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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.
- A business plan is a document describing a company's business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
- There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.
Investopedia / Ryan Oakley
Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.
Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."
Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.
Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.
While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.
These are some of the most common elements in many business plans:
- Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
- Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
- Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.
The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.
2 Types of Business Plans
Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
- Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.
Why Do Business Plans Fail?
A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.
How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.
Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.
A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
U.S. Small Business Administration. " Write Your Business Plan ."
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- Business Ethics: Definition, Principles, Why They're Important 2 of 46
- Business Plan: What It Is, What's Included, and How to Write One 3 of 46
- Organizational Structure for Companies With Examples and Benefits 4 of 46
- Which Type of Organization Is Best For Your Business? 5 of 46
- What Are the Major Types of Businesses in the Private Sector? 6 of 46
- Corporate Culture Definition, Characteristics, and Importance 7 of 46
- What Is an S Corp? Definition, Taxes, and How to File 8 of 46
- LLC vs. Incorporation: Which Should I Choose? 9 of 46
- Private Company: What It Is, Types, and Pros and Cons 10 of 46
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- Seed Capital: What It Is, How It Works, Example 14 of 46
- Venture Capital: What Is VC and How Does It Work? 15 of 46
- Startup Capital Definition, Types, and Risks 16 of 46
- Capital Funding: Definition, How It Works, and 2 Primary Methods 17 of 46
- Series Funding: A, B, and C 18 of 46
- Small Business Administration (SBA): Definition and What It Does 19 of 46
- Upper Management: What it is, How it Works 20 of 46
- What is the C Suite?: Meaning and Positions Defined 21 of 46
- Chief Executive Officer (CEO): What They Do vs. Other Chief Roles 22 of 46
- Operations Management: Understanding and Using It 23 of 46
- Human Resource Planning (HRP) Meaning, Process, and Examples 24 of 46
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- What Is Brand Management? Requirements, How It Works, and Example 27 of 46
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- Brand Loyalty: What It Is, and How to Build It 29 of 46
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- Indirect Sales: What it is, How it Works 45 of 46
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Simple Business Plan Templates
By Joe Weller | April 2, 2020
In this article, we’ve compiled a variety of simple business plan templates, all of which are free to download in PDF, Word, and Excel formats.
On this page, you’ll find a one-page business plan template , a simple business plan for startups , a small-business plan template , a business plan outline , and more. We also include a business plan sample and the main components of a business plan to help get you started.
Simple Business Plan Template
Download Simple Business Plan Template
This simple business plan template lays out each element of a traditional business plan to assist you as you build your own, and it provides space to add financing information for startups seeking funding. You can use and customize this simple business plan template to fit the needs for organizations of any size.
One-Page Business Plan Template
Download One-Page Business Plan Template
Excel | Word | PDF | Smartsheet
Use this one-page business plan to document your key ideas in an organized manner. The template can help you create a high-level view of your business plan, and it provides easy scannability for stakeholders. You can use this one-page plan as a reference to build a more detailed blueprint for your business.
For additional single page plans, take a look at " One-Page Business Plan Templates with a Quick How-To Guide ."
Simple Fill-in-the-Blank Business Plan Template
Download Simple Fill-in-the-Blank Business Plan Template
Use this fill-in-the-blank business plan template to guide you as you build your business plan. Each section comes pre-filled with sample content, with space to add customized verbiage relevant to your product or service.
For additional free, downloadable resources, visit " Free Fill-In-the-Blank Business Plan Templates ."
Simple Business Plan for Startup
Download Startup Business Plan Template — Word
This business plan template is designed with a startup business in mind and contains the essential elements needed to convey key product or service details to investors and stakeholders. Keep all your information organized with this template, which provides space to include an executive summary, a company overview, competitive analysis, a marketing strategy, financial data, and more. For additional resources, visit " Free Startup Business Plan Templates and Examples ."
Simple Small-Business Plan Template
Download Simple Small-Business Plan Template
This template walks you through each component of a small-business plan, including the company background, the introduction of the management team, market analysis, product or service offerings, a financial plan, and more. This template also comes with a built-in table of contents to keep your plan in order, and it can be customized to fit your requirements.
Lean Business Plan Template
Download Lean Business Plan Template
This lean business plan template is a stripped-down version of a traditional business plan that provides only the most essential aspects. Briefly outline your company and industry overview, along with the problem you are solving, as well as your unique value proposition, target market, and key performance metrics. There is also room to list out a timeline of key activities.
Simple Business Plan Outline Template
Download Simple Business Plan Outline Template
Word | PDF
Use this simple business plan outline as a basis to create your own business plan. This template contains 11 sections, including a title page and a table of contents, which details what each section should cover in a traditional business plan. Simplify or expand this outline to create the foundation for a business plan that fits your business needs.
Simple Business Planning Template with Timeline
Download Simple Business Planning Template with Timeline
Excel | Smartsheet
This template doubles as a project plan and timeline to track progress as you develop your business plan. This business planning template enables you to break down your work into phases and provides room to add key tasks and dates for each activity. Easily fill in the cells according to the start and end dates to create a visual timeline, as well as to ensure your plan stays on track.
Simple Business Plan Rubric Template
Download Simple Business Plan Rubric
Excel | Word | PDF | Smartsheet
Once you complete your business plan, use this business plan rubric template to assess and score each component of your plan. This rubric helps you identify elements of your plan that meet or exceed requirements and pinpoint areas where you need to improve or further elaborate. This template is an invaluable tool to ensure your business plan clearly defines your goals, objectives, and plan of action in order to gain buy-in from potential investors, stakeholders, and partners.
Basic Business Plan Sample
Download Basic Business Plan Sample
This business plan sample serves as an example of a basic business plan that contains all the traditional components. The sample provides a model of what a business plan might look like for a fictional food truck business. Reference this sample as you develop your own business plan.
For additional resources to help support your business planning efforts, check out “ Free Strategic Planning Templates .”
Main Components of a Business Plan
The elements you include in your business plan will depend on your product or service offerings, as well as the size and needs of your business.
Below are the components of a standard business plan and details you should include in each section:
- Company name and contact information
- Website address
- The name of the company or individual viewing the presentation
- Table of Contents
- Company background and purpose
- Mission and vision statement
- Management team introduction
- Core product and service offerings
- Target customers and segments
- Marketing plan
- Competitive analysis
- Unique value proposition
- Financial plan (and requirements, if applicable)
- Business and industry overview
- Historical timeline of your business
- Offerings and the problem they solve
- Current alternatives
- Competitive advantage
- Market size
- Target market segment(s)
- Projected volume and value of sales compared to competitors
- Differentiation from competitors
- Pricing strategy
- Marketing channels
- Promotional plan
- Distribution methods
- Legal structure of your business
- Names of founders, owners, advisors, etc.
- Management team’s roles, relevant experience, and compensation plan
- Staffing requirements and training plans
- Physical location(s) of your business
- Additional physical requirements (e.g., warehouse, specialized equipment, facilities, etc.)
- Production workflow
- Raw materials and sourcing methods
- Projected income statement
- Projected cash flow statement
- Projected balance sheet
- Break-even analysis
- Charts and graphs
- Market research and competitive analysis
- Information about your industry
- Information about your offerings
- Samples of marketing materials
- Other supporting materials
Tips for Creating a Business Plan
It’s easy to feel overwhelmed at the thought of putting together a business plan. Below, you’ll find top tips to help simplify the process as you develop your own plan.
- Use a business plan template (you can choose from the variety above), or refer to the previous section to create a standard outline for your plan.
- Modify your outline to reflect the requirements of your specific business. If you use a standard business plan outline, remove sections that aren’t relevant to you or aren’t necessary to run your business.
- Gather all the information you currently have about your business first, and then use that information to fill out each section in your plan outline.
- Use your resources and conduct additional research to fill in the remaining gaps. (Note: It isn’t necessary to fill out your plan in order, but the executive summary needs to be completed last, as it summarizes the key points in your plan.)
- Ensure your plan clearly communicates the relationship between your marketing, sales, and financial objectives.
- Provide details in your plan that illustrate your strategic plan of action, looking forward three to five years.
- Revisit your plan regularly as strategies and objectives evolve.
- What product or service are we offering?
- Who is the product or service for?
- What problem does our product or service offering solve?
- How will we get the product or service to our target customers?
- Why is our product or service better than the alternatives?
- How can we outperform our competitors?
- What is our unique value proposition?
- When will things get done, and who is responsible for doing them?
- If you need to obtain funding, how will you use the funding?
- When are payments due, and when do payments come in?
- What is the ultimate purpose of your business?
- When do you expect to be profitable?
To identify which type of business plan you should write, and for more helpful tips, take a look at our guide to writing a simple business plan .
Benefits of Using a Business Plan Template
Creating a business plan can be very time-consuming, especially if you aren’t sure where to begin. Finding the right template for your business needs can be beneficial for a variety of reasons.
Using a business plan template — instead of creating your plan from scratch — can benefit you in the following ways:
- Enables you to immediately write down your thoughts and ideas in an organized manner
- Provides structure to help outline your plan
- Saves time and valuable resources
- Helps ensure you don’t miss essential details
Limitations of a Business Plan Template
A business plan template can be convenient, but it has its drawbacks — especially if you use a template that doesn’t fit the specific needs of your business.
Below are some limitations of using a business plan template:
- Each business is unique and needs a business plan that reflects that. A template may not fit your needs.
- A template may restrict collaboration with other team members on different aspects of the plan’s development (sales, marketing, and accounting teams).
- Multiple files containing different versions of the plan may be stored in more than one place.
- You still have to manually create charts and graphs to add to the plan to support your strategy.
- Updates to the plan, spreadsheets, and supporting documents have to be made in multiple places (all documents may not update in real time as changes are made).
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- The Basics of Writing a Business Plan
- The Benefits and Risks of Writing a Business Plan
- The Main Objectives of a Business Plan
- What to Include and Not Include in a Successful Business Plan
- The Top 4 Types of Business Plans
- A Step-by-Step Guide to Writing Your Business Plan Deck
- 6 Tips for Making a Winning Business Presentation
- 12 Ways to Set Your Business Goals and Objectives
- 3 Key Things You Need to Know About Financing Your Business
- How to Use Your Business Plan Most Effectively
- How to Pitch Your Business Plan in 6 Minutes
- How to Fund Your Business With Angel Investors
- How to Assess the Potential of Your Business Idea
- How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
- How to Fund Your Business Using Banks and Credit Unions
- How to Fund Your Business With an SBA Loan
- How to Fund Your Business With Bonds and Indirect Funding Sources
- How to Use Your Business Plan to Track Performance
- How to Make Your Business Plan Attractive to Prospective Partners
- When to Update Your Business Plan
- How to Fund Your Business With Venture Capital
- How to Raise Money With Your Business Plan's Executive Summary
- What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
- How to Write the Management Team Section to Your Business Plan
- How to Create a Strategic Hiring Plan
- How to Write a Business Plan Executive Summary That Sells Your Idea
- How To Build a Team of Outside Experts for Your Business
- Use This Worksheet to Write a Product Description That Sells
- Customers and Investors Don't Want Products. They Want Solutions.
- Who Is Your Customer? 4 Questions to Ask.
- How to Determine the Barriers to Entry for Your Business
- How to Define Your Product and Set Your Prices
- How to Get Customers in Your Store and Drive Traffic to Your Website
- 5 Essential Elements of Your Industry Trends Plan
- How to Identify and Research Your Competition
- How to Identify Market Trends in Your Business Plan
- How to Effectively Promote Your Business to Customers and Investors
- How to Write an Operations Plan for Retail and Sales Businesses
- How to Write an Operations Plan for Manufacturers
- How to List Personel and Materials in Your Business Plan
- What Equipment and Facilities to Include in Your Business Plan
- What Technology to Include In Your Business Plan
- How to Write an Income Statement for Your Business Plan
- How to Make a Balance Sheet
- How to Make a Cash Flow Statement
- How to Use Financial Ratios to Understand the Health of Your Business
- How to Make Realistic Financial Forecasts
- How to Write a Letter of Introduction
- What To Put on the Cover Page of a Business Plan
- How to Format Your Business Plan
- 6 Steps to Getting Your Business Plan Seen
- The Best Ways to Follow Up on a Buisiness Plan
- The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
- How to Hire the Right Business Plan Consultant
- Business Plan Lingo and Resources All Entrepreneurs Should Know
The Basics of Writing a Business Plan Here's why you need a business plan and everything you need to know to get started writing yours.
By Entrepreneur Staff • Oct 27, 2023
- Finding the purpose of a business plan
- How to know if you need a business plan
- Writing a back-of-the-napkin plan.
This is part 1 / 11 of Write Your Business Plan: Section 1: The Foundation of a Business Plan series.
Writing a business plan is like the architectural plan for a home or a brick-and-mortar building. You need to know what materials you need, how you're going to construct the building, and when you need to build each piece of the building. You start by building the foundation because your business can't stand up without it.
What is a business plan?
A business plan is a written description of the future of your business. It is a document that tells the story of what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan.
Business plans are inherently strategic. You start here, today, with certain resources and abilities. You want to get to a "there," a point in the future (usually three to five years out) at which time your business will have a different set of resources and abilities as well as greater profitability and more assets. Your plan shows how you will get from here to there. In essence, it is a road map from where you are now to where you want to be later on.
Building your business plan brick-by-brick
If you've done any research about business plans online or through an agency like the Small Business Administration (SBA), you've probably heard about some generally accepted conventions about what a business plan should include and how it should be presented. In sum, a plan should cover all the important matters that will contribute to making your business a success, including:
1. Your basic business concept. This is where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success. To use the analogy of building a brick-and-mortar building, this is the concrete you use for your foundation.
2. Your strategy and the specific actions you plan to take to implement it. What goals do you have for your business? When and how will you reach your goals? After all, you need to know how you plan to construct your building.
3. Your products and services and their competitive advantages. Here is your chance to dazzle the readers with good, solid information about your products or services and why customers will want to purchase your products and services and not those of your competitors. Your products and services are the materials you'll use for the building.
4. The markets you'll pursue. Now you have to lay out your marketing plan. Who will your customers be? What is your demographic audience? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience? What sets your business apart from the competition? How are you going to get people to come to your building and spend money?
5. The background of your management team and key employees. Having information about key personnel is an important but often misrepresented portion of a business plan. It's not a long and detailed biography of each person involved but an accurate account of what they have done and what they bring to the table for this specific business opportunity. Readers will want to know who will construct your building and if they're qualified builders.
6. Your financing needs. These will be based on your projected financial statements and provide a model of how your ideas about the company, its markets, and its strategies will play out. With a building, you need to know the costs of your materials and how you will adapt to changing conditions, including pricing and construction delays due to weather.
As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth. You want to show readers that your building will last for years. And facts—checkable, demonstrable facts—will invest your plan with the most important component of all: credibility.
How Long Should Your Plan Be?
A useful business plan can be any length, from a one-page summary to more than 100 pages for an especially detailed plan describing a complex enterprise. A typical business plan runs fifteen to twenty-five pages, created and (usually) sent electronically, sometimes accompanied by forms the receiver requests you fill out. Occasionally, you may still be asked for a hard copy of your plan.
Mini plans of five to ten pages are the popular concise models that may stand on their own for smaller businesses. Larger businesses, seeking major funding, will often have mini plans, but the full business plan will be waiting in the wings. It's advantageous to run long when creating your plan and then narrow it down for presentation purposes.
The size of the plan will also depend on the nature of your business and your reason for writing the plan. If you have a simple concept, you can express it in very few words. On the other hand, if you are proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across. If you are writing a plan for a division of a large organization, you may be given a set format and prescribed length.
The purpose of your plan also determines its length. If you are looking for millions of dollars in seed capital to start a risky venture, you will usually (although not always) have to do a lot of explaining and convincing. If you already have relationships with potential investors, they may simply want a mini plan. If you are just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version may suffice.
If you want to start small with an effective way to get your ideas down, you can follow the guidance of LivePlan , a business planning and management software, on writing your one-page plan for your business.
Many business plan presentations are made with PowerPoint decks, using ten to twelve slides to tell your story. This is a great starting point, but you should have at least a mini plan available, especially if you seek millions of dollars.
When Should You Write Your Business Plan?
The fact that you're reading this article means you suspect it's about time to write a business plan. Odds are you are at or near one of the many occasions when a business plan will prove useful.
- A business plan is a good way to explore the feasibility of a new business without actually having to start it and run it. A good plan can help you see serious flaws in your business concept. You may uncover tough competition when researching the market section, or you may find that your financial projections simply aren't realistic.
- Any venture that faces major changes (and that means almost all businesses) needs a business plan. If the demographics of your market are rapidly changing, strong new competitive products challenge your profitability, you expect your business to grow or shrink dramatically, or the economic climate is improving or slipping rapidly, you'll need a business plan. This will allow you to make changes accordingly.
- If you are contemplating buying or selling a business, your business plan can provide you with a handy tool to establish a value—and to support that value if challenged.
- You will need a business plan if you are seeking financing. Your business plan is the backbone of your financing proposal. Bankers, venture capitalists, and other financiers rarely provide money without seeing a plan. Less sophisticated investors or friends and family may not require a business plan, but they deserve one. Even if you're funding the business with your own savings, you owe it to yourself to plan how you'll expend the resources you're committing.
Writing a business plan is not a one-time exercise. Just because you wrote a plan when you were starting out or raising money to get underway doesn't mean you are finished. Many companies look for additional rounds of funding. By updating business plans to let investors know how the funding has been used to date, and the results of such efforts, the chances of procuring such funding are improved. A business plan should be rewritten or revised regularly to get maximum benefit from it. Commonly, business plans are revised yearly, more frequently if conditions have changed enough to make the previous plan unrealistic.
Business Plan Buzzword
Competitive advantage makes you different from, and better than, your competition. Lower prices, higher quality, and better name recognition are examples of competitive advantages. By studying your competition, you can devise your own competitive advantage by providing something (or several things) that it does not offer.
Cocktail Napkin Business Plan
Business plans don't have to be complicated, lengthy documents. They just have to capture the essence of what the business will do and why it will be a success.
The business plan for one of the most successful startups ever began with a triangle scrawled on a cocktail napkin. The year was 1971, and Herb Kelleher and Rollin King were formulating their idea for an airline serving Houston, Dallas, and San Antonio. The triangle connecting the cities was their route map—and the basis of the business plan for Southwest Airlines.
The two entrepreneurs soon expressed their vision for Southwest Airlines more fully in a full-fledged business plan and raised millions in initial capital to get off the ground. Eventually, they went public. Along the way, the airline expanded beyond the three cities to include other Texas destinations, and now it serves over 100 destinations in 42 states plus Washington, DC, and Puerto Rico, with over 4,000 flights daily and revenues of $15.8 billion in 2021. Southwest specializes in low-cost, no-frills, high-frequency service, which, if you add some lines to the original triangle, is the same strategy mapped out on that cocktail napkin.
More in Write Your Business Plan
Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.
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What is a Business Plan? Definition, Tips, and Templates
Published: June 07, 2023
In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.
Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?
In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.
What is a business plan?
A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.
The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.
What is a business plan used for?
The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.
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Purposes of a Business Plan
Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:
1. Securing financing from investors.
Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.
All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.
Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.
2. Documenting a company's strategy and goals.
A business plan should leave no stone unturned.
Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.
To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.
These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.
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Free Business Plan [Template]
Fill out the form to access your free business plan., 3. legitimizing a business idea..
Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.
A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.
As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.
It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.
4. Getting an A in your business class.
Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.
If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?
What does a business plan need to include?
- Business Plan Subtitle
- Executive Summary
- Company Description
- The Business Opportunity
- Competitive Analysis
- Target Market
- Marketing Plan
- Financial Summary
- Funding Requirements
1. Business Plan Subtitle
Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.
2. Executive Summary
Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.
3. Company Description
This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.
4. The Business Opportunity
The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.
5. Competitive Analysis
Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.
6. Target Market
Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.
7. Marketing Plan
Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.
Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.
8. Financial Summary
Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.
So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.
10. Funding Requirements
Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.
Types of Business Plans
- Startup Business Plan
- Feasibility Business Plan
- Internal Business Plan
- Strategic Business Plan
- Business Acquisition Plan
- Business Repositioning Plan
- Expansion or Growth Business Plan
There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.
For even more examples, check out these sample business plans to help you write your own .
1. Startup Business Plan
As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.
The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.
Because startup business plans expand on an original idea, the contents will vary by the top priority goals.
For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.
2. Feasibility Business Plan
This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:
- A detailed product description
- Market analysis
- Technology needs
- Production needs
- Financial sources
- Production operations
According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.
Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.
3. Internal Business Plan
Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.
Besides the typical elements in a startup business plan, an internal business plan may also include:
- Department-specific budgets
- Target demographic analysis
- Market size and share of voice analysis
- Action plans
- Sustainability plans
Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.
4. Strategic Business Plan
Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.
These types of business plans may include:
- Relevant data and analysis
- Assessments of company resources
- Vision and mission statements
It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.
5. Business Acquisition Plan
Investors use business plans to acquire existing businesses, too — not just new businesses.
A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.
A business plan for an existing company will explain:
- How an acquisition will change its operating model
- What will stay the same under new ownership
- Why things will change or stay the same
- Acquisition planning documentation
- Timelines for acquisition
Additionally, the business plan should speak to the current state of the business and why it's up for sale.
For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:
- What the new owner will do to turn the business around
- Historic business metrics
- Sales projections after the acquisition
- Justification for those projections
6. Business Repositioning Plan
When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.
This plan will:
- Acknowledge the current state of the company.
- State a vision for the future of the company.
- Explain why the business needs to reposition itself.
- Outline a process for how the company will adjust.
Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.
For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.
7. Expansion or Growth Business Plan
When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.
For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.
This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:
- SWOT analysis
- Growth opportunity studies
- Financial goals and plans
- Marketing plans
- Capability planning
These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.
Getting Started With Your Business Plan
At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.
When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.
Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.
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The Business Planning Process: 6 Steps To Creating a New Plan
In this article, we will define and explain the basic business planning process to help your business move in the right direction.
What is Business Planning?
Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.
The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.
The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.
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The Better Business Planning Process
The business plan process includes 6 steps as follows:
- Do Your Research
- Calculate Your Financial Forecast
- Draft Your Plan
- Revise & Proofread
- Nail the Business Plan Presentation
We’ve provided more detail for each of these key business plan steps below.
1. Do Your Research
Conduct detailed research into the industry, target market, existing customer base, competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:
- What are your business goals?
- What is the current state of your business?
- What are the current industry trends?
- What is your competition doing?
There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.
You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.
Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.
This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.
3. Calculate Your Financial Forecast
All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.
Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.
A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.
This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.
4. Draft Your Plan
With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.
If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.
5. Revise & Proofread
Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.
Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.
6. Nail the Business Plan Presentation
The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.
Business Planning Process Conclusion
Every entrepreneur dreams of the day their business becomes wildly successful.
But what does that really mean? How do you know whether your idea is worth pursuing?
And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way.
Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.
Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.
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Create a Great Visual Business Plan
Writing a business plan isn't something to be taken lightly. A survey by the University of Oregon's Department of Economics found that companies that complete a business plan are twice as likely to grow and secure investment capital as those that don't.
This may seem like an insurmountable task. But it doesn't need to be.
We've boiled the important elements down to a few diagrams. Complete these and you'll have a great, visual business plan that will take a fraction of the time to complete than a traditional narrative one. It will also be appreciated by readers, who can see and understand the key elements of your plan quickly, without wasting a lot of time.
Step 1. Mission: Explain Why the Business Exists
Too many businesses fail because the entrepreneur(s) weren't in business for the right reason. All too often, the drive is a desire to get rich or leave a job one doesn't like. Unfortunately, emotional motives usually doom a new enterprise.
Focus on the "why" of your business—its purpose for existing. Richard Branson believes that a sense of frustration is the key to business success. His first venture, Virgin Records, was launched because he didn't like how a few high-priced London record outlets controlled the market. His company's mission was to ease this frustration by making it easier and cheaper for people to buy music.
A good way to summarize your mission is with a process list diagram. It has five key questions about what your business is, who your customers are, and why it will succeed within its market space. Each answer needs to be brief—no more than a couple of sentences. Keep your thinking very "high level" in this exercise.
Step 2. Objectives: Create Milestones for Important Events
What are your primary objectives over a specific time period? How long a time period? For most businesses, this timeframe should be long enough to get the business to at least its first major milestone—profitability, an equity event, etc. It should not be less than a year nor should it be longer than five years.
A timeline diagram is a good way to present this.
Step 3. Team: Show Them You're the Right People for the Job
Lenders, angel investors, and venture capital firms want to know who comprises the team. Do your backgrounds, qualifications, and experiences fit the mission?
An organizational chart should be included, along with a brief bio of each key individual. Make it clear why each person is the right "fit" for the mission.
Step 4. Marketing: Show How Your Price, Product, and Promotions will Differ
Getting your product into your customers' hands requires a clear and concise strategy. In today's world, having a well-thought-out marketing plan is essential.
A good starting place for this is a 4Ps diagram. It looks at your product, who the potential buyers are, how to reach them, and at what price point they will buy.
Step 5. Tactics: Show Off Your Process
Here's where you want to show you can deliver on your promises. This means getting the product from concept to customers' hands within a timeframe that meets or exceeds their expectations.
There are a number of ways to present this. For most businesses, a basic flowchart, such as a workflow diagram or business process map will work well.
For manufacturing companies, a value stream map is an excellent tool. It not only explains a potentially complicated process succinctly, it also helps your management and production teams to evaluate and streamline operational efficiency.
Step 6. Finances: Presenting the Right Numbers the Right Way is Crucial
What numbers should you present in your business plan? There are many possible answers to this question. It really depends on the purpose of your business plan and who will be receiving it.
For example, say you are writing a business plan for the internal purposes of management. You may not need to document historical data or validate projections to the degree you should, say, for a bank loan.
If you're seeking investment capital, then you need to make sure your forecasts are extremely well thought out, and they show the investor(s) a clear plan for how and when they will be compensated.
Regardless of your intended audience, there are a few financial documents you should include in your business plan.
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All About Business Process Mapping, Flow Charts and Diagrams
What are your requirements regarding bpmn diagrams, current-day purpose and benefits, business process mapping symbols, how to do business process mapping, key tips for business process mapping, drawing your map, how to do mapping with lucidchart.
Learn all about business process mapping and discover how you can effectively use it within your organization.
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What is business process mapping?
Business Process Mapping details the steps that a business takes to complete a process, such as hiring an employee or ordering and shipping a product. They show the “who,” “what,” “when,” “where” and “how” for these steps, and help to analyze the “why.” These maps are also called Business Process Diagrams and Business Flow Charts. Like other types of diagrams, these maps use defined symbols such as circles, rectangles, diamonds and arrows to depict the business activities.
Business Process Mapping can be used to document a current process and to model a new one. Its purpose is to gain a detailed understanding of the process, people, inputs, controls and outputs, and then potentially to simplify it all, make it more efficient and/or improve the process results. It requires time and discipline to conduct this mapping, but the payoff can be significant over time. Mapping has become common in the business world to standardize procedures, become more efficient, meet audit requirements and gain competitive advantage.
Business Process Mapping has its roots in the 1920s and ‘30s. In 1921, industrial engineer and efficiency expert Frank Bunker Gilbreth, Sr. introduced the “flow process chart” to the American Society of Mechanical Engineers (ASME). In the early 1930s, industrial engineer Allan H. Morgensen used Gilbreth’s tools to teach business people at his work simplification conferences how to make their work more efficient. In the 1940s, two Morgensen students, Art Spinanger and Ben S. Graham, spread the methods more widely. Spinanger introduced the work simplification methods to Procter and Gamble. Graham, a director at Standard Register Industrial, adapted flow process charts to information processing. In 1947, ASME adopted a symbol system for flow process charts, derived from Gilbreth’s original work.
Business Process Mapping can be used to prepare for business audits or a sale, to reduce expenses, to plan for automation, to understand impacts of pending changes, to realign related processes, and to measure and realign the efforts of people involved in the processes. Often, a business may think it understands its processes, but then discovers twists and turns during a mapping initiative. When modeling a new business process, the mapping is sometimes called Business Process Modeling, or BPM. (That same acronym means Business Process Management, a related area.) For a more detailed look at Business Process Modeling, see this article.
Here are more specific examples of the uses of Business Process Mapping:
- Compliance with International Organization for Standardization, called ISO 9001. It’s used to conduct third-party audits of an organization’s quality management, and Business Process Diagrams are often a key part. ISO 9001 tries to ensure that a company’s product is complying with government regulations and meeting customer needs.
- Internal audits. Businesses can ensure that they are meeting their company standards, and that their processes are aligned with their mission and goals.
- Compliance with the 2002 Sarbanes-Oxley Act, or SOX. It’s also known as the Public Company Accounting Reform and Investor Protection Act, and it protects the public and shareholders from accounting errors and fraudulent practices. It requires public companies to disclose compliance issues. As with ISO, Business Process Mapping plays a key role in SOX compliance.
- Standardizing a process. By documenting a process, a business can standardize it so that it’s always performed in the same, most optimal way, reducing confusion and inefficiency.
- Training employees. The mapping also provides a standard training document for anyone to learn the process.
- Improving a process. Once an existing process is mapped, it can be analyzed for bottlenecks and inefficiencies. Business Process Modeling can be used to model a better process.
- Communication. Mapping provides visualization that may be much easier to understand than narrative text would be. This can help for interpretation and collaboration, either with an internal team or external team or consultants.
Here’s one more important entrant in the acronym arena: BPMN. That’s Business Process Modeling Notation, the set of symbols and notations in common use today for modeling. It was developed by the Business Process Management Initiative. It depicts these main components of Business Process Diagrams:
- Process: A set of activities, performed by people or systems, in a sequence, monitored and modified by controls.
- Task or Activity: A particular activity performed by a person or system. It’s shown by a rectangle with rounded corners. They can become more detailed with subprocesses, loops, compensations and multiple instances.
- Participant: Person or system that performs a task or provides an input.
- Flow: The sequence, shown by lines and arrows on the map.
- Event: A trigger that starts, modifies or completes a process. Event types include message, timer, error, compensation, signal, cancel, escalation, link and others. They are shown by circles containing other symbols based on event type.
- Gateway: Decision point that can adjust the path based on conditions or events. They are shown as diamonds. They can be exclusive or inclusive, parallel, complex, or based on data or events.
Another important mapping concept is called swimlanes , which show who is responsible for specific work. Just like swimlanes in a pool, tasks are shown for a particular participant in a lane, or row, on the map.
Need more detail? See this article on BPMN .
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This requires a commitment of time and energy, but the payoff in understanding and analysis can be large. There are four major steps to a mapping initiative:
- Identify the process. Clearly define what is being mapped and what you hope to gain from it. Make sure the scope is appropriate for your goals.
- Gather information. Observe and study the steps involved, capturing who, what, when, where and how it’s all occurring. Get down to the necessary level of detail. Keep digging and breaking down the process into more detail.
- Interview participants and stakeholders. Talk with the participants in the process as part of your mapping to understand what they are doing. This also often helps to uncover inefficiency, miscommunication and potentially better ways to do things.
- Draw the maps and analyze. Document it all in your Business Process Mapping software , and now you will have the basis for in-depth analysis and interpretation.
To conduct a significant mapping project, you will need to have a support structure in place first. As with any project, you would follow these steps:
- Create a project charter or purpose statement explaining what you plan to do and hope to achieve.
- Have an executive sponsor for the project.
- Select the team to do the work.
- Plan and conduct the mapping, as outlined in the four steps above.
In Business Process Management, the idea is to create a life cycle of continuous improvement. The steps are model, implement, execute, monitor and optimize.
Business Process Mapping is better for some types of processes than others. For example, it usually doesn’t lend itself to diagramming decision-making processes. High level, open-ended decision making often has too many intangibles and wild cards to effectively map. Business Process Mapping is better for the other two types of processes: transformational and transactional, both of which have more clearly defined activities. Transformational refers to processes such as manufacturing or systems development, which take inputs and change their forms, either physical or virtual. Transactional refers to an exchange such as a sales process or any other transaction.
As with any type of diagram, there are situations when another diagram method might be more fitting. For example, a Data Flow Diagram (DFD ), popularized by computing pioneers Ed Yourdon and Larry Constantine in the 1970s, is best at illustrating how information flows through a system or process. Value Stream Mapping (VMS) details the steps required to deliver a product or service. Items are mapped as adding value or not adding value from the customer’s standpoint, with the purpose of rooting out items that don’t add value. And Unified Modeling Language (UML) is used in software engineering to visualize the design of a system.
- A skilled practitioner, such as someone trained in Six Sigma, can make a mapping project go much, much smoother. If you don’t have one in house, consider a consultant to work with your internal team.
- Identify metrics of importance. This will enable your mapping to speak effectively with data.
- Interview one or two people at time. If you interview in groups, some people might not speak up or might not want to contradict another person.
- As you interview, keep asking how, where and why. Such as: How do you spend most of your time, and why? Where in the process do you repeat work, and why? Do you ever skip steps? Why? Where are your pain points, and why?
- Be on the lookout for assumptions that may not be true. Keep asking questions until you reach the definitive answer.
- Validate your maps after you initially draw them by reviewing them with participants and your other data sources.
For a simple process, you might start with Post-It Notes, a white board or a hand-drawn map. However, you might find yourself limited rather quickly as the complexity increases. With chart software, you can draw professional-looking maps that allow for more detail. You also will be able to do subsequent breakdowns with multi-level Business Process Maps, typically ranging from Level 0 (overall view) to Levels 1 through 4 for breakout detail of subprocesses, tasks and flows. Sometimes, a sequence table can be the best way to supplement a map by showing a series of steps. Map software will provide you with the shapes you’ll need to map out the process.
Lucidchart makes it easy to do business process mapping with its intuitive drag-and-drop design. Whether you’re trying to standardize a process, train new employees or streamline a business process, Lucidchart can help you visually communicate. Try it now for free .
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How to Create a Small Business Organizational Chart in 4 Easy Steps
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Whether you're just starting out or have been in business for a while, creating and maintaining a business organizational chart can be an extremely helpful way to illustrate how your company operates and can also be used to show how you're going to grow and change in the future.
What is a small business organizational chart? A business organizational chart, sometimes also referred to as a "business org chart," is a visual representation of the structure of your business—it outlines the role of each employee and clarifies who reports to whom within your company. In many cases, developing and updating this chart will fall under the purview of your small business HR department, but if you don't currently have a separate human resources branch (or even if you do) it's worth understanding how these tables work and how to create one.
In this guide, therefore, we'll explain exactly how to create a business organization chart in four simple steps—discussing the various types of diagrams you can choose from, as well as the different goals you should consider when making an org chart for your company.
How to create a business organizational chart
Although looking at business organizational chart examples can be overwhelming, creating one of these diagrams for your company can be broken down into four easy steps. By taking this process one step at a time, you'll be able to decide which type of chart is best for your business and ultimately, develop a table (like many other operational documents you have) that can be utilized throughout the lifecycle of your business. With this in mind, let's get started:
Step 1: Decide how to structure your business organizational chart.
The first step in creating an org chart for your business is deciding what type of chart you want to use. Generally, there are four popular designs to consider and you'll want to choose the one that best suits your business's needs.
Hierarchical business organizational chart
To begin, a hierarchical diagram starts at the top of the business and works its way down the chain of command (as you can see below). A vertical line between individuals indicates that the employee above directly supervises the employee below. Hierarchies also show lateral relationships, where two people are on equal footing within the business framework, but may still collaborate or share responsibilities—these charts use horizontal lines to connect lateral workers. The business organization chart here shows how the company is structured starting with the CEO and progressing through the rest of the company.
Overall, most small businesses use a hierarchical organizational chart because it’s the simplest option. This being said, you can use this type of business org chart even if you only have a few names to fill in—as your business grows, it's easy to add new employees.
Functional business organizational chart
Next, you might consider a functional business organizational chart if your company is large enough to divide employees into departments. This type of diagram shows the head of each department and all the individuals who report to them. A functional chart is not entirely distinct from a hierarchical chart, but it does have a slightly different emphasis based on the different departments.
You can use this same information in all small business organization charts:
Name of employee (leave blank if the position is open)
Department (sales, marketing, accounting, operations, etc.)
Position or job title (sales representative, supervisor, account manager)
Description of duties (a brief phrase or two should be sufficient)
Location (if you have more than one office)
Contact information (physical address, phone number or extension, business cell phone number, work email address)
Photo (to recognize each other with ease)
As you can see, although the functional small business org chart is fairly similar to the hierarchical option, this diagram can be useful for distinguishing departments, giving a larger insight into how your company functions in this specific way.
Matrix business organizational chart
The third option, called a matrix or cross-functional business organizational chart, is useful if workers report to multiple supervisors. Like hierarchical graphs, matrix org charts illustrate the immediate supervisory relationships between employees, but they also show the project manager, team, or department to which an employee reports. Solid lines once again indicate that an individual is the primary manager of the person below them. Dotted lines demonstrate a less direct, but nonetheless important, reporting connection.
As this org chart from the Project Management Institute shows, the matrix small business organizational chart is often used by companies with project managers that work across different teams. Similarly, you may find that product, research, and engineering-based companies are more likely to utilize this type of diagram to illustrate their business structure.
Circle business organizational chart
Finally, the last option to consider is the circle business org chart. The circle diagram has become increasingly popular, especially among startup small businesses that wish to discard traditional business hierarchies. The idea behind these graphs is that all teams—and the employees that comprise them—play an equally important role in the company.
Once again, although this example shows dummy text, you can see how you would complete the chart based on your business's information. Each department makes up a spoke in the wheel and the employees within are listed in each section. As we discussed above, you would fill in essential information for each employee—name, job title, brief description, contact information, etc.
Ultimately, this first step may take time—you'll want to consider your business as it exists now and how you want it to grow—that way, you can determine which of these four org chart options will work best for illustrating your company structure.
Step 2: Collect employee information and categorize the data.
Now, once you’ve decided on the type of business organizational chart you’ll use, the rest of your chart development is fairly straightforward.
For your next step, therefore, you'll want to write a list of all the employees at your company and include the pertinent information about them that we mentioned above.
If you selected a hierarchical chart, you'll place each individual in their proper order on the list. The business owner occupies the first tier, anyone who reports directly to them belongs on the second tier, and the chart progresses from there. If you chose a functional or circle chart, you'll organize your list by each department, as shown in the examples we explained above. Finally, if you opted for a matrix small business org chart, you'll want to be sure to make note of all supervisory relationships.
Step 3: Decide how you'll complete your business org chart.
After you've gathered all of the information you need for your employees and categorized it based on the chart type you've selected, you'll want to determine how you're going to complete your chart. As you saw in our examples above, there are images and small business org chart templates you can download and edit using a software program like Adobe Photoshop.
On the other hand, you might choose to create your business organizational chart in a simple, reliable program you might already own, like Microsoft Office (Excel, Outlook, PowerPoint, or Word) or Google Sheets. You also have the option to purchase a template from a provider like SmartDraw or Lucidchart. To make the most out of your investment, however, you might consider purchasing an HR or payroll software that includes this functionality (among other features). As an example, Gusto's all-inclusive platform allows you to create an org chart within their system, as well as manage your essential payroll and HR tasks.
Although technically , you could diagram your small business org chart by hand, if you use an online template or software, you can modify your graph with ease as your business expands and staff changes.
Step 4: Fill in your business organizational chart and file it securely.
Finally, once you've chosen how you're going to complete your org chart, you'll be ready to actually fill it in.
With the data you've compiled, you'll fill in each box or branch of the chart that you’ve picked. Once again, if your diagram is hierarchical, you'll start with the owner or CEO of the business at the top. Then, you'll create a box below the owner for each person who is an immediate report, and draw a solid vertical line down from the proprietor to each of these supervisees. You'll continue this process for each layer in the company chain of command, and move down the corporate ladder until you’ve placed every employee on the chart.
If your graph is a functional design, you'll fill in the primary boxes with the information for the head of each department and the remainder with the information for every individual they directly manage. You'll follow the same procedure with a matrix chart—with this chart, however, don't forget to include secondary managers to the side of each department, and make dotted lines (or some other distinction) between boxes to represent those additional supervisory relationships.
Last, with a circle chart, you'll add the information employees and duties of each department to the corresponding pie slice, and your diagram is complete.
Once you've completed your small business org chart, you'll want to be sure you save it in a secure location—if you're not utilizing an HR software or another program that allows you to save it within that system. You'll want to keep your organizational chart on hand to update as your business grows and changes.
Along these lines, it's also helpful to store a copy of your org chart on a shared company server, drive, or employee portal so that everyone in your company can see it (but not change it)—this way, everyone in your organization can understand how the company is structured and refer back to the chart as needed.
Small business organizational chart templates
If you're not ready to invest in a software platform to build your diagram, you may be interested in exploring different small business organizational chart templates. As we mentioned, there are well-known solutions, like Microsoft Office, that offer org chart templates that you can download and use for your business. Let's look at a few examples:
Microsoft Office : Within the templates section of the Office website, you can find various, free business org chart templates that you can download for free and customize within PowerPoint, Word, or Excel. For a simple hierarchical chart option, you might start with this "Minimal organization chart."
24Slides : Among other business template options, 24Slides offers free small business org chart templates that you can copy and edit within Google Slides. They also offer these templates in different types including the classic hierarchical chart, as well as the circle chart.
Canva: Image editing and graphics platform Canva allows you to design and customize your own business organizational chart (for free, you just need to sign up for an account) using their system.
Vizzlo : Although Vizzlo does offer paid plans, with their free version, you can access over 100 different chart types, including small business org templates. Plus, you have the option to edit your template within Vizzlo, or create your chart direct in PowerPoint or Google Slides using a Vizzlo integration.
Of course, these are only a few options—there are numerous additional templates and examples you can find by searching and browsing online.
The benefits of a business org chart
As we've shown through our four-step guide, creating a business organizational chart can be a fairly straightforward and simple process. However, if you're just starting out, or don't have a dedicated employee or department to work on developing this graph, you may be wondering if you really need an org chart. Ultimately, the decision is up to you—but, to this end, it's worth highlighting some of the benefits of one of these diagrams and why they can be so useful for your small business.
Clarify management structure
If you're just starting your business the process necessary to construct a business organizational chart forces you to officially distribute tasks and flesh out the roles of each individual and the purpose of each department in your enterprise. This avoids confusion later, as your business grows. Of course, you can always restructure your business organizational chart down the road—however, if you outline the expectations for each position early on, you’re already a step ahead in the entrepreneurial process.
On the other hand, if your company is more established, a business org chart helps both new and existing employees to understand where they fit within the company’s framework, which clarifies any questions regarding the chain of command. This transparency saves time and increases efficiency, as workers can consult your organizational chart and determine exactly who to speak with when faced with a given issue. Plus, if your business organizational chart is well-structured, your employees will already know not just the name of the proper individual to consult, but also what position they hold and what responsibilities they oversee.
Increase operating efficiency
Another benefit of creating and maintaining a small business org chart is that by doing so, you can examine your company’s current structure and unearth potential ways to improve it. Are certain employees responsible for too many tasks, and others too few? Is there unnecessary overlap between individual workers? Are there any duties that fall through the cracks? Should you reorganize in order to meet those needs, hire additional workers, or possibly even outsource these assignments? You may find that you can better utilize the workers you already have, and thereby increase productivity.
A business organizational chart can also improve cross-functional communication throughout your business, which leads to more effective project management. It’s easier to accomplish tasks that involve multiple workers or teams when the reporting structure is clear, and everyone knows who to talk to about what.
Demonstrate current success
Even if you think that your business wouldn’t benefit from an organization chart, you may find that potential lenders want to see one when you're applying for financing. Similar to a business plan, banks, institutions like the SBA, and potential investors want assurance that you’ve carefully considered the structure of your business, as such preparation is often an indicator of future success.
As financial professionals, they’ll also want to ensure that the business organizational method you’ve chosen is one that they believe is likely to prosper—so that you can pay back your potential business loan on time.
Facilitate future planning
Finally, a small business organizational chart can help you prepare for the evolution and expansion of your business. In this vein, we'd recommend that you create two versions of your organization chart: one that reflects your current company structure and one that shows your growth objectives. You might even consider additional charts that indicate how you might reorganize should unexpected changes occur, like reductions in funding or the sudden departure of a key employee.
Your second business organizational chart, of course, will have a lot of blank spaces—room for all the positions you’d like to fill in the future as implement your business growth strategies. In this way, you can use your chart to find possible holes that exist in your current staffing, and you’ll have a built-in roadmap for future hiring.
The bottom line
At the end of the day, taking the time to plan and create a business org chart can be extremely beneficial for your small business—now and in the future. Whether you develop this diagram yourself, or work with your team to do so, you can follow our four simple steps to complete the process relatively quickly and easily.
Plus, if you already utilize a payroll or HR software, you can check to see if your platform already includes an org chart builder. If it doesn't, you might decide to use one of the templates we've discussed here. On the other hand, if you don't have an HR or payroll software, you might consider exploring some of the top options out there—Gusto, Zenefits, etc.—as any of these solutions will not only allow you to create a small business org chart, but will also help you efficiently and effectively an important part of your day-to-day operations.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.
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Business diagrams: what they are, and why you should use them
June 10, 2021 by MindManager Blog
By: Emily Finlay
People are visual creatures . Understanding operational processes or applying data to decisions becomes easier when you can see a simplified form of the information you’re working with. This is especially true of business process diagramming.
These data visualizations break your operations into smaller, more easily understood pieces of information. You can then use these charts and graphs to explore the strengths and weaknesses of your processes. You can also work more effectively with your team to find solutions when everyone is on the same page.
But which business diagram should you use for the best results?
In this guide, we will introduce you to the types of business diagrams, how you can use them, and the benefits they offer.
What are business diagrams?
Business diagrams represent your business processes in a visual way. Also called business process mapping, these tools show the steps involved in your procedures. Used for anything from production processes to employee onboarding, business diagrams clearly map out everything involved in your operations.
Because each industry and company has its own way of doing things, there are many options for creating a business diagram. In the next section, we’ll go through each of the visuals you can use to map your processes.
Types of business model diagrams
Flowcharts are used to visualize processes or systems. These diagrams use a variety of shapes, such as ovals, rectangles, and diamonds, to depict various steps or pieces of these processes. By using arrows to show how each stage flows into the next one , you can better understand and analyze the sequence of your systems.
Mind maps help you organize data around a central idea. If you wanted to map your quality assurance process, for example, you could use a mind map to outline the different actions you take to ensure quality throughout the production process.
Building a mind map starts with a large shape in the center to represent the main topic. You can then use lines or arrows to move users to the steps or ideas that are included in this central idea. You can also add additional levels or images and text to further explain these steps.
Organization charts display the structure of your organization or team. A large box at the top shows the leader, either the boss or team manager. Lines then lead down into boxes that show the next level of leadership, repeating until the organization is fully mapped out. These diagrams help viewers understand the structure of the staff. They can also be used to illustrate your chain of command and decision-making hierarchy.
For diagrams that need large amounts of text, a process map is a great choice. These graphics use a combination of text and visuals to guide readers through a process. If you wanted to diagram a customer’s journey through your company, you could use an infographic with a flowchart design. Including blocks of text to explain each stage and guide the user along offers more information than a standard flowchart, also relying on visuals to make the concepts clear.
When processes cross multiple departments, swimlane diagrams clearly display these processes for easier understanding. Placed within horizontal or vertical rows (each representing the different departments), shapes and arrows outline the stages involved in your procedures. Swimlane diagrams show how your processes move through each area and what steps are the responsibility of each department. These charts can improve both communication and collaboration.
Workflow diagrams are similar to flowcharts, but they focus exclusively on a specific task or process used by one person. Using a variety of shapes and arrows, you can use this graphic to outline the steps involved. Workflow diagrams are a great way to show new hires how to perform tasks. They can also be used to find weaknesses within your processes.
How can I use business diagramming?
Business diagrams are designed to help you and your team improve and understand your processes. Though you may think your procedures are optimized and efficient, these visuals uncover areas that may need improvement. They also give you the insights you need to realign your processes with your main goals.
Outlining your procedures equips your team to be more efficient and effective in everything they do. Rather than keeping the status quo, you can find ways to save on costs and time as you optimize every process.
Business process flow diagram use case examples
There are many situations where business diagrams are valuable assets. In this section, we’ll walk you through some of the ways you can use data visualization to grow your business and exceed customer expectations.
There are many reasons to conduct an audit within your business. Perhaps you received a complaint about your product or want to assess your compliance with industry regulations. No matter the reason, diagramming your processes should be the first step.
When you lay out the steps involved, you can clearly see areas that may be slowing production or affecting quality. You can also use your diagram to make sure employees are following the proper procedures. Armed with your guide, you won’t miss any issues that might exist.
Onboarding new employees
Offering a diagram that outlines the steps needed for a task to your new employees empowers their work and saves your time. You won’t need to walk them through your process or direct them to the appropriate collaborators. Instead, they can quickly understand and adjust to the work involved.
Preparing for a launch
Whether you’re launching a new product or opening a new location, your business process flow diagram will keep everything moving smoothly. Your team will be prepared in advance and ready to handle their responsibilities. If something goes wrong, you can use your chart to find the best way forward. You can focus on wowing your customers, confident in the plan you’re following.
The benefits of using a business analysis diagram
When a business uses a process diagram, they can access their data in a new way. From meetings to improving sales, there are endless ways to benefit from these visuals. To help you understand how business diagramming can support your business, discover the benefits it offers below.
1. Improve communication
Unclear communication processes are one of the easiest ways to create chaos within a team and organization. If your employees don’t know who to go to, none of your projects will run smoothly. Instead, multiple people will receive the same information and it may never get to the people who need it most.
Outlining your processes shows how you expect employees to communicate data. You won’t run the risk of missing out on key information and your team can move forward more quickly. It also solidifies your procedures for future projects. Your team can do more in less time when they work together more effectively .
2. Optimize processes
Analyzing your processes on a regular basis keeps your team working better as time passes. When you first create the procedure, diagramming helps you find the best ways to get things done. As time goes on, you can use your diagrams to identify new ways to improve.
This also strengthens your responses to changes. No matter the shift, you can identify the ideal pivots to make to maintain and grow your business.
3. Maintain consistency
People like patterns. Laying out the steps to your procedures creates a reliable rhythm and routine to the work you do. Like a well-run machine, you can establish processes that encourage productivity. Consistency also ensures that your team can deliver the same level of quality with everything they do. Everyone will know exactly what is expected of them and what they need to do to succeed, keeping your results dependable and exceptional.
4. Stay compliant
When companies violate regulations, it’s often due to deviations from policy that aren’t caught by management. A business process diagram minimizes this risk by clearly showing what each task requires to stay in compliance. Even when new staff joins your team, you can ensure that they follow your exact steps to keep your business operating within regulations.
5. Beat the competition
A business that runs well internally will also perform better in its industry. You won’t be losing money to inefficiencies, giving you more resources to expand. Uniting your team through excellent communication strategies and clear roles will empower them to perform at their best. Your business will operate as it’s designed to from top to bottom, allowing you to offer industry-best results to your customers.
Most importantly, improvement will be baked into every area of your business processes. Your organization will always focus on doing better and doing more, helping your customers succeed at the same time. As you continually work to make your processes that much better , you will show the market that you are the best choice available.
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Business Plan Flowchart Complete Guide
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EdrawMax specializes in diagramming and visualizing. Learn from this article to know about what is the business plan flowchart and business plan flowchart example. Just try it free now!
Do you want an organized route for your business workflow? Keeping track of your business progress can become difficult if you cannot enlist your goals. Plus, you need something that reminds you about the resources and guides you to their usage. A business plan flow chart is the solution for you. It is a graphical representation of the workflow of a business process. This simple chart shows how each step in the process gets to the finish line and how it relates to others.
1. What Is A Business Plan
A business plan is a formal statement of business goals and objectives. It's a written document that describes the company's mission, strategies, and financial information. Moreover, It is also a road map for the future.
Furthermore, this comprehensive document that outlines the business's goals, objectives, and strategies is a passage for your future success as an entrepreneur. Business plan flow charts are essential for any business owner who wants to take their business to the next level.
Elements Of A Business Plan:
The business plan is not just the name of a hard piece of paper. On the contrary, it is a mixture of diverse statistical and theoretical elements, some of which are as follows:
The first element of a business plan is its purpose. When starting a new business, you'll want to define your goals and how you intend to achieve them.
The second element is the product or service that your business provides. You'll want to describe what it is you're offering, and why it's better than those alternatives. Furthermore, it is better to target customers and answer what problems or issues it solves for them.
- Financial Statistics:
The third element of the business plan flow chart is how much capital (money) you need to get started. You'll need enough funds to cover initial expenses, such as advertising costs and lease payments on office space or equipment.
- Task Timeline:
The fourth element is a timeline for when accomplishments must meet the end. Plus, it includes milestones that indicate finished objectives and money spent on them.
- Financial Analysis:
The fifth element is a financial analysis. It breaks down the costs of running the business by category. As a result, it helps you to determine whether or not there's enough money available for everything involved in running it at once.
2. 4 Different Business Plan Types
A business plan flow chart helps you understand what your company will look like and how much money it will need to get off the ground. However, not all of them are created equal. It may vary based on the company framework, data provided, and business objectives. In this article, you'll get a comprehensive overview of 4 different business plan flow chart templates that can help you understand the overall notion of a business plan.
2.1 Business Plan Process
The business plan process flow chart type is a simple diagram. However, it is an essential one indeed. The visualization includes a top-down process enlisting for business growth. It all starts from the goal, which maps the further procedures accordingly. The end focus product is the budget. The business plan flow chart highlights specific strategic and tactical objectives throughout the journey. Each is essential for business performance and judgment for better decision-making. The overall physical presentation may not be luxurious. However, it serves a much bigger purpose, making it far more critical. Considering all the above facts, we can say that this type is a comprehensive process guide for employees and investors to look into.
2.2 Market Analysis Business Plan
The Market Analysis Business Plan is a business plan that focuses on the industrial analysis of your company. It's essential to include information about the following:
- The market, including its size and growth rate
- Your competition (including their strengths and weaknesses)
- Your target audience (what do they want?)
Unlike the above example, this business plan flow chart type gives a much more detailed overview to the business owner and investor. It focuses on the target market, and the share business has in it. This type is essentially beneficial for most companies. Whether you have a small or huge business, it will analyze your market exposure accordingly.
2.3 Business Plan Timeline
The business plan timeline visually represents the order in which tasks should be completed. It helps you visualize your progress and decide what's most important for your project. It can be of yearly timeline progress or future task procedural approach. In general, every business plan flow chart based on a timeline has four different quadrants.
The first quadrant defines what the business is all about. As a result, it sets the stage for everything else in the plan. All the goals and subjects come under this category. The second quadrant helps you assess what your company wants to accomplish, focusing specifically on customer needs or wants at a specific time. Unlike the above example, this business plan flow chart type gives a much more detailed overview to the business owner and investor. It focuses on the target market, and the share business has in it. This type is essentially beneficial for most companies. Whether you have a small or huge business, it will analyze your market exposure accordingly.
2.4 Business Strategy Diagram
A business strategy diagram is a step-by-step flowchart. This business plan flow chart helps you simultaneously visualize the process of developing and implementing your company's overall mission, vision, and goals. Moreover, it can help you evaluate potential new growth strategies and improve current ones. A business strategy diagram includes a whole architecture that summarizes your organization's overall goal.
Simply put, it is a step-by-step roadmap targeting economic departments, strategies to work, and actions performed in a business. Furthermore, it classifies how grouped, and individual actions impact business growth. All in all, this type is an in-depth value analysis chart for every small and big firm that wants ideal business automation.
3. Tips To Create A Business Plan That Stands Out
The Business Plan Flow chart is a visual way of showing the procedural roadmap of a business. It helps your team see the big picture and visualize the order in which tasks need completion. It can help them understand how to sequence their work, so they don't miss anything.
An exemplary flowchart also helps you create a business plan that stands out from competitors. It is possible by providing more information than other companies do about their company goals, services offered, and market presence. To create an ideal business plan that has the potential to visualize a complex production framework, you must follow the given tips.
- The business plan flow chart should be simple, clear, and concise so readers can easily understand it.
- The business plan should include at least one example of how each element has been completed successfully or unsuccessfully in the past. It is necessary because it shows how other people have accomplished similar tasks previously and helps increase confidence that you can do it too!
- Be honest, and do not overestimate your capabilities. Be realistic about the time it takes to accomplish your goal and what resources you need.
- It s better if the business plan flow chart references previous projects as testimonials for future projects. It shows that you have experience with similar tasks, improving customer and investor confidence.
- Make sure that you clearly understand your target audience's demographics and how they will react to your product or service.
A business plan flow chart effectively organizes your business and keeps track of the tasks due for completion. It is also a great tool for communicating with investors, bankers, or partners. The above examples show how a simple flowchart can help you communicate ideally while maintaining order in your company's growth process. With EdrawMax , creating, designing, and sharing happens all in one place. You do not have to worry about losing your files, as all the exported files from EdrawMax are highly encrypted. All in all, EdrawMax is a solid tool -- you just sit with your design ideas and explore the tons of features that this business plan maker has to offer.
Flowchart Complete Guide
Check this complete guide to know everything about flowchart, like flowchart types, flowchart symbols, and how to make a flowchart.
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The Ultimate List of Business Analysis Models | With Editable Templates
Updated on: 5 January 2023
The business analysis models come into play when understanding the requirements of stakeholders in every organization whilst identifying opportunities for growth and problem-areas which needs attention. While there are many areas to look at, it would consume more time unless you have the correct tools at hand.
In this guide, we have compiled a list of business analysis models that you can use during a strategic, tactical or operational business analysis. They are as follow,
Analyzing Organizational Strengths and Weaknesses
Organizational charts help to visualize the hierarchy of your organization and the reporting relationships among employees. Org charts are useful when planning a project, allocating resources, planning for future projects or organizational developments.
Any change you want to make to your organizational structure should start with an organizational chart template like the one below.
Organogram Template (Click on the template to edit it online)
More Organizational Chart Templates
Business analysts use the MOST analysis to plan and analyze organizational activities and make sure that they are centered around your business goals.
How to do it
MOST stand for,
Mission – Mission is basically what your organization wants to accomplish or its purpose. It should be centered around your stakeholders and benefits. Write down your mission statement in the Mission box of your MOST analysis template.
Objectives – These are the individual goals that will help you complete your mission.
Strategy – This section includes the different tasks you have to do to reach your objectives.
Tactics – Here you need to identify and list down the specific tactics you need to get your activities done.
Once you’ve filled out the template, you can get a quick overview of how you need to plan your organizational strategies.
MOST analysis template ( click on the image to edit this online )
PESTLE analysis is a tool that is used to identify and examine the external factors that affect a business. These macro environmental factors the analysis try to identify are
- Political factors such as government policies, trading policies or elections
- Economic factors such as economic trends, taxes, or import/export ratios
- Social factors such as demographics, lifestyles, or ethnic issues
- Technological factors like advancing technology or technology legislation
- Legal factors such as employment laws or health and safety regulations
- Environmental factors such as climate change or environmental regulations
PESTLE Analysis for Business Analysis (Click on the template to edit online)
More PESTLE Diagram Templates
SWOT analysis can be used to identify both internal and external factors that may affect a business. These are Strengths, Weaknesses, Opportunities and Threats.
Refer to our post on SWOT Analysis: What, Why and How to Use Them Effectively to learn about the technique in more detail.
SWOT Analysis for Business Analysis (Click on the template to edit online)
Check out our post on Marketing Strategy Planning Tools to learn about more useful tools and techniques for business analysts.
Analyzing Competitors and the Market Trends
A competitive analysis lets you identify what makes your product or service unique from that of your competitors and develop strategies to attract your competitors.
There are many competitor analysis techniques like Porter’s Five Forces, value proposition canvas, radar chart etc. to conduct a research on your competitors. Refer to our post on Visual Techniques to Conduct a Competitive Analysis to learn about these techniques in detail.
Analyzing Products and Services
Product roadmaps are a great way to analyze the development or the evolution of a product over time. They highlight the goals, milestones, and deliverables of your product development project.
They can also be used
- To communicate product related details to stakeholders and customers
- As a guiding document for strategic planning
- To coordinate the product development process
- To track your progress in achieving your objectives
How to create it
Step 1: Decide the duration of your roadmap and who you are designing it for. While you need to tailor your roadmap for your audience (i.e. if it is for your product development team the map should detail all specific tasks and features and dates), the timeframe should be reasonable.
Step 2: Collect the information you need to create the roadmap . These include goals, tasks, deadlines, key milestones etc.
Step 3: Using a product roadmap template like the one below, you can easily visualize these details for quick reference
Product Roadmap (Click on the template to edit it online)
More Roadmap Templates
Mind Map of Product Features
The initial phase of a product development process or any other project usually make up of brainstorming sessions. There are a lot of ideas and opinions shared and requests made. Business analysts can use mind maps to capture and organize these ideas shared.
Product Feature Mind Map (Click on the template to edit online)
Analyzing Systems and Processes
Activity diagrams visualize use cases at a more detailed level. Business analysts can use them to illustrate the flow of events in a business process, or the flow activities through a system.
How to use it
Step 1: Identify the various steps in your business process or the activities in your system
Step 2: Identify the actors involved in the process. If you know who they are, it would be easier for you to decide the steps performed by them
Step 3: Find the order in which each order the process steps flow
Step 4: Add swimlanes to your activity diagram to highlight the responsible actors
To learn about activity diagrams in more detail, refer to our Easy Guide to Activity Diagrams .
Activity Diagram Templates
Use Case Diagrams
Use case diagrams let you identify the different roles in a system and how they interact with it. These come in handy when you want to communicate how a system functions to your stakeholders etc.
Here’s our use case diagram tutorial to learn how to draw a use case diagram.
Use Case Diagram for Business Analysis (Click on the template to edit online)
Use Case Diagram Templates
The website navigation map helps you design your wireframes and UI mockups. It basically outlines how the user interface flows, or how your customer would interact with your website.
To draw a navigation map, you need to know the touchpoints your ideal website visitor would interact with upon visiting your site. You can use a customer journey map to identify these touchpoints and then use the following navigation map template to outline the website journey of your visitors.
Website Navigation Flow for Business Analysis (Click on the template to edit online)
Wireframe and UI Mockup Templates
User Interface Wireframes
Wireframes present a blueprint of your website or application screen. It will help you define the information hierarchy of your design and in turn letting you plan your website or app in a user-friendly way.
Step 1: Decide on all the details you want to add to your design.
Step 2: Create the layout by drawing boxes on the grid. It would be easier for you if you start adding information from top to bottom and left to right. Or you can simply select a wireframe like the one below from the Creately UI mockup and wireframe templates to get a head start.
Step 3: Add text to define the information hierarchy. Here you can use different font sizes to see how it would look.
User Interface Wireframe for Business Analysis (Click on the template to edit online)
With process maps , it’s easier to understand processes and identify bottlenecks and blockers that might be slowing your business processes, as they visualize a process step-by-step.
You can use a current-state process map and future-state process map to identify gaps in your processes and communicate how your work gets done to your stakeholders.
Check out our process map tutorial to learn how to draw a process map. Our post on process map improvement techniques covers 9 process improvement methodologies that you can use to streamline your business processes.
Analyzing Stakeholders and Their Interests
When planning a project, it’s important to know who the stakeholders are and why the project is important to them. It helps identify stakeholder roles and responsibilities.
Step 1: Identify the stakeholders of your project. These are the people who may be affected by your project directly or indirectly. Remember to consider those who come from outside your company as well.
Step 2: Based on the stake they have in your project, group and prioritize them.
Step 3: Using a stakeholder map, categorize your stakeholders.
Stakeholder Map (Click on the template to edit online)
Threats and Opportunity Matrix for Stakeholders
Threats and opportunity matrix is used by business analysts to examine how project stakeholders will be affected by implementing and not implementing a proposed solution. It helps to make better decisions with regard to your stakeholders as it helps you look at things from their perspective.
Step 1: Get a list of stakeholders and have a look at your project charter
Step 2: List down the reasons for the change you want to implement. Then list down the threats of not implementing the change, and the opportunities you can gain by implementing the change.
Step 3: Think of the reaction of stakeholders who would not like the change and list down the threats of implementing the change and opportunities of not making any changes.
Step 4: Get together your team and discuss the results. Arrive at a conclusion that won’t negatively affect your key stakeholders.
Threats and Opportunity Matrix for Stakeholders (Click on the template to edit online)
MoSCoW method is used to understand priorities. With it, you can quickly decide which to prioritize when it comes to your customer requirements, projects, project tasks, and products etc.
While the o’s are added to make pronunciation easier the rest of the letters stand for
M – Must Have (a requirement you must have to meet a business need)
S – Should Have (a requirement you should have if possible)
C – Could Have (a requirement you could have if it doesn’t affect other project activities negatively)
W – Would Have (a requirement that you would like to have later)
By categorizing your requirements with a matrix like below, you can decide which requirements to prioritize, which you can do later and which to exclude.
MoSCoW method template (Click on the image to edit this online )
Managing and Dealing with Change
In the context of business, implementing change is never easy, especially as it may affect so many aspects. By using the correct tools, you can make sure that you adapt to new changes seamlessly.
In our Guide to Change Management Tools , we discuss change management techniques that you can use to plan ahead for the changes in your organization.
Add to the List of Business Analysis Models
Whether planning a project, developing strategies, or improving business processes, you can use the business analysis models in this list, for quick solutions. These are just a few business analysis techniques from those that are out there.
What other business analysis models do you use in your organization? Do add them in the comment section below so we can expand this list.
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Workflow diagram: Symbols, uses, and examples
A workflow diagram provides a visual overview of a business process or system. These diagrams help team members easily visualize their goals and deadlines, preventing potential bottlenecks. Find out how to create one of your own.
A workflow diagram can help prevent project deviations and bottlenecks by communicating goals and deadlines in a visual way. Whether you use a workflow diagram when onboarding new hires or to streamline use cases and testimonials, it’s a great way to visualize tasks and data flows.
From what it is to how to create one of your own, we’ve put together some of the most important facts to know about workflow diagrams and included helpful examples.
What is a workflow diagram?
A workflow diagram—also known as a workflow chart—provides a graphic overview of a business process or system. Usually, you’ll use these diagrams to visualize complex projects after you’ve completed the initial research and project planning stages.Once you’ve created a workflow diagram, you will have a detailed view of high level tasks and dependencies based on the overall project timeline and objectives.
Workflow diagram compared to other process mapping
Workflow diagrams share many aspects of other diagrams in the UML (Unified Modeling Language)—a standard language for specifying, visualizing, constructing, and documenting the artifacts of software systems. But workflow diagrams differ slightly from other process mapping and UML diagrams. Here, we compare them to some common types to show how:
Business process mapping
Workflow diagrams are closely related to business process mapping . The difference between the two is that a process map typically outlines steps in detail while a workflow diagram gives a visual representation of them. The objective of a workflow diagram is to help team members understand their tasks, objectives, and roles and responsibilities within the project at a high level.
Workflows and flowcharts are often confused. While the two terms sound similar, a workflow is just one type of flowchart . You can also use flowcharts to visualize other processes, like PERT charts and process documentation .
Activity diagrams are another type of flowchart that outline the flow of a series of activities within a system. It’s used to translate a business system’s functions into more digestible information for those who don’t understand the backend workings as much. In other words, an activity diagram is an easy way to visualize technical processes. For example, in Asana , you could draw an activity diagram to create a project as follows:
User clicks the button to create a project
New project launched
User customizes the project with different names and features
User saves the project and updates when needed
Data flow diagrams
Data flow diagrams follow the data through an operating system or process, whereas workflow diagrams follow the work itself. Instead of inputting actions, for example, in a data flow diagram you’d enter in metrics, results, or other data points that you want to portray.
When to use a workflow diagram
A workflow diagram is a visual representation of a process, either a new process you’re creating or an existing process you’re altering. For example:
A process to streamline your ecommerce customer journey.
A project to increase customer retention and satisfaction.
A process to automate and optimize manual tasks involving customer data.
A workflow diagram comes between the business process map (which you’ll create before the project starts) and business process automation (which you’ll use to optimize and streamline processes). This is because your map provides detailed process steps that stakeholders need to begin work, while a workflow diagram is a high level visual representation that can help clarify overarching goals during the process.
The components of a workflow diagram
In order to understand how a workflow diagram works, you first need to understand the components that make up a workflow. These include inputs, outputs, and transformations, which all help to communicate deliverables in as little time as possible.
Once you understand these components, you’ll be able to properly read a workflow process diagram and create one of your own. The main components of a workflow diagram include:
Inputs: An action that impacts the following step
Transformations: An input change
Outputs: The outcome after the transformation
These components are visualized by shapes and arrows, including:
Ovals: Represent the start and end points of a process.
Rectangles: Represent instructions about actions and steps.
Diamonds: Represent key decisions during the process build.
Circles: Represent a jump in actions and may indicate steps to bypass (in certain situations).
Arrows: Connectors that represent the dependency between all shapes and actions.
Together, these components instruct the reader how to follow the correct path and achieve the desired outcome.
Types of workflow diagrams
When it comes to visualizing processes, there are a few different workflow diagram formats that you can choose from. Each one offers unique advantages that can help you map out your next process. The type of diagram you choose will depend on the process you’re working on and your needs for that process.
From process flows to swimlanes, here are the four different types of workflow diagrams you can use for your workflow analysis.
1. Process flow diagram
A process flow diagram tool is the standard design for workflows. In this diagram, all components are mapped out chronologically, making it a basic visual representation of a process. This type of diagram provides a general overview of individual tasks and objectives without getting into too much detail.
Best for: Teams that want a high level visual representation of a new process that is quickly comprehended by any stakeholder or department.
2. Swimlane diagram
A swimlane diagram is also a popular workflow layout, though swimlanes differ quite significantly from process flow diagrams. A swimlane diagram breaks down your workflow into smaller flows or units. These flows are interconnected but separated to highlight interactions and possible inefficiencies. This creates visibility and offers a deeper dive into the overall process workflow.
Best for: Teams working on complex processes with many layers that are interrelated but independent.
3. Business process modeling notation (BPMN) diagram
BPMN uses uniform notations that both business and technical stakeholders can easily interpret. It is a type of unified modeling language which uses standardized symbols to communicate different steps.
BPMN diagrams focus on the information that is received internally and how that information is interpreted. This is why it's most commonly used for internal process changes that don't impact external customers.
Best for: Teams working on process improvements in different departments.
4. Supplier, input, process, output, customers (SIPOC) diagram
SIPOC is a type of swimlane diagram that focuses on analyzing multiple different parts of a workflow.
Unlike a traditional diagram that organizes data in sequential order, a SIPOC diagram prioritizes who creates and receives the process data. SIPOC focuses on how the data is being received internally as well as externally which is why it's used for processes associated with customer experience.
Best for: Teams looking to focus on how data is being received internally and externally.
How to create a workflow diagram (with example)
To create a workflow diagram, begin putting together the main components of your process. To do this, bring together your inputs, outputs, transformations, and your main process deliverables.
Map workflow components out on your diagram by using arrows, circles, rectangles, ovals, and diamonds to represent each data point.
1. Select your type of workflow
To select the workflow type that’s best for you, consider the functions needed for your process. Is it a complex process with multiple stakeholders best fit for a swimlane diagram? Or is it a relatively simple process that’s best suited for a simplistic process flow diagram?
While you can adjust your workflow as you go, it's easier to decide on the type of workflow up front. This way, you know exactly how complex or simple your workflow is.
2. Determine your start and end points
Next, determine your workflow start and end points (represented by ovals on your diagram).
To determine these points, consider when your process begins and when it ends. Is there an action that triggers the process? Likewise, is there an action or step that ends the process? These data points will help effectively communicate when the process begins and ends.
3. Gather necessary information
To gather information, connect with stakeholders to understand each piece of the process. This may include a kickoff meeting with various departments and leaders to gather the details and approvals needed to begin constructing your workflow diagram.
Since each process differs, the information you need to gather will also vary. Consider the steps required to complete the process, the stakeholders who will be involved, and any other significant details that will help inform readers.
4. Eliminate inefficiencies
The final step before constructing your visual workflow is to consider and eliminate any inefficiencies that may arise. Make sure you analyze inefficiencies before designing your workflow so you can prevent any issues—rather than dealing with them in real time. The specific inefficiencies will vary, but they can include a lack of resources, issues with product development, or any other obstacle that could arise during the process.
Document these inefficiencies in a change log under your change control process . This way you will be able to communicate these problems to stakeholders, prioritize inefficiencies, and track whether they've been resolved.
5. Design your workflow
Finally, begin constructing your workflow. Gather the unit information, data points, and efficiencies and map them on the diagram you chose in step one. Since each process is different and each diagram is constructed differently, yours will likely be unique in its design. Here’s just one example of what a workflow diagram might look like:
Once your workflow is designed, review it with your stakeholders to ensure it's accurate and appropriate for the situation. This is a great way to ensure all inefficiencies have been accounted for and resources have been specified properly.
Use workflows to map out processes
Visualizing workflows can help you effectively communicate deliverables to stakeholders and leadership. Plus, it’s a great way to align multiple different departments on a given process.
To take your workflows one step further, try workflow management software. From task automation to streamlined communication, Asana can help.
Project management software and tools: Your best picks for 2023
SWOT analysis: What it is and how to use it (with examples)
SMART Goals: How To Write Them and Why They Matter
8 time-saving Asana tips to get more done, faster
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Blog Data Visualization
What Is A Venn Diagram [+ Examples, Purpose, And Types]
By Lydia Hooper , Jun 29, 2023
Perhaps there is nothing more ubiquitous, quintessential and delightful than the Venn diagram.
You may have noticed how they have a tendency to appear in social media feeds, online forums and whiteboard discussions.
And it’s no secret how much we love them at Venngage — they only inspired our company name after all!
So it’s only natural I show you just how awesome Venn diagrams are, and how you can easily create one to help you with any communication challenge with Venngage’s Venn Diagram Maker .
Don’t want to design a Venn diagram from scratch? Check out our library of Venn diagram templates instead that lets you customize to your heart’s desire.
Note: Some of our Venn diagram templates are free to use and some require a small monthly fee. Sign-up is always free, as is access to Venngage’s online drag-and-drop editor.
Click to jump ahead:
What is a venn diagram.
- Purpose of Venn diagrams
- Venn diagram examples
- Types of Venn diagrams
What can Venn diagrams be used for?
How to create a venn diagram.
A Venn diagram is a graphical representation that shows similarities and differences between items, concepts or data.
They utilize shapes, often circles, to illustrate relationships and compare data.
Venn diagrams are certainly one of the most well-known types of diagrams .
Here’s an example of a Venn diagram. This design, featuring a series of simple circles or ellipses that overlap is ubiquitous.
The overlapping region of a Venn diagram indicates similarities while others showcase differences.
Although the Venn diagram was created to describe mathematically logical relationships, it’s now used to show all types of relationships.
What is the purpose of Venn diagrams?
The purpose of Venn diagrams is to visually represent relationships between different groups of items or concepts.
Here are some use cases where you’ll want a Venn diagram.
- Organize diverse information : Venn diagrams help organize data in a way that makes it easy to understand relationships between data.
- Compare choices : Venn diagrams are perfect tools when you want to compare two or more choices. They highlight shared elements and distinctive features, enabling anyone to make informed decisions.
- Solve complex problems : Venn diagrams aid in logical reasoning by depicting logical relationships between different elements or statements. For a more advanced guide, check out our post on Venn diagram symbols to see how they help with complex problem-solving.
15 Venn diagram examples
There’s no denying Venn diagrams are popular.
Businesses use them for everything from internal whiteboard sessions to customer-facing ads to inspiration for new products.
Here are some example situations where Venn diagrams really shine.
Compare different solutions
One of the most frequent uses for a Venn diagram is comparing different products, services, or solutions.
Here’s an example comparing two different products by listing things customers are interested in that might cause them to select one over the other:
Source : Tech Digest
Here’s another Venn diagram comparing two different services and what they both offer:
Source : diff.wiki
This Venn diagram describes two offerings and the relationships between them:
Source : InformationWeek
In this example, a Venn diagram details three complementary options.
Again, each can stand alone, or they can be combined:
Source : Supply Chain Shaman
Highlight combinations and overlaps
Venn diagrams are also great if you want to draw attention to combinations or overlaps.
This simple Venn diagram shows how classrooms today use a combination of different instructions:
Source : Imagine Learning
This Venn diagram emphasizes how critical events impact people and other assets:
Source : CIPHR
This innovative, non-hierarchical spin on an organizational chart is meant to describe how roles can bridge different teams and departments:
Source : Metal Toad
Some of the above examples demonstrate how useful Venn diagrams are for helping people better understand complex topics and ideas.
But they can also help break down markets.
This Venn diagram outlines market segments or niches:
Source : Lending Times
And here’s another that shows the relationship between various competitors based on offerings:
Source : Wall Street Journal
Some ideas can be so abstract that you’ll need a diagram to help colleagues or clients get the big idea.
For example, you can use a Venn diagram to explain corporate culture.
Source : Dan Pontefract
And…sources of competitive advantage…
Source : Transmission
Or… even how to unlock innovation.
Source : UX Studio
Advertise brands and products
Many of the examples so far are meant to help inform conversations that happen inside companies.
But due to the popularity of Venn diagrams, they are also being used as customer-facing visuals and even products.
For example, Venn diagrams helped inspire the evolution of Mastercard’s logo :
Source : Mashable . Credit : Pentagram / Mastercard
They were also used in a McDonald’s advertising campaign several years ago:
Source : TRENDHUNTER
But this example takes the cake.
Nike released a new sneaker inspired by and named after the Venn Diagram known as the Nike Air Max 90 “Venn Diagram”.
Source : Sneaker News
3 types of Venn diagrams
Several types of Venn diagrams are used to represent different types of relationships between sets.
For most needs, a two-set, three-set, and four-set Venn diagram is enough to analyze simple and/or complex scenarios.
This is the simplest type of Venn diagram and one we all know.
It highlights the relationship between two sets using two circles, with the overlapping region showing the elements common to both sets.
A three-set Venn diagram uses three shapes to represent the relationships between three sets.
The overlapping regions in this diagram indicate elements that are common to specific combinations of sets.
A four-set Venn diagram uses four shapes to display the intersections and differences among the sets.
This allows for a more comprehensive visualization of the relationships and commonalities. The four-set Venn diagram is a valuable tool in various fields, such as mathematics, statistics, data analysis, and business or social sciences.
Remember, these are not the only types of Venn diagrams out there.
Here are some other types of Venn diagrams you can use:
- Euler diagram
- Shaded Venn diagram
- Network Venn diagram
As we’ve seen, Venn diagrams are excellent for multiple reasons.
But let’s see some of their practical applications.
This diagram, for example, draws attention to an important intersection:
Want to compare two products, highlight the similarities and differences between two services, or show how a solution combines two ideas, then customize this Venn diagram template.
This example compares different options by detailing the strengths of each:
So if you want to describe service combinations or overlapping ideas, customize this Venn diagram template .
As you can see, Venn diagrams are incredibly flexible and can be used to see patterns of many kinds.
This visual uses a Venn diagram to describe a complex topic in a clarifying and engaging way:
You can customize this Venn diagram template to create a visual that explains your company’s customers, competitors, or culture, for example.
Now that you’ve gotten lots of inspiration, it’s time to make your own Venn diagram!
Here are some simple steps to help you get from pen to Venn.
1. Try different concepts to see what works best
I highly recommend starting with pen and paper so you can start to map out the relationships you might want to show — it’s easy to draw rough-looking ovals after all.
This will allow you to better play around with ideas before you start working with software to create more polished designs.
You may even get inspired to think outside of the box.
Or you might decide there’s a fair amount to explain, and that a Venn diagram is certainly more attractive than a boring text document.
You might even mix it up by using squares or diamonds if that works well for the topic.
2. Choose a template
Although there are many tools out there that can help create a Venn diagram, I recommend using Venngage’s Venn Diagram Maker . Why?
Well, it’s an intuitive drag-and-drop editor that eliminates the need to have design experience. Just drag and drop elements to create your Venn diagram.
Or if you really want to get a head start, simply pick a Venn diagram template that fits what you outlined, and use Venngage to edit elements like icons, and logos.
Venngage offers over 40,000 icons and illustrations, 2,000 of which are diverse icons.
If you want to change an icon in a template, simply double-click the icon and choose the one you want to change it to:
3. Add straightforward labels
When it comes time to add text, think “keep it simple.”
Use language appropriate for your audience and try to integrate the text and the visual, rather than having one crowd out the other.
If you want to use a fair amount of text, be sure to use a format that still helps people be able to best understand the comparisons you are trying to make.
4. Be mindful of the size of the shapes
Labels aren’t the only thing that will be communicating your ideas to people.
The size of your shapes can also tell them what’s most important, most significant, or of the greatest magnitude.
For example, in this Venn diagram, the website portion stands out as foundational:
Use the size of shapes to help your audience know what matters most.
5. Select colors to help people read
You can also use color to help draw attention to certain elements or themes.
If you are creating a particularly complex Venn diagram, use color in ways that help your audience easily see differences and draw comparisons.
Want to learn other ways to create a Venn diagram? Check out these posts! How To Make A Venn Diagram In Microsoft Word How to Create a Venn Diagram in PowerPoint? How to Make a Venn Diagram in Google Docs
Summary: Venn diagrams are useful, versatile, easy to create, and even fun
You may never be as big of a fan of them as we are, but once you start using them, you will see how helpful they can be, for you, your colleagues, clients and customers.
No design experience? No problem. Venngage’s Venn Diagram Maker makes it easy for you to create engaging, beautiful Venn diagrams in minutes.
New York Tech
Understanding the Basics of a Cash Flow Diagram
Posted: November 7, 2023 | Last updated: November 7, 2023
A cash flow diagram sounds a bit daunting, doesn’t it? Think of it like a roadmap that tells you the money story of a business. It shows you how cash comes in, goes out, and flows within a business.
This is crucial for businesses to identify trends and plan effective strategies for growth and sustainability. In this guide, we’ll help you understand their formation, interpretation, and applications in various financial scenarios.
So come along and we’ll decipher this financial tool together. Let’s get into it!
A Brief Cash Flow Diagram Explanation
A cash flow diagram is a graphical representation of the inflow and outflow of cash for a business over a specific time. It consists of three main components:
Additionally, the horizontal axis represents time while the vertical axis represents cash flows. On the other hand, arrows indicate the direction of cash flow. The upward arrow represents inflow and a downward arrow indicates outflow.
Lastly, the size of the arrow represents the amount of cash flow.
How to Create a Cash Flow Diagram
Creating a cash flow diagram is simple. The first step is to determine the period for analyzing cash flow timing. It can be a week, month, quarter, or year depending on your needs.
Next, identify all sources of inflow and outflow during that period and categorize them accordingly. These may include:
- investment activities
- financing activities
- loan payments
Once you have all the information, plot the cash flow on a graph with time on the horizontal axis and cash flow amount on the vertical axis. Use arrows to indicate the direction of cash flow .
Finally, make sure to label each arrow with its corresponding amount.
Simplifying the Process with Cash Flow Tracking Tools
One popular option is QuickBooks, an accounting software that automates cash flow management. It also integrates with your bank account, making it easier to reconcile transactions and stay updated in real-time.
Another tool, called Pulse, offers a visual and interactive approach to managing cash flow. It allows users to create multiple cash flow scenarios, making it easier to plan for future business decisions.
For businesses focusing on accounts receivable financing , a tool like Fundbox can be beneficial. It offers invoicing solutions, which can help businesses get paid faster by advancing payments on outstanding invoices, thereby enhancing cash flow.
Remember, each tool has its strengths and weaknesses. That’s why it’s essential to evaluate your specific tracking needs before choosing a tool.
Applications of Cash Flow Diagrams
Cash flow diagrams are useful in various financial scenarios. First, it can help businesses plan and manage their budget effectively.
Additionally, it can show the projected cash inflow and outflow to determine the profitability of the venture. So the next time you come across a cash flow diagram, remember it’s not as complicated as it seems.
It’s a powerful tool that can help you gain a better understanding of your business’s financial situation and make informed decisions for its future.
Exploring the Basics of a Cash Flow Diagram
A cash flow diagram is a powerful tool that provides a visual representation of a business’s financial health, paving the way for informed decision-making and strategic planning. By understanding its nuances, businesses can navigate their financial journey with confidence and foresight.
After reading the cash flow diagram fundamentals, it’s time to put it into practice. So start tracking, analyzing, and visualizing your cash flows today. Don’t just view your financial story, take control of it.
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This article is published by NYTech in collaboration with Syndication Cloud.
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