A business plan is a written document that explains what your business does, who it sells to, how it will make money and what it needs to get there. It sets out your goals, your market, your team, your costs and your financial projections, so that you, a lender or an investor can judge whether the business can work.
That’s the short answer. The rest of this guide covers what a business plan is used for, who reads it, the main types of business plans and how they compare, what goes into one, and when you need one at all.
What is a business plan and why is it important?
A business plan does two jobs at once. It’s a thinking tool for you, and it’s a case you make to other people.
The U.S. Small Business Administration calls it “the foundation of your business” and “a roadmap for how to structure, run, and grow your new business” in its guide to writing a business plan. The same page says it’s “the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.” In Canada, the Government of British Columbia’s business plan page puts it more briefly: a plan helps you define your business and show how it will become profitable.
Why it matters in practice:
- It forces the hard questions early. Writing down who your customers are, what you’ll charge and what it costs to serve them shows gaps while they’re still cheap to fix.
- It turns an idea into numbers. A plan without sales, cost and cash flow figures is a wish. With them, you can see whether the business pays its bills and when.
- It’s what money asks for. Banks, government-backed lenders, loan programs and investors usually want to see a plan before they commit.
What is a business plan used for?
Most plans are written for one of four purposes. Knowing which one is yours decides how long the plan should be and which sections get the most attention.
Getting a loan
A lender wants to know one thing above all: can you repay? Expect them to read your funding request, your cash flow forecast and your financial projections closely, and to check that your numbers hang together.
Each lender sets its own requirements. For example, the Canada Small Business Financing Program FAQ for small businesses says that borrowers present their business proposal directly to a financial institution, and that the decision to approve a loan rests entirely with that institution. Our guide to a CSBFP loan business plan covers what to include for that program. Ask your own lender what format and level of detail it expects.
Some programs make a plan an explicit condition. Futurpreneur, which supports entrepreneurs aged 18 to 39 in Canada, lists among its eligibility criteria that you produce “a complete and viable business plan and cash flow by the end of the application process.” Our guide to a Futurpreneur business plan walks through it.
Raising money from investors
Investors care about growth more than repayment. They look hardest at the size of the market, what sets you apart from competitors, the team and how big the business could get. Many investors first ask for a short pitch deck and only want the full plan if they’re interested.
Bringing in partners
A co-founder, a key supplier, a landlord or a franchisor may want to see your plan before signing anything. Here the plan shows that you’ve thought the business through and that you’ll be a reliable partner.
Running the business
A plan written only for yourself is still worth having. It sets goals for the year, gives you targets to compare actual results against and helps you decide what to do first. Many owners revisit it when results drift from the forecast or before a big decision like hiring or opening a second location.
Who reads a business plan?
| Reader | What they want to know | Sections they read first |
|---|---|---|
| Bank or lender | Can you repay, and what secures the loan? | Funding request, cash flow, financial projections |
| Investor | How big can this get, and can this team do it? | Executive summary, market analysis, team |
| Loan program or grant body | Do you meet the program rules, and is the business viable? | Whatever the program’s application asks for |
| Partner or landlord | Is this business stable and serious? | Executive summary, company description |
| You and your team | What are we doing this year, and are we on track? | Goals, marketing plan, budget |
Types of business plans
There’s no single official format. The SBA’s guide says there’s “no right or wrong way to write a business plan” and that what matters is that it meets your needs. That said, most plans fall into a few common types, sorted two ways: by format (how much detail) and by purpose (what stage the business is at).
Traditional vs lean (one-page) business plans
The SBA describes two formats:
- Traditional business plan. A detailed document with a standard structure. The SBA says these “can be dozens of pages long” and that lenders and investors commonly request this format.
- Lean startup plan. A summary of only the key points, typically one page. The SBA says it “can take as little as one hour to make,” but that some lenders and investors may ask for more information. Its sections follow the business model canvas: key partnerships, key activities, key resources, value proposition, customer relationships, customer segments, channels, cost structure and revenue streams.
If you’re asking anyone for money, write the traditional plan. A lean plan is a good first draft, a way to test an idea quickly, or a working document for a simple business.
Startup, operating and strategic plans
- Startup business plan. For a business that doesn’t exist yet. It leans on research and estimates, because there’s no track record. Expect heavy attention on startup costs, how you’ll fund them and how long until the business covers its own bills.
- Operating (internal) plan. For an existing business, usually covering the next year. It sets targets, budgets and who is responsible for what. It’s mostly read by the owner, managers and staff.
- Strategic plan. Looks further ahead and at the big picture: where the business should be in several years, which markets to pursue and what to stop doing. It sets direction rather than detailed budgets.
Comparison table
| Type | Typical length | Main reader | Focus | Use it when |
|---|---|---|---|---|
| Traditional | Many pages, plus appendix | Lenders, investors | Full detail on every section, with financials | You’re applying for a loan or raising money |
| Lean / one-page | About one page | You, your team, early conversations | Key assumptions only | You’re testing an idea or need a quick overview |
| Startup | Usually traditional length | Lenders, investors, you | Market research, startup costs, path to break-even | The business doesn’t exist yet |
| Operating / internal | Short to medium | Owner, managers, staff | Annual goals, budgets, responsibilities | You’re running an existing business |
| Strategic | Short to medium | Owner, board, senior team | Long-term direction and priorities | You’re deciding where the business goes next |
The lengths are rough guides, not rules. The right length is whatever answers your reader’s questions without padding.
What’s in a business plan?
The SBA lists these sections for a traditional plan:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
Most plans also add an appendix for supporting documents such as resumes, quotes, permits and leases.
Each section has its own job, and the order matters: the executive summary comes first but is written last. Our step-by-step guide on how to write a business plan walks through every section with what to put in it and a worked example.
When do you need a business plan?
You need a written plan when:
- You’re applying for a loan or raising money. Lenders and investors commonly ask for a full plan, or at least its projections and cash flow forecast.
- You’re starting a business that needs real money up front, such as a café or shop with a lease and equipment. The plan shows whether your savings will last.
- You’re bringing in a partner, or making a big change like a second location. Writing it down surfaces disagreements before they cost you.
When you might not need a full plan
Not every business needs a 20-page document. You can usually get by with a lean, one-page plan when:
- You’re testing an idea on the side, with little money at stake.
- You’re a freelancer or consultant whose main costs are your time and a laptop. When a client wants a pitch for one job, what you write is a business proposal.
- You aren’t borrowing or raising money, and the business is simple enough that you can see the numbers in your head and on one page.
Even then, write down your prices, your costs and how many customers you need to break even. If those numbers don’t work on one page, a longer plan won’t fix them. And if you later apply for financing, expect to expand the lean plan into a traditional one.
How long does it take to write a business plan?
It depends on the type of plan and how much research you’ve already done. The SBA says a lean startup plan can take as little as an hour. A traditional plan takes much longer, because most of the time goes into work that happens before the writing:
- Market research: who your customers are, how many there are and what competitors charge.
- Real numbers: quotes for equipment, rent, insurance, permits and wages.
- Financials: turning those numbers into sales, cash flow and profit forecasts.
- Writing: usually the quickest part, once the research is done.
Plan for several weeks of part-time work on a traditional plan rather than one evening, especially if you’re starting from scratch. AI tools can speed up drafting and help you spot gaps, but they can’t do your research or know your real costs. Our guide to writing a business plan with ChatGPT shows how to use them without letting them invent your numbers.
Free business plan templates and help
You don’t have to start from a blank page. These Canadian resources are free:
- The Government of Canada’s planning your business page links to guides on writing a plan.
- BDC’s business plan template is free and includes a guide, instructions, a glossary and an example plan.
- The Government of British Columbia’s business plan page offers a business plan template and cash flow and sales forecast templates.
This guide is general information, not financial, legal or tax advice. For lending, legal or tax decisions, check with your lender, an accountant or a lawyer.
Quick checklist: do you need a business plan?
- Are you asking a bank, loan program or investor for money? Write a traditional plan.
- Will the business need a lease, equipment or staff before it earns money? Write a traditional plan.
- Are you bringing in a partner? Write at least a lean plan, together.
- Is it a low-cost side business with no outside money? A lean, one-page plan is likely enough.
- Does your existing business need yearly targets and budgets? Write an operating plan.
- Are you deciding where the business goes over the next few years? Write a strategic plan.