefits of franchising for the franchisee is the business assistance they receive from the franchisor.

Depending on the terms of the franchise agreement and the structure of the business, the franchisee might receive essentially a turnkey business operation. They may be provided with the brand, the equipment, supplies, and the advertising plan—essentially everything they need to operate the business.

Other franchises may not provide everything, but all franchises provide the knowledge and wisdom of the franchisor. Whether that knowledge is stored in a searchable, digital knowledge base or is a phone number to reach the franchisor directly, the franchisee has access to a deep reservoir of business assistance to guide them through the process of owning and operating a business. This knowledge can be essential to running a successful business and makes it much easier than starting a business from scratch.

2. Brand recognition

A big benefit that franchisees receive when opening a franchise is brand recognition. If you start a business from scratch, you would have to build your brand and customer base from the ground up, which would take time.

Franchises, on the other hand, are already well-known businesses with established customer bases built in. So when you open a franchise with this recognizable branding, people will automatically know what your business is, what you provide, and what they can expect.

3. Lower failure rate

In general, franchises have a lower failure rate than solo businesses. When a franchisee buys into a franchise, they’re joining a successful brand, as well as a network that will offer them support and advice, making it less likely they’ll go out of business.

As well, franchises have already proven their business concept, so you have reassurance that the products or services you’ll be offering are in demand.

4. Buying power

Another benefit of franchising is the sheer size of the network. If you’re operating a standalone business and need to order products or supplies to make your products, you’re paying more money per item because your order is relatively small.

However, a network of franchises has the opportunity to purchase goods at a deep discount by buying in bulk. The parent company can use the size of the network to negotiate deals that every franchisee benefits from. A lower cost of goods lowers the overall operation costs of the franchise.

In general, franchises see higher profits than independently established businesses. Most franchises have recognizable brands that bring customers in droves. This popularity results in higher profits. Even franchises that require a high initial investment for the franchise fee see high return on investment.

6. Lower risk

Starting a business is risky. This is true whether a business owner is opening an independent business or purchasing a franchise. That being said, the risk is lower when opening a franchise.

One of the reasons franchise owners face lower risk than independent business owners is the franchise network. Most franchises are owned by established corporations that have tested and proven the business model of the franchise in multiple markets.

This lower risk may also make it easier to access loans, including the best SBA franchise loans, to help you launch your business.

7. Built-in customer base

One of the biggest struggles of any new business is finding customers. Franchises, on the other hand, come with instant brand recognition and a loyal customer base. Even if you’re opening the first branch of a franchise in a small town, the likelihood is that potential customers are already familiar with the brand from exposure to TV commercials or travel to other cities.

8. Be your own boss

One of the biggest benefits of owning a business is being your own boss. When starting a franchise business, you get to be your own boss with the added benefit of receiving support from the franchise’s knowledge base.

Owning a business is hard work, but when you’re your own boss, you get to create your own schedule, have autonomy over your career, and potentially work from home.

A franchise gives you the benefit of being your own boss without the risk of starting your own independent business.

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Disadvantages of franchising for the franchisee

While there are many advantages of franchising, it would be remiss to think there aren’t also disadvantages. Let us explain further.

1. Restricting regulations

While a franchise allows the franchisee to be their own boss, they’re not entirely in control of their business, nor can they make decisions without taking into account the opinion of the franchisor.

For most franchisees, the most frustrating disadvantage that they face is that they must follow the restrictions laid out in the franchise agreement. The franchisor can exert a degree of control over the majority of the franchise business and decisions made by the franchisee.

Depending on the franchise agreement, the franchisor can control any of these aspects of the business:

Business location

Hours of operation

Advertising and marketing

Resale conditions

These restrictions are put into place to maintain uniformity between the different franchises and the overall brand, but they can also be frustrating and feel limiting for the franchisee.

2. Initial cost

While the initial investment of the franchise fee buys a lot of benefits for the franchisee, it can also be costly—especially if you’re joining a very well-known and profitable franchise. While this often translates to larger profits, coming up with this initial money can put a strain on any small business owner.

Even if you opt for a low-cost franchise , you’ll likely still have to front a few thousand dollars. While this can be seen as a disadvantage of franchises, it’s important to weigh the opportunity against the initial investment and find the right balance for your business. And keep in mind, there are also franchise financing options to help you come up with this initial cost.

3. Ongoing investment

In addition to the initial investment you’ll have to provide to start your franchise, there are additional, ongoing costs that are unique to franchises. Within the franchise agreement, the ongoing costs of the franchise should be enumerated. These costs might include royalty fees, advertising costs, and a charge for training services.

You’ll want to keep these ongoing fees in mind when you’re deciding whether to start a franchise.

4. Potential for conflict

While one of the benefits of owning a franchise is the network of support you receive, it also has the potential for conflict. Any close business relationship, especially when there’s an imbalance of power, comes with a risk that the parties won’t get along.

While a franchise agreement states the expectations of both the franchisee and franchisor, the franchisee has minimal power to enforce the franchise agreement without a costly legal battle. Whether it’s lack of support or simply a clash of personalities, the closeness of the business relationship between franchisor and franchisee is rife for conflict. A franchisor should screen all potential franchisees before entering into business with them, and as the franchisor, you should also use this opportunity to get a feel for the franchisor’s personality and management style.

5. Lack of financial privacy

Another disadvantage of franchising is a lack of privacy. The franchise agreement will likely stipulate that the franchisor can oversee the entire financial ecosystem of the franchise. This lack of financial privacy can be seen by franchisee as a disadvantage of owning a franchise; however, it may be less of an issue if you welcome financial guidance.

Advantages of franchising for the franchisor

The advantages and disadvantages of franchising don’t solely apply to the franchisee, of course. The franchisor should also weigh the pros and cons before deciding to enter into this business model. First, let’s explore the benefits of franchising that the franchisor can enjoy.

1. Access to capital

One of the biggest barriers to expansion for small business is the money it costs to expand. And while there are several business loan options, they don’t always pan out. Franchising your business will take some time and money on your end, but it also has the potential to make you a lot of money in the form of franchise fees.

Expanding your business as a franchise allows you to expand with little debt. The business expands as capital becomes available from franchisees instead of taking on debt through loans. The franchisor also shares minimal risk with the franchisee because the franchisee puts their name on the deed for the physical location of the business and lowers the franchises overall liability.

2. Efficient growth

Opening the first unit of a business is costly and time consuming. Opening a second unit can be almost as difficult. When that burden is shared with another business owner, it makes the process more efficient and takes the onus off the initial business owner.

When trying to grow your small business, starting a franchise can make opening multiple locations a much simpler process.

3. Minimal employee supervision

One of the big stresses as a business owner is hiring and managing employees. As a franchisor, the only support that you have to provide to the franchisee is training and business knowledge. In general, the franchisor has no hand in the management, hiring, and firing of employees.

This minimal employee supervision allows the franchisor to focus on the growth of the business instead of day-to-day operations. Instead of worrying about whether an employee shows up for their shift or not, the franchisor is focused on the big picture for business success.

4. Increased brand awareness

One of the many benefits of franchising is increased brand awareness. The more locations the brand has, the more people who are aware of the brand. And the more these customers come to know and love the brand, the more profitable and successful the brand can be. This increased brand awareness of a multi-location franchise can be highly beneficial to the franchisor and their franchisees—a win-win.

5. Reduced risk

One of the biggest benefits to the franchisor in a franchise agreement is the ability to expand without an increase in risk. Because the franchisee takes on the debt and liability of opening a unit under the name of the franchise, the franchisor gets all the benefit of an additional location without taking on the risk themselves.

Additionally, the franchisor is often further insulated because the franchise is incorporated as a new business entity, leaving the original business owned by the franchisor as a separate entity from the franchise. A franchise lawyer can help to set up the terms for this type of protection within the franchise agreement.

Disadvantages of franchising for the franchisor

While franchisors receive a lot of benefits from starting a franchise, there are also some disadvantages to consider.

1. Loss of complete brand control

When a business owner opens an independent business, they maintain complete control over their brand and every decision that happens within the business.

When a franchisor allows a franchisee to open a business under their brand, they’re giving away (actually, selling) some of the control over their small business branding. While the franchise agreement should contain strong stipulations and rules to guide the decisions made by the franchisee, your franchisees won’t be clones of you. They will think and act differently, and your brand could wind up suffering because of it.

2. Increased potential for legal disputes

Any time you enter into a close business agreement with other people, you open yourself to the risk of legal disputes. While a well-crafted and lawyer-approved franchise agreement should limit a lot of the possibilities for legal disputes between the franchisor and franchisees, these disputes are still possible.

Any legal disputes that must be resolved in mediation or through the court system can be costly in both time and money, which takes away from the success of the franchise.

3. Initial investment

While much conversation is devoted to the initial investment that a franchisee must make in the franchise, that ignores the initial cost that is taken on by the franchisor.

When a franchisor starts a franchise, there’s a startup cost to get the business in operation. A franchisor must make sure that the franchise agreement is written clearly and reviewed by a lawyer experienced in franchise law. You may also hire a franchise consultant for expertise during this process. Starting a franchise requires an initial investment of both time and money on the part of the franchisor.

4. Federal and state regulation

While not entirely a drawback, dealing with the federal regulations set down by the Federal Trade Commission for franchises can be a nuisance for franchisors. These regulations ensure that franchises are operated fairly, but it also requires time and effort from the franchisors to meet all of these regulations.

And while you don’t have to file your agreement with the federal government, you do have to file with some states—and you will have to make sure you’re compliant with different state’s laws. This can be a time-consuming process, but can be made easier with professional guidance.

LLC Formation

The final word

Like most other business decisions, starting or buying into a franchise has its pros and cons. And not all franchises or franchise relationships are created equally. It’s important to do research before choosing the franchise that’s right for you and to understand all the advantages and disadvantages of franchising that you may come across as either the franchisee or franchisor.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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12 Reasons You Need a Business Plan In the new book "Write Your Own Business Plan," business expert Eric Butow breaks down how a solid business plan can save your startup during those tough early days.

By Dan Bova Sep 19, 2023

Running a business can be unpredictable, which is why having a solid business plan as a foundation is vital to surviving and thriving in the early days of your startup. Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to write the second edition of our best-selling book Write Your Business Plan , providing you with a roadmap for success.

In the following excerpt, Butow explains how a well-thought-out plan can power your startup and help your vision come to life.

Business plans could be considered cheap insurance. Just as many people don't buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas, intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.

1. A plan helps you set specific objectives for managers.

Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.

2. You can share your strategy, priorities, and plans with your spouse or partner.

People in your personal life intersect with your business life, so shouldn't they know what's supposed to be happening?

Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium

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3. Use the plan to explain your displacement.

A short definition of displacement is, "Whatever you do is something else you don't do." Your plan will explain why you're doing what you've decided to do in your business.

4. A plan helps you figure out whether or not to rent or buy new space.

Do your growth prospects and plans justify taking on an increased fixed cost of new space?

5. You can explain your strategy for hiring new people.

How will new people help your business grow and prosper? What exactly are they going to do?

6. A plan helps you decide whether or not to bring on new assets.

How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what's going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.

7. Share your plan with your team.

Explain the business objectives in your plan with your leadership team, employees, and new hires. What's more, make selected portions of your plan part of your new employee training.

8. Share parts of your plan with new allies to bring them aboard.

Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.

9. Use your plan when you deal with professionals.

Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.

Write Your Own Business Plan is available now at Entrepreneur Bookstore | Barnes & Noble | Amazon

10. Have all the information in your plan when you're ready to sell.

Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and why they want it.

11. A plan helps you set the valuation of the business.

Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. Usually, that takes a business plan as well as a professional with experience. The plan tells the valuation expert what your business is doing, when it's doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.

12. You can use information in the plan when you need cash.

Seek investment for a business no matter what stage of growth the business finds itself in. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.

Entrepreneur Staff

VP of Special Projects

Dan Bova is the VP of Special Projects at Entrepreneur.com. He previously worked at Jimmy Kimmel Live, Maxim, and Spy magazine. His latest books for kids  include  This Day in History , Car and Driver's Trivia Zone ,  Road & Track Crew's Big & Fast Cars , The Big Little Book of Awesome Stuff , and  Wendell the Werewolf . 

Read his humor column This Should Be Fun  if you want to feel better about yourself.

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How to Start a Franchise In 7 Steps

Starting a franchise can be a big undertaking. But it can come with a number of benefits, including pre-established brand awareness, a framework for success, and built-in customer base. For those entrepreneurs looking to franchise, knowing where to start and having a plan is critical.

• As a franchisee, you need to know what to expect and the types of costs you will encounter along the way. In this blog, we cover seven foundational steps you can take to start your own franchise.

What Is a Franchise?

A franchise is a business arrangement where the franchisor grants the franchisee a license to access their processes, trademarks, and proprietary business knowledge. This allows the franchisee to sell the product or service under the franchisor’s business name without the franchisor having to manage every location themselves.

Franchising offers a proven path for entrepreneurs to start a business locally, while leveraging the strengths of an existing brand. From establishing a solid business plan to navigating legal requirements, the journey to franchise success begins with careful planning and strategic decision-making.

How to Start a Franchise In 7 Simple Steps

#1: plan and research franchise opportunities.

The first step in determining how to franchise a business involves a few key questions:

• Do you have a future vision for your business?
• Do you have the capital to start a franchise?
• Which industry is right for your franchise?

These questions can only be answered by you after evaluating and determining how franchising fits with your specific goals and objectives. Use tools like FranchiseDirect or FranchiseforSale.com to determine potential franchise prospects by location, investment level, or industry.

Begin by exploring various franchise opportunities to find a market that matches your interests, skills, and financial capabilities. Evaluate factors, such as market demand, competition, and brand recognition.

#2: Pinpoint Spend and Cost Budget

Starting a franchise is a large financial commitment. The initial investment to start a franchise can range widely, from $10,000 to $5 million, with most falling within the $100,000 to $300,000 range. The exact amount varies based on factors such as industry, location, and the specific type of franchise. Focusing on developing a finance plan early on can aid in the overall business venture.

#3: Set Business Plans and Goals

Even though many parts of the franchise are already defined, you still have control over its most important aspects. Creating a business plan will describe how your specific franchise will achieve the overall goals and objectives.

• Conducting industry research, local market trends, and creating a franchise business plan is essential for becoming a successful franchisee.

Developing this plan involves thorough research, a clear business idea, a robust financial strategy, effective marketing and sales plans, detailed operations planning, and a capable management team.

#4: Get a Franchise License Agreement

According to franchise laws, a franchisor is obligated to provide a Franchise Disclosure Document (FDD) before offering or selling a franchise. At the federal level, and in numerous states, there is no mandate to formally register an FDD.

However, in the 13 states, known as franchise registration states , a franchisor must register its FDD with the state’s franchise regulator before offering or selling a franchise within that state. In the nine states designated as franchise filing states , a franchisor must file a notice with the state regulator before offering or selling a franchise in those states.

#5: Form a Business Entity

Limited liability companies, or LLCs, provide business owners with liability protection, lower startup costs, and greater flexibility for management and taxes compared to other business structures, making them an attractive choice for many small business and franchise owners. Consider forming an LLC as you begin your journey to franchise ownership.

#6: Choose Location and Business Space

If your ideal franchise requires a physical location, choosing the ideal business location goes beyond aesthetics. It’s about selecting a competitive spot that fosters business growth, fits in your budget, and meets local and state regulations.

This decision can ultimately attract more customers, enhance operational efficiency, and ensure compliance with legal requirements. Consider factors like demographics, accessibility, and proximity in setting up a successful franchise location.

#7: Find and Hire Employees

Once you have a budget, business plan, and location established, you need to start planning to hire employees. For franchise businesses, hiring and retaining the right employees can be the difference between a thriving franchise business and a struggling one.

Your franchise recruitment strategy is an essential part of your future business success. Implementing a strong recruitment strategy with cost-effective solutions, like JazzHR, is an effective way to ensure efficient time-to-hire processes for potential applicants.

Improving recruiting speed, quality, and efficiency is an ongoing endeavor. But it’s also an effort that is much easier for franchises like yours to continually make progress with when using an intuitive, easy-to-use ATS.

With JazzHR , you can automate and optimize the entire hiring process so you can compete in real time for tap talent and make great hires so you can focus your time growing your business and your people.

Start the Journey to Your Franchise Today

Now that you know the fundamentals of what it takes to start your own franchise, you can begin your journey to doing the hard work. While becoming a franchisee takes significant planning and investment, you can begin knowing that you will have the strength of a well-known brand behind you and a framework that will guide your efforts. And with the right hiring software, like JazzHR , you can streamline hiring and find the best talent fast for your growing business.

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6 Reasons Why You Need a Business Plan

A business plan is very important and for entrepreneurs to secure funding such as bank loans that’s why do you need a business plan. Get some Reasons! A good business plan helps you prove your business idea, grow faster, secure funding, reduce risk, build a team, and develop a rewarding marketing strategy.

Why should I write a business plan ? If you’re like many entrepreneurs excited to get your idea off the ground, then the idea of sitting down and writing a business plan may falsely look like a waste of time.

Why is a business plan important?

A business plan stands as a cornerstone for entrepreneurs, a strategic tool that charts the path to success. A well-crafted business plan not only directs entrepreneurs towards the vital steps needed for their business ideas to flourish but also paves the way for both short-term and long-term achievements.

Before embarking on the journey of crafting a business plan, it’s essential to ponder three critical questions:

• What do you wish to inspire in their response?
• How will this plan adapt to the ever-changing business environment?
• Who will be the reader of this plan?

Need Professional Business Plan Writer

Hire our experienced business plan writers to create a winning business plan to achieve your company’s goals.

Starting a business is a lot of work, and it can be tempting to just wing it. But if you want your business to be successful, you need a plan. A business plan is a written document that outlines your goals, strategies, and how you plan to achieve them.

Here are five reasons why you need a business plan, even if you’re a startup:

1. It helps you think through your business model.

When you’re writing a business plan, you’re forced to think through all the key aspects of your business, such as your target market , products and services , pricing strategy , and marketing plan . This process can help you identify any potential problems or gaps in your business model before you launch.

2. It helps you secure funding.

If you’re planning to raise money from investors , you’ll need a business plan. Investors want to see that you have a clear plan for how you’re going to use their money to grow your business. A well-written business plan will show investors that you’re serious about your business and that you have a realistic chance of success.

3. It helps you attract and retain employees.

Potential employees want to know that they’re joining a company with a bright future. A business plan can help you show potential employees that your company has a clear vision and a plan for growth . It can also help you attract and retain talented employees by offering them a sense of ownership in the company’s success.

4. It helps you stay on track.

As your business grows and changes, it’s important to have a roadmap to guide you. Your business plan can serve as this roadmap. By regularly reviewing and updating your business plan, you can make sure that your business is on track to achieve its goals.

5. It helps you adapt to change.

The business world is constantly changing, and it’s important to be able to adapt to these changes. Your business plan can help you stay flexible and adaptable. By regularly reviewing your business plan, you can identify any potential threats or opportunities and make necessary adjustments to your strategies.

6. It helps you identify and mitigate risks.

Every business faces risks, such as competition, economic downturns, and regulatory changes. A business plan can help you identify and assess these risks, and develop strategies to mitigate them.

For example, your business plan may include a section on risk management that identifies the following risks:

• Increased competition from new entrants to the market.
• A potential economic recession.
• New regulations that could impact your business.

Your business plan can then outline strategies for mitigating these risks, such as:

• Developing a strong brand identity to differentiate your business from the competition.
• Diversifying your product or service offerings to reduce your reliance on any one product or service.
• Building relationships with key stakeholders, such as government officials and industry leaders, to stay ahead of the curve on regulatory changes.

By having a business plan in place, you’ll be better prepared to deal with any challenges that come your way.

Free: Business Plan Examples

Do you need help creating a business plan? Check out these 14 free, proven business plan examples from different industries to help you write your own.

A business plan serves as a roadmap for your business. It outlines your goals, strategies, and the steps you need to take to achieve success. It provides a clear direction, helps you make informed decisions, attracts investors or lenders, and keeps you focused on your objectives.

There are several benefits to having a business plan. It helps you:

• Define your business goals and objectives.
• Identify your target market and understand customer needs.
• Develop strategies to differentiate your business from competitors.
• Determine your financial projections and funding requirements.
• Create a framework for measuring progress and evaluating success.
• Communicate your business concept effectively to stakeholders.

Every entrepreneur or business owner, regardless of the size or stage of their business, can benefit from having a business plan. Whether you’re starting a new venture, seeking funding, expanding an existing business, or reevaluating your strategies, a well-crafted business plan provides guidance and serves as a valuable tool.

A comprehensive business plan typically includes the following sections:

• Executive Summary: An overview of your business and its objectives.
• Company Description: Detailed information about your business, its structure, and mission.
• Market Analysis: Research on your target market, competition, and industry trends.
• Products or Services: Description of what you offer and how it meets customer needs.
• Marketing and Sales Strategy: Plans for promoting and selling your products or services.
• Organization and Management: Details about your team and organizational structure.
• Financial Projections: Forecasts of revenue, expenses, and profitability.
• Funding Request (if applicable): If seeking funding, details on the amount and purpose of the funding.

A business plan is not a static document. It should be seen as a dynamic tool that evolves with your business. Regularly reviewing and updating your business plan allows you to adapt to market changes, revise your strategies, and set new goals. This ensures that your business remains relevant, competitive, and aligned with your long-term vision.

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