Two female entrepreneurs standing in the backroom of their shop looking at their business plan on a computer.

What makes a good business plan?

Results.

Goals met, milestones achieved, objectives accomplished.

Forget the old-fashioned thinking of evaluating plans like a college term paper. You don’t get points for writing style, formatting, or completeness.

A good business plan shows you can get results. But what does that look like in practice? What should you focus on when writing?

Well, I’ve narrowed it down to 10 key qualities. Qualities I’ve found make for the best business plans and, ultimately, more successful businesses.

1. It fits the business need

You have to consider why you need a business plan in the first place. Business plans aren’t one-size-fits-all. Form follows function.

Not all business plans have to be pretty

Most business plans exist to help run the company, not to be presented to outsiders. They don’t have to be polished and formal; they just need to work for you and be easy to review, revise, and run your business.

Write it for your audience

A business plan being shown to outside investors does, in fact, have to look good, read well, and be presentation-worthy. It needs good summaries and descriptions to validate the idea, the team, the market, and other key elements. It should also describe how you intend to exit in the future.

The business plan to support a loan application also needs summaries and descriptions. They need to reassure a lender about risk, usually with assets, often with the owner’s personal financial statements, and past performance on credit ratings and debt repayment.

2. It’s realistic and can be implemented

The second measure of a good or bad business plan is realism. You don’t get points for ideas that can’t be implemented. Setting unrealistic and unachievable goals is a waste of time.

For example, a brilliantly written, beautifully formatted, and excellently researched business plan for a product that can’t be built is not a good business plan. A plan that requires millions of dollars of investment but lacks a management team to get that investment is not a good plan.

A plan that ignores a fatal flaw is not a good plan. Make sure your goals are achievable.

For example, if you share a financial forecast, is it realistic? Based on current revenue, can you realistically achieve your goals? If you’ve brought in $200,000 annually in revenue for the last few years, don’t expect to jump to $400,000 in the next quarter.

Make a plan for increasing revenue—but in increments that make sense and are achievable. Look at changes in revenue drivers, such as traffic, web views, sales per store, etc. Get into the details.

Link your projected increases to actions and events, such as milestones, promotions, a new product launch, or a new location. Think of the power of cause and effect. Increases are more real when they result from activities and events, not just out of the blue.

3. It’s specific and measurable

Every business plan should include tasks, deadlines, dates, forecasts, budgets, and metrics. These will make your plan measurable.

Ask yourself:

How will we know if we followed the plan?
How will we track actual results and compare them against the plan?
How will we know if we are on track or not?

While high-end strategy can be fun to develop, good planning depends more on what, when, who, and how much. These are the concrete specifics that offer visibility into the real progress toward your goals.

4. It clearly defines responsibilities for implementation

You have to be able to identify a single person who will be responsible for every significant task and function. A task that doesn’t have an owner isn’t likely to be implemented.

You should be able to review a business plan and recognize who is responsible for implementation at every point. If you don’t, you have a gap and need to fill it.

Avoid sharing responsibilities between different people or groups because this reduces accountability. Match every important task or function with one person in charge and accountable.

Again, if you don’t have that person right now, don’t just ignore it. Mention in your plan that it’s a known gap, when you intend to address it, and if you have anyone in mind.

5. It clearly identifies assumptions

Business plans are always wrong. They’re written by humans who are making guesses about the future. Humans tend to guess wrong.

So, your business plan must clearly address assumptions upfront.

Did you assume the company will increase productivity by 10% this year because it did the last few years? Do you assume the market won’t change much? No new competitors? Do you assume that your technology will reduce your direct costs? Do you assume growth in your social media impact?

Share your thoughts on why this is achievable based on past factors, but also clarify that you’re guessing.

You may need to update or refine these areas of your plan after a few months. By flagging them as assumptions from the start, you won’t be surprised when you over or underperform and are prepared to revisit and adjust.

6. It defines strategy and tactics

In the real world, a small business can’t do everything, so it has to do the right things. You can’t please everybody, so you need to please the right people. That is the essence of strategy.

A strategy defines what problem you solve, the solution you offer, the relevant target market, and why you are the one to do it.

How you treat strategy in a business plan depends on the nature and objective of the plan itself.

Strategy can be as simple as a bulleted list taking up a page or two of a lean business plan. It could also be one or more slides in a pitch deck or a more detailed formal chapter of a traditional plan.

The plan defines the strategy so you can refer back to it as often as necessary. It might be there for management value or to explain to outsiders. And who will be using or looking at it will dictate how it needs to be presented.

Get into the details

Strategy is useless without the key tactics.

Tactics might be pricing, distribution, marketing, financial plans, sales plans, etc. Make sure the tactics you choose are directly in service of executing your strategic goal.

You should be able to explain how every action you take relates to your overall business strategy. And don’t leave tactics without developing concrete specifics, milestones, budgets, tasks, responsibility assignments, tracking, and how you’ll follow up.

7. It incorporates a monthly review schedule

Good business plans include timing and schedules for regular updates. You anticipate the need for a regular monthly review.

You know your plan is not perfect and needs to be revised to accommodate ongoing results. Real business plans need to be kept fresh.

8. It includes essential numbers

Sure, there is a place for a simpler one-page business plan and other shorter plan summaries. Investors, banks, and strategic partners might want that kind of simple summary to quickly understand your business.

But real business runs on cash, and keeping your business in cash requires thorough financial planning.

You need budgets and tracking.

So a real business plan includes essential financial projections, including sales, costs of sales, expenses, profits, and cash flow.

You track sales, costs, and expenses to monitor related budgets and progress toward goals. You also track cash flow factors such as accounts receivable and inventory to look for indications of change that might require management actions.

Remember that management is about constant course corrections. This is why you include a regular monthly review of the plan against your actual results.

9. It’s clear and simple

Keep it simple.

Most businesses need and will use a lean business plan, which can be just a few pages of bullet point lists (strategy, tactics, milestones, etc.) and tables (sales, costs, expenses, profits, cash flow).

Don’t use a business plan to show off.

A business plan is about the business, not the science. Avoid industry jargon and long technical explanations. Investors and bankers will have experts review your details, but they don’t expect to find them all in the plan document.

Related Reading: How long should your business plan be?

10. Easy to communicate with the right people

Again, form follows function.

For example, an internal plan to manage your business is not lengthy and formal. Instead, it links key elements together to make them easy for team members to access and work on.

If you do have to present the plan, make the text business-appropriate.

Take the time and trouble to avoid typos and spelling errors. Use outlines and summaries to make the more important points easy to find. Make font sizes clean and large enough for older readers. Have somebody else read it before you finish.

This makes it professional and shows respect for the reader and the business situation. It should also be presented in a format that lends itself to sharing, like a website or PDF document.

Security is important too. Is the plan safely locked away from the prying eyes of outsiders? Most business plans live online or on local networks where team members can access and manage. Some are online, and outsiders can see them. In both cases, use security safeguards.

Ongoing planning process: it’s about the management it causes

U.S. president and military strategist Dwight D. Eisenhower is often quoted as saying:

The plan is useless, but planning is essential.

The key point is that no clear criteria exists to tell you if a business plan is good or bad.

What makes a business plan useful (good) is the management that comes out of it. The regular reviews and revisions that help you stay on track. That’s good planning, as opposed to just a good plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

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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.

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10 Qualities of a Good Business Plan Explained