salary requirements in business plan example

How Do You Draft the Personnel Section of the Business Plan? The Personnel Section of a Business Plan Explained.

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How to Create a Desirable Compensation Plan

Table of Contents

A robust compensation plan is crucial for attracting and keeping a quality team. A successful compensation strategy incorporates multiple elements beyond salary, including flexibility, employee benefits, paid time off (PTO) and much more. 

We’ll detail compensation plan elements and explain how to develop and implement a competitive compensation plan that can boost recruitment and retention efforts while ensuring equity and fairness. 

What is a compensation plan?

A compensation plan, also called a “total compensation plan,” encompasses all of the compensatory components of a company’s strategy: employees’ wages, salaries, benefits and total payment terms. Employee compensation plans also include raise schedules, fringe benefits, union perks and employer-provided vendor discounts.

A strategically designed compensation philosophy that is kept current, relevant and compliant supports critical components of your business, including the following:

• Strategic plans
• Budgeting and business goals
• Industry-competitive challenges
• Operating needs
• Total reward strategies that support retention of the company’s top talent

When your business maintains a robust compensation program, you’ll enjoy the following benefits: 

• A compensation plan can support your business strategy. A desirable compensation plan describes how your organization’s pay and compensation philosophies support your business strategy, industry competitiveness, operating objectives and staff needs.
• A compensation plan can help with recruitment. A desirable compensation plan helps your business attract and retain top talent with the in-demand career skills that can take your business to the next level.
• A compensation plan can boost employee motivation. A desirable compensation plan motivates employees to perform at high levels and exceed goals.
• A compensation plan can keep your business competitive. A desirable compensation plan helps keep your business competitive in the marketplace in terms of base pay, incentives, total compensation and benefits opportunities.

Why do companies need a compensation plan?

Companies need a thoughtful compensation program to stay competitive in their industry and attract and retain top talent. Employers that determine salaries and benefits without regard for industry data will slowly lose the talent game to competitors. Additionally, managing a workforce without a predetermined business budget is risky. Compensation programs allow for consistent and predictable budgeting and planning.

According to Payscale’s 2023 Compensation Best Practices Report, job seekers have the upper hand in today’s job market. To attract and retain the best workers, more organizations are focusing on building compensation packages that will help recruit employees in a tough labor market and keep them engaged and motivated. 

What is direct and indirect compensation?

There are two types of foundational compensation:

• Direct compensation: Direct compensation includes salary, hourly pay, commissions and bonus pay.
• Indirect compensation: Indirect compensation includes various benefits.

We’ll take a closer look at direct and indirect compensation.  

4 types of direct compensation

Most employers choose one type of direct compensation and stick to it. However, you can use various methods to compensate employees for their work. The exception is bonus pay, which is meant to be an addition to regular pay based on employee or company performance.

• Salary: The most traditional form of salary is a monetary amount scheduled over one year. How often salaried employees are paid is another part of the compensation strategy. However, businesses typically pay their employees every two weeks. Salary is the most common method of direct compensation for exempt employees . An exempt employee is not eligible for overtime pay . They receive a base salary for their work instead of being paid an hourly rate; employers pay exempt employees for their job instead of the number of hours they work.
• Hourly pay: Nonexempt employees are typically paid an hourly rate and are eligible for overtime pay; they’re guaranteed at least minimum wage . When an employee works over 40 hours in a workweek, their employer must pay them overtime. The hourly pay rate is typically a predetermined dollar amount per work hour. Hourly employees generally keep a timecard or clock in and out to begin and end their work shifts. During times of slow or reduced work or budget changes, nonexempt employees might not work as many hours as they did in previous weeks. Thus, a routine number of hours worked per pay period is not guaranteed.
• Commission: Commission is when compensation is based on volume, production or a predefined performance level. This compensation type is also known as “piecework” or “piecemeal.” Paid commissions are usually based on the volume of services performed or products made, or are structured around sales volume. For example, a real estate agent who sells a house will receive compensation from that sale. It doesn’t matter how long or what work activities were necessary to sell the house, only that it was sold.
• Bonus pay: Bonuses are used to motivate employees or increase their overall performance. Bonuses are a variable compensation method that’s commonly associated with sales professionals, who tend to be salaried or exempt personnel. For example, if a sales professional exceeds their quarterly target by a specific dollar amount based on a predetermined matrix, they will receive a commensurate bonus. Bonuses can also be paid for company performance or when hard-to-fill positions are filled with employees with unique or highly sought-after skills or experience. Holiday bonuses are another popular type of bonus.

Types of indirect compensation

Indirect compensation can be any fringe benefit employers offer. Most commonly, it refers to the various insurance types employers offer in their employee benefits plans . For example, the employer may offer health insurance , dental insurance, life insurance, short- and long-term disability insurance and vision insurance. Employee retirement plans , like 401(k) plans , are another common form of indirect compensation.

Equity-based programs are another compensation offering. However, these aren’t typically offered within the small business realm. Equity-based compensation is generally some sort of share or stock in the company.

Other examples of indirect compensation include the following:

• Disability income protection
• Vacation days 
• Paid holidays
• Flexible work policies
• Other forms of retirement benefits
• Opportunities for advancement and career growth
• Student loan assistance
• Educational benefits
• Assistance with child care expenses
• Employee relocation packages
• Company car
• Company equipment (e.g., laptops, mobile phones)

How to develop and implement a compensation plan

There’s no one-size-fits-all strategy for developing a compensation plan. Rather, it’s best to approach it in terms of what’s right for your team. Here are some suggestions to guide you along the way.

• Create a compensation plan outline. Set an objective for your program and specific targets. Begin with job descriptions for each position on the team, and set a generalized budget for your personnel.
• Appoint a compensation manager. This position, usually filled by someone in human resources, aligns the program and researches what each position pays within the industry, how job classifications will be determined and how direct compensation will be selected.
• Craft a compensation philosophy. Determine how competitive you’ll be in your industry’s job market. Will you lead the market in direct compensation or offer modest pay with great benefits?
• Rank jobs and place them within a matrix. Outline what, if any, pay tiers should exist in pay structures for executives and sales employees, for example. You also should determine potential tiers within each job classification.
• Develop seniority grades within each job classification. It’s essential to develop opportunities for career advancement. For example, create levels or senior- and entry-level roles that may affect the compensation matrix but offer advancement for employees.
• Settle on salaries and hourly pay rates. After you outline your compensation platform, assign pay rates and salary ranges for each position and job classification. This is when you’ll fine-tune your organizational budget.
• Complete necessary policies. A compensation plan may affect policies related to payroll, fringe benefits and other pay-related matters. For example, companies often have policies for paid holidays, healthcare benefits, payroll administration and company-issued pay advances that must factor into — or at least align with — the company’s compensation policy. Ensure that all policies are updated and included in your employee handbook .
• Get approval or buy-in from your company’s other leaders. Once everything is in place, ensure that your company’s leadership team fully supports your compensation packages.
• Develop a communication plan. All of your employees should learn about the compensation program at the same time. Use several communication methods to share the plan (e.g., email, group gatherings, social media, flyers in common areas). Issue this messaging in multiple languages if not all of your employees speak English as a first language. You should also expect many questions. The complexities of total compensation are not easy to understand, and it’s essential for every employee to understand their compensation package.
• Monitor your compensation plan. Be prepared to keep tabs on and change employee compensation. Over time, adjustments will be necessary for you to remain legally compliant and competitive.

How can you ensure equity, fairness, legality and competitiveness?

Part of developing a compensation plan is ensuring it’s fair for all employees. This pertains to gender, culture, race and ethnicity, as well as to the skill sets and experience new team members bring to your company.

Before you unveil your compensation plan, address the following questions: 

• Are the programs in your compensation policy legally compliant? Be mindful of labor laws , including state laws (which may include PTO or vacation regulations) and federal laws (such as the Affordable Care Act).
• Is the overall program fair to all employees?
• Do employees perceive the overall program as fair? In this case, perception is reality.
• Is the overall program fiscally sound? Can you maintain the benefit offerings even if profits dip for a quarter or two?
• Can your organization effectively communicate the overall program to employees?
• Are the programs fair, competitive and in line with your overall compensation policies?
• Is the compensation policy competitive? Will it help your organization attract and retain top talent in your industry?

It’s crucial to keep your compensation plan active and relevant by adjusting it as necessary to stay compliant and continue attracting and retaining excellent employees.

Resources for creating compensation plans

Consider the following compensation planning and design companies that can guide you toward a fair, desirable compensation plan: 

• Culpepper and Associates: Culpepper and Associates offers compensation surveys and other services.
• PeopleFluent: PeopleFluent provides talent management services.
• Unit4: Unit4 offers comprehensive HR and financial software, including employee compensation management software.
• Flex HR: Flex HR provides full-service consulting.
• emPerform: emPerform offers all-inclusive employee performance management.

Good compensation plans make good teams

A solid compensation plan should be a key component of any company’s strategy for attracting and retaining the best team members possible. There are many ways to offer a good compensation program to your employees based on your business needs and budget. Take the time necessary to develop a comprehensive program that works for your organization, and then communicate the plan effectively to everyone on your team. Do it right, and your employee morale and retention will increase substantially.

Natalie Hamingson contributed to this article. 

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

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

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

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

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

Let’s get started.

What Do You Need A Business Plan For?

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

1. Secure Funds

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

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

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

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

2. Monitor Business Growth

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

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

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

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

3. Measure Business Success

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

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

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

4. Document Your Marketing Strategies

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

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

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

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

How to Write a Business Plan Step-by-Step

1. create your executive summary.

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

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

A good executive summary should do the following:

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

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

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

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

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

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

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

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

2. Add Your Company Overview

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

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

Your company overview should contain the following:

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

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

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

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

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

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

• Mission Statement

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

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

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

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

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

Business Objectives

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

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

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

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

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

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

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

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

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

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

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

Market Analysis

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

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

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

• Market Research

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

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

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

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

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

How to Quantify Your Target Market

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

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

What Does a Good Market Analysis Entail?

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

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

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

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

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

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

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

Competitive Analysis

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

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

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

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

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

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

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

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

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

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

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

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

Direct vs Indirect Competition

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

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

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

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

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

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

Factors that Differentiate Your Business from the Competition

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

1. Cost Leadership

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

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

2. Product Differentiation

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

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

3. Market Segmentation

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

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

4. Define Your Business and Management Structure

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

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

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

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

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

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

Management Team

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

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

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

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

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

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

Key Questions to Answer When Structuring Your Management Team

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

Additional Tips for Writing the Management Structure Section

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

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

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

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

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

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

Organizational Chart

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

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

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

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

5. Describe Your Product and Service Offering

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1. Avoid Technical Descriptions and Industry Buzzwords

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

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

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

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

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

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

3. Long or Short Products or Services Section

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

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

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

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

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

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

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

4. Describe Your Relationships with Vendors or Suppliers

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

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

5. Your Primary Goal Is to Convince Your Readers

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

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

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

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

Key Questions to Answer When Writing your Products and Services Section

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

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

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

6. Show and Explain Your Marketing and Sales Plan

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

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

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

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

Outline Your Business’ Unique Selling Proposition (USP)

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

Target Market and Target Audience

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

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

Creating a Smart Marketing and Sales Plan

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

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

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

Your Positioning Statement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Basic Rules to Follow When Pricing Your Offering

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

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

Pricing Strategy

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

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

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

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

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

Advertising

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

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

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

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

Public Relations

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

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

Content Marketing

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

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

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

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

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

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

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

Social Media

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

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

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

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

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

Strategic Alliances

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

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

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

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

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

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

2. Evaluate Your Competition

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

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

These questions can help you know your competition.

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

3. Consider Your Brand

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

4. Focus on Benefits

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

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

5. Focus on Differentiation

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

Key Questions to Answer When Writing Your Marketing and Sales Plan

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

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

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

7. Clearly Show Your Funding Request

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

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

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

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

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

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

Funding Request: Debt or Equity?

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

Case for Equity

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

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

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

Case for Debt

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

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

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

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

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

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

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

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

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

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

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

8. Detail Your Financial Plan, Metrics, and Projections

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

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

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

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

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

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

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

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

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

Use Graphs and Charts

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

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

Address the Risk Factors and Show Realistic Financial Projections

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

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

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

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

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

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

1. Sales Forecast

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

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

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

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

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

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

2. Personnel Plan

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

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

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

3. Income Statement

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

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

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

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

4. Cash Flow Statement

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

5. Balance Sheet

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

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

6. Exit Strategy

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

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

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

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

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

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

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

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

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

9. Add an Appendix to Your Business Plan

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

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

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

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

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

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

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

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

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

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

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

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

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

Tips and Strategies for Writing a Convincing Business Plan

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

1. Know Your Audience

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

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

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

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

2. Get Inspiration from People

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

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

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

3. Avoid Being Over Optimistic

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

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

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

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

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

4. Keep it Simple and Short

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

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

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

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

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

5. Make an Outline and Follow Through

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

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

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

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

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

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

6. Ask a Professional to Proofread

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

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

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

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

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

1. hubspot's one-page business plan.

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

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

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

2. Bplan’s Free Business Plan Template

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

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

3. HubSpot's Downloadable Business Plan Template

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

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

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

4. Business Plan by My Own Business Institute

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

The comprehensive template consists of a whopping 15 sections.

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

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

5. Score's Business Plan Template for Startups

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

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

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

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

6. Minimalist Architecture Business Plan Template by Venngage

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

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

7. Small Business Administration Free Business Plan Template

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

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

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

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

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

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

9. PandaDoc’s Free Business Plan Template

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

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

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

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

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

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

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

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

Alternatives to the Traditional Business Plan

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

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

Business Model Canvas (BMC)

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

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

Segments of the Business Model Canvas

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

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

Lean Canvas

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

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

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

Startup Pitch Deck

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

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

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

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

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

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

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

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

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

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

Business Plan FAQ

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

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

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

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

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

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

Exlore Further

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

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Martin luenendonk.

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

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

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How to Write a Business Plan [Complete Guide]

Last Updated on – Aug 8, 2023 @ 3:22 pm

Preparing to write your business plan? You’re already one step ahead of other entrepreneurs who don’t see its value.

A well-thought-out and well-written plan for starting and running your business helps you focus on what you need to do to make your business idea work. It can also boost your chance of getting investments and loans to finance your business .

Did you know that half of small businesses fail in their first four years? Planning is such a crucial step to reducing the risks of managing an enterprise. Turn your business idea from something abstract and uncertain into a successful venture. It starts with drafting a good business plan.

Here’s your definitive guide to writing a business plan that speaks for itself.

What is a Business Plan?

A business plan is a written document that details what a business is, what direction it will take, and how you’ll get it there.

Practically speaking, the business plan evaluates your business’ viability. As the Department of Trade and Industry (DTI) puts it , the document allows entrepreneurs to find out whether or not their business idea will bring in more money than how much it costs to start and run it.

More than just a document, the business plan helps business owners to figure out the key aspects of an enterprise, including the following:

• Business goals and strategies to meet them
• Competitive edge and how to leverage it
• Potential problems and how to solve them
• Funding required to start the business
• Equipment, facilities, and manpower needed for operations

Who Needs a Business Plan and What Is It Used For?

Every aspiring entrepreneur who will spend a great amount of money, time, and energy to earn a profit needs a business plan.

Business planning is a crucial part of starting an entrepreneurial journey, no matter how small or big a business is. Never skip this step—as they say, failing to plan is planning to fail.

Here are some examples of business types that benefit much from business planning:

Founders of startup businesses seek funds to begin their new venture. Business plans help them persuade investors and lenders to provide the funding they need.

For startups, a business plan explains the nature of the new venture, how it will achieve its goals, and why the founders are the best people to lead the company. The startup business plan should also specify the capital needed to jumpstart the new business.

Related: Fast-Growing Startups in the Philippines

Existing Businesses

Not only do startups gain advantage from a business plan—existing enterprises need it, too.

But business plans for growing businesses serve a different purpose. Usually, a business plan helps a middle-stage business raise funds for additional facilities, equipment, manpower, and others needed for expansion. This document also defines strategies for growth and allocates resources based on strategic priorities.

Growing businesses also use business plans to communicate their vision to various stakeholders such as customers, business partners, potential investors and lenders, employees, and suppliers.

For such needs, a business plan for existing businesses lays out the goals, strategies, metrics to evaluate success, responsibilities, and resource allocation.

Social Enterprises

Social enterprises may not be as profit-driven as other business types, but that doesn’t mean they need business planning any less.

A social enterprise needs to prepare a business plan to achieve its social objectives and keep empowering the communities it’s supporting. This document is what government agencies and donor agencies require and evaluate when approving grants for funding a social project .

A social enterprise business plan determines the social issue that a business idea will solve, its beneficiaries, products or services, target market, and sales projections, among many others.

Non-Profit Organizations/NGOs

Like social enterprises, non-governmental organizations (NGOs) can also use business plans to source funds for their campaigns and projects.

A nonprofit business plan discusses the problems an NGO is trying to solve through a certain project, as well as how it will do that and how much resources are needed.

It also helps the organization and its board members to prepare for risks by making projections on how likely the activities will push through and how the current sources of funds will continue to yield a certain level of revenue. Most importantly, the business plan defines the Plan B if the original plan ends up failing.

Business Plan Format and Its Components

How does a business plan exactly look like? There’s no recommended universal format for business plans. Ideally, yours is customized according to the nature of your business and what you’re going to use the plan for.

However, all business plans have sections in common. Here’s a quick walkthrough of the six components that make up a business plan.

1. Executive Summary

Like an abstract of a college thesis or a foreword of a book, the executive summary is meant to provide a brief overview of the document. It presents the highlights of a business plan in a page or two.

The executive summary the first thing that readers see, so keep it short yet engaging and compelling enough to make them want to view more details in your plan.

2. Company Profile

The company profile is your chance to introduce yourself and your business to people outside your company. It’s also called the company summary, company information, business description, and business profile.

This section quickly answers the five Ws and one H of your business: who, what, when, where, why, and how.

Think of it as your business calling card. Being the shortest section of the business plan, the company profile provides a quick overview of the business—who the owner and founder is, management team, business goals, business address, product or service, and what makes it unique.

3. Operations Plan

The operations plan explains how you’ll run your business, focusing on the different aspects of manufacturing your product. This section includes the following information, among many others:

• Type of business (sole proprietorship, partnership, corporation , or non-profit)
• How the product is made or the service completed
• Necessary materials, equipment, and facilities to manufacture the product or complete the service
• Any subcontractors needed
• Quality control system

4. Organizational Plan

Your people should play a major role in your business plan, just as how they’re important to your business success . The organizational plan includes a chart that shows how your company is structured according to key departments or functions such as administration, production/manufacturing, marketing, and finance. This organizational chart not only presents the levels of authority in a company but also clarifies who is responsible for which people and function.

Aside from the organizational chart, the organizational plan also includes these details:

• Number of employees to hire
• Responsibilities of each job role
• Qualifications of workers who will perform each role
• Salaries and benefits per job assignment

5. Marketing Plan

The marketing plan and the succeeding chapters are the heart and soul of your business plan, explaining the things that will make your business work. This section details how you plan to promote your product or service in the market.

Specifically, the marketing plan covers the following:

• How the product or service will work and how it will benefit customers
• Target market and its profile
• Strategies for packaging, advertising, public relations, and distribution
• Competitive advantage

6. Financial Plan

A critical section in your business plan, the financial plan helps you assess how much money you’ll need to start or grow your enterprise and identify your funding sources to get your business off the ground and sustain its operations. This is where you’ll provide financial estimates that cover at least one year of running your business.

Investors and lenders specifically look for these financial details in business plans:

• How much you’re going to borrow, what you’ll use the loan for, and how you’ll pay it back
• How much profit you’re expecting to make (through an income statement and balance sheet)
• How you can finance your business operations (through a cash flow statement)
• Whether to keep the business going or close it down to cut losses (through a break-even analysis)

Related: How to Write a Business Proposal

Should You Use a Business Plan Template?

Business plan templates identify what information to put into each section and how it should be structured.

They provide instructions to guide entrepreneurs through the process. This way, nothing is missed out while writing the plan.

Thus, using a business plan template is a great idea, especially if this is your first time to prepare a plan for starting or growing your enterprise.

Helpful as it as may be, a business plan template doesn’t make business planning 100% effortless. While it provides the outline that makes writing the plan easy and quick, you still need to do your homework.

For example, a template won’t compute the financial projections for you—it’s a task you have to complete either on your own or with the help of a professional.

So before you use a business plan template, manage your expectations first and be prepared to do a lot of math!

8 Free Business Plan Templates

Yes, you read it right—you can download free online business plan templates. Some of these templates are designed for a specific niche, while others offer sample business plans for a wide range of business categories and industries.

Start off by choosing any of these free templates that suit your business planning needs.

1. Business Plan Format by the DTI

DTI has a wealth of useful information for micro, small, and medium businesses in the Philippines. Of course, it’s free to access since it comes from the government.

On the DTI website, simply look for the Business Planning section and download the business plan format in a PDF file. This document not only lists down all the information to be included in every section of a business plan, but it also provides guide questions per section—making business planning easier for first-timers.

If you want a more detailed discussion of what should go into each component of your business plan plus sample scenarios, check the DTI’s Negosyo Center e-book that fleshes out things for small business owners.

2. Simple Business Plan Template by The Balance Small Business 

The Balance is an online resource for small business owners. It has a free business plan template that’s simple and easy to understand for beginners, with instructions on how to use it. Broken down into sections, the simple business plan template tells you what to include in each component of the plan.

Simply copy the free template and paste it into a word document or spreadsheet. From there, you can start drafting your business plan with the template as a guide.

3. Free Sample Business Plans by Bplans

This website features a collection of over 500 free business plan samples for various industries, including restaurants, e-commerce, real estate, services, nonprofit, and manufacturing.

Under each category are links to many sample business plans for specific types of business. Each sample comes with a plan outline, too. For example, under the Services category, you’ll find sample plans for businesses like auto repair shops, advertising agencies, catering companies, health spas, photography studios, and more.

4. Business Plan Samples by LivePlan

More than 500 free sample business plans are available at the LivePlan website, so you’re likely to find one that suits your business best. The samples allow users to know how other businesses structured and worded each component of their business plans. You can copy and paste the sections into your own plan.

To download a full business plan sample, you’ll have to sign up by submitting your name and email address through the website.

5. Business Plan Templates by PandaDoc

PandaDoc offers free business plan templates for NGOs, startups, restaurants, cafes, bakeries, hotels, and salons. These documents can be downloaded in PDF format.

But if you want a customizable template, you can download the PandaDoc template for a 14-day free trial. This template allows you to edit the document, choose a theme that matches your branding, and add pictures and videos.

The website also has free templates for executive summaries and business letters.

6. The One-Page Business Plan by The $100 Startup

If your business has a simple concept, then a one-page business plan template is ideal to use. This downloadable PDF file is a very simple outline made up of a few sections with questions that you have to answer in just a short sentence or two.

7. Business Plans by Microsoft

Microsoft provides a broad selection of templates for its users, including business plan templates in Word, business plan presentations in PowerPoint, and business plan checklists in Excel.

• Sample business plan template (Word) – Provides the steps in writing a complete business plan
• Business plan presentation template (PowerPoint) – Consists of slides for different sections of a business plan that highlight the key points for viewers
• Business plan checklist template (Excel) – Enumerates the important things to do when writing a business plan, using the Strength, Weakness, Opportunity, and Threat (SWOT) analysis framework

The advantage of using a template from Microsoft is having a professional-looking document, slideshow presentation, or spreadsheet. No need to do the formatting by yourself because the template is already formatted. All you have to do is enter the necessary information into the template to complete your business plan.

8. Social Business Plan Guidelines by the Ateneo de Manila

This free business plan format for social entrepreneurs comes from the Ateneo de Manila University’s John Gokongwei School of Management. In a glimpse, it provides the basic information you need to plan a social enterprise.

It also has more detailed business plan guidelines you can refer to. Simply click the link to the word document at the bottommost part of the page.

Related: 11 Best MBA Programs & Schools in the Philippines

How to Write a Business Plan

An outstanding business plan covers everything your stakeholders need to know about your business. So don’t just wing it—put a lot of thought into this critical document.

Let’s get down to the nitty-gritty of drafting a business plan, whether you’ll use a template or not.

1. Brainstorm about your business idea

You may have a very promising business idea, but it won’t fly unless you develop it into a clear-cut concept.

Brainstorm with your team about everything you can think of about starting and running the business. Then list them all down.

Be as creative as possible. No need to be too critical at this point.

While brainstorming, aim to answer these key questions:

• Why do you want to start the business? What has inspired you to go for it?
• What product or service do you plan to sell?
• Who will be your target customers? What are their problems that you’re hoping to solve through your product or service? How will you promote your offerings to them?
• What will be your business branding ? How will you position your brand in the industry?
• What is your competitive advantage? What makes your business unique?
• Where do you see your business within a year?

2. Validate your business idea

Research on the specifics of your business idea—paying special attention to your product or service, target market, and competitors.

According to entrepreneurship experts, it’s best to spend twice as much time on this step as spending the time to the actual drafting of the business plan.

Here are some ways to validate your business idea:

• Read studies and research to find information and trends about your industry .
• Conduct market research to gather insights from industry leaders, potential customers, and suppliers . You can do this through surveys, focus group discussions, and one-on-one interviews with your stakeholders.
• Collect data about your competitors , especially the product or service they offer and how they reach their customers. Consider buying from them or visiting their store to get a feel of their products and customer experience.

Gather all relevant information and analyze your findings to assess whether the business idea is feasible or not. You may need to tweak your business idea based on your evaluation of its feasibility.

3. Define the purpose of your business plan

It’s extremely difficult to carry out anything if you aren’t sure about why you’re doing it in the first place. Without a clear purpose, you’re like driving a car without knowing where you’re headed to.

When it comes to writing your business plan, you should have its purpose in mind from the get-go. It can be one or more of the following:

• Create a roadmap to provide the directions the business must take to achieve your goals and overcome challenges. This is ideal for bootstrapping or self-funding startups.
• Seek investments and loans to finance a business. If this is your purpose for making a business plan, it should be compelling enough to attract investors and lenders.
• Set your targets, budget, timelines, and milestones. When you put them all in writing, it’s so much easier to evaluate and measure your business’ actual performance versus your goals.
• Communicate your vision and strategic priorities with the management team. With this purpose, your business plan must establish specific goals for your managers so that they have something to commit to, you can track progress, and get them to follow through on their commitments. Also, having a business plan for this purpose ensures that everybody involved in running your business is on the same page.
• Minimize risks. Running a business in itself involves a lot of risks, and it gets riskier with a poorly researched business idea. A business plan can help entrepreneurs mitigate them by organizing activities and preparing for contingencies.

4. Create an outline for the executive summary

The first section of any business plan is the executive summary. You don’t have to draft it yet at this point, but it helps to write an outline for it before you proceed with the rest of the sections.

In a sentence or two, describe these key aspects of your business:

• Product or service
• Target market
• Competitors
• Unique value proposition (how you set your business apart from the competition)
• Management team
• Short-term and long-term business goals
• Possible sources of revenue

5. Describe your business

The next step is to write your company profile. Get your readers to become familiar with your business and realize why they should be interested in it.

If you have no idea what specifically goes into this crucial business plan section, you can check the company profiles of businesses in your industry. Usually, you can find them on their websites at the About Us or About the Company page. Take note of the information included and how they’re written.

Here are the must-haves of a great company profile:

• Brief history of the company
• Mission and vision
• Product or service lineup
• Target market and audience
• How the business will address the customers’ pain points
• What makes the business unique

6. Provide details about your operations and organizational structure

Anyone who will read your business plan needs to know what they should expect when they deal with you. They need to see a solid plan for your operations and the people who make up your team. So give your operations plan and organizational plan a careful thought.

For your operations plan, choose carefully the right legal structure for your business. Will you be a sole proprietor? Or will you partner with someone or form a corporation? Your choice will have an impact not only on your business operations but also on the taxes you’ll pay and your personal liability .  

As for the organizational plan, it’s where you put your organizational chart that shows a glimpse of the hierarchy within your organization. You can easily create this chart in Microsoft Word, Excel, or PowerPoint.

Also introduce the people who comprise your management team—their relevant experience, qualifications, and expertise . The organizational plan must also include information of the support personnel, as well as who reports to whom and who manages whom.

If you’ll be outsourcing some of your business functions, add them to your organizational plan, too. These may include consultants , accountants , lawyers , logistics specialists, and IT specialists. This way, you’re showing that you’re planning to fill in any expertise and skill gaps in your in-house team.

Also Read: Business Process Outsourcing to the Philippines [Complete Guide]

7. Compose your marketing plan

Make this section of your business plan as comprehensive and detailed as possible. You’d want to prove that you’ll take a strategic and aggressive approach to reach your target customers and promote your brand and product or service to them.

Divide your marketing plan into five subsections: objectives, product/service description, target market profile, competition profile, and promotional activities.

A. Objectives

Zero in on the what and the why of your marketing activities. Under the marketing objectives section, list down all your goals and the strategies you’ll implement to meet them.

Your marketing goals can be any of the following:

• Raise brand awareness
• Introduce a new product or service
• Regain or get more customers for an existing product or service
• Secure long-term contracts with your ideal clients
• Increase sales in a certain market, product, or price point
• Improve product manufacturing or product/service delivery
• Increase prices without affecting sales

B. Product/Service Description

Describe each product or service you’ll offer, including its features and benefits. You can use storytelling , images, charts, tables, or any visual element that best illustrates how each item will work to the benefit of your target customers.

C. Target Market Profile

Present as much relevant data as you can about your potential customers. Make sure to include the following:

• Demographic profile: age range, gender, income level, education, interests, etc.
• Buying behaviors
• Factors that influence their buying decisions: purchasing power, personal preferences, economic conditions, marketing campaigns, social factors (such as peer pressure and social media influencers ), cultural factors, etc.

D. Competition Profile

Your marketing plan must focus not only on your own business but also those of your competitors. List down the similar products or services that they offer to your target customers.

Also, provide an assessment of your competitors’ performance. Which areas are they doing well? How can you improve on their strengths and weaknesses? How can your business stand out? Is it your more competitive pricing? Better customer service? Superior product quality?

To come up with a good competition profile, take the time to research about your competitors. When interviewing your target customers, ask them about the brands they use or businesses they deal with.

You can also do an online search of your competitors. For example, if you’ll run a pet supplies store in Pasig, search for “pet stores Pasig” on Google. The search engine results page may show you the different stores that sell the same products as the ones you plan to offer. Read customer reviews online to get deeper insights on how these businesses serve their clients.

Consider doing a “secret shopping” in your competitor’s store. This way, you can experience firsthand how they treat their customers and how they market and sell their products or services. You might even be able to get information about their product lineup and pricing.

E. Promotional Activities

The last subsection of your marketing plan must discuss how you’ll promote your brand and products or services and connect with customers. Also, be ready to allocate budget for each marketing activity you identify in your plan.

Create a list of marketing activities you plan to implement. Will you reach your audience through SEO (organic online search), paid advertising, and/or social media? Or will you go the traditional route through print and TV advertising or joining expos, exhibits, and trade shows? The right choice depends on the nature of your business and the type of audience you’re trying to reach.

8. Develop your financial plan

The financial plan is the section where you’ll crunch the numbers. Unless you’re really good at math, it’s best to hire an accountant or business consultant who will work with you to develop a foolproof financial plan.

Put simply, a financial plan explains how a business will spend money and make more money. It also estimates the amount of time it will take for the business to earn a profit.

Here are the specifics of a good financial plan:

• Total capital requirement
• Business financing plan and any loan requirement
• Collateral to put up for a business loan
• Schedule for loan repayment
• Financial statements : cash flow statement, income statement/profit and loss statement, and balance sheet
• Break-even analysis
• Return on investment (ROI)
• Financial analysis

Ultimately, these financial projections answer the question, “Is your business financially feasible?”

9. Back up your business plan with supporting documents

Books and theses have an appendix section at the end that provides additional resources. Your business plan should have one, too. This final section consists of documents, surveys, studies, charts, tables, images, and other elements that provide supporting data.

Depending on the information you’ve presented in the other sections of the plan, your appendix may include these things:

• Market research data and findings
• Resumes of the management team
• Relevant financial documents
• Lease agreements
• Bank statements
• Licenses and permits

10. Review and refine your business plan

Your business plan is almost done at this point. Now all you have to do is go over the document once more to ensure you’ve covered everything and nothing crucial is left out.

Check your final draft and be sure it has the following:

• Sound business idea – If you’ve done Step 2 properly (validating business idea), you can be confident that you have a sound business idea.
• Comprehensive and in-depth look into your business in a professional format
• Thorough understanding of your target customers , their behaviors, interests, and needs
• Competent management team – The people who make up your team must possess the skills and expertise that complement yours.
• Business focus or specialization

Aside from yourself, ask a business partner, proofreader, and accountant or financial expert to review your business plan and spot any errors and inconsistencies. You’d want to make sure that it looks professional and is accurate.

11. Write the executive summary

Lastly, get back to the outline you created in Step 4 and write it based on your final draft. Make sure to craft an engaging executive summary that hooks people into reading the rest of the plan.

6 Actionable Tips on Writing a Business Plan

Anyone can write a business plan—but it takes more than great writing skills to create an exceptional one.

Here are some tips to help you prepare an effective business plan that goes beyond the ordinary.

1. Write with your audience in mind

When drafting your business plan, you’re writing not for yourself but for people who will play key roles in starting and running your enterprise. This is why it’s important that you know whom you’re writing for and keep them in mind while preparing your business plan.

If you think you can’t create a plan that caters to all your audience groups, consider having different versions of the document. For example, you can come up with a business plan for investors, another for lenders, one for employees, and so on. But keep the data consistent across all versions.

To write a business plan that suits a particular audience, you have to use the right language, highlight the parts that interest them, and adjust the format accordingly.

A. Use the Right Language

One of the most important rules in business writing: use the language that your target audience easily understands. If you’re writing for engineers, finance people, or lawyers, your language can be technical—meaning you can use jargons and terminologies familiar to them.

However, if you’re writing for investors who barely have technical knowledge, tweak your language in simple terms that are easy to grasp and appreciate.

Likewise, if you’re writing a business plan to communicate internally with managers and employees your company’s direction and strategies, it’s best to use more casual language than you would when writing for high-level, external stakeholders.

B. Appeal to Your Audience’s Interests

It also helps to understand what interests your audience because they will influence how you’ll write your business plan.

Your management team, for instance, will be interested in knowing your business goals and strategies so that they can help you steer the company in the right direction.

Investors and lenders look at the business plan differently—they’ll be more interested in your financial statements to determine your financial health, like if your business is worth investing in or has the ability to pay back a loan.

C. Adopt a Suitable Business Plan Format

There’s no one-size-fits-all format for business plans because it depends mainly on your audience, aside from the nature of your business.

Let’s say you’ll set up a restaurant, and you’re drafting a business plan to apply for a business loan. To convince lenders that your business is viable, details such as your restaurant’s location and possible renovations are crucial.

Meanwhile, if you’re writing the plan for potential big-time investors, you’ll take a different approach. A good restaurant business plan focuses on the business aspects that will lead to growth and profitability (Remember that investors are interested in how they’ll make money from partnering with you).

2. Keep it concise

How long should a business plan be? According to the U.S. Small Business Administration (SBA) , it depends on various factors such as the specific audience it’s written for and the nature of a business. The SBA cites surveys that found the ideal length to be at least 25 to 100 pages.

Sounds a lot? If you have a simple business idea and you’re writing a business plan for busy people who don’t have time to pore over hundreds of pages, then one page up to 20 pages should be fine.

However, you may need to provide more explanation (which will take up more pages in your business plan) if you’re planning to build a new kind of business, and a risky one at that.

The size of your business also affects the length of your business plan. Business plans for small businesses need not exceed 30 pages. Corporate business plans are expected to be longer.

What matters more than length is how concise your business plan is. Meaning, it provides all the necessary information—including solid research and analysis—using the fewest words possible. No place for wordiness here!

3. Document everything related to your business

Support your claims in the business plan with solid facts and proof. Investors, for instance, need an assurance that they won’t lose their investment when they trust you with their money. This is where documenting your business thoroughly plays a crucial role.

What kinds of documentation can you include in your business plan?

• Industry forecast or projections
• Licensing agreements
• Location strategy
• Prototype of your product or service
• Survey and FGD results
• Resumes of your management team

4. Show your passion and dedication to your business

Although business plans have straightforward, matter-of-fact content, you can still establish an emotional connection with your readers through your plan. After all, your readers are humans with feelings and motivations.

No need to be dramatic about it—you can show your passion and dedication while still sounding professional in your business plan. Write about the mistakes you’ve had (like a failed business in the past), what you’ve learned from the experience, the values you hold, and the problems of your customers you want to solve through your product or service.

5. Know your competition and how you’ll stand out

Your business won’t be the single player in your industry. Other businesses in the same niche have started way ahead of you, and some new ones will also compete for business in the future.

Write your business plan in such a way that you know your competitors so well. Identify all of them and what makes your business unique compared with the rest without belittling them.

6. Be realistic and conservative in all your estimates

In any aspect of your business, it’s better to underpromise and overdeliver than the other way around. This also holds true when writing a business plan. You wouldn’t want to set unrealistic expectations that will lead to disappointments and worse, losses, when you fail to deliver on your promise.

There’s no place for too much optimism in your business plan. Your budget allocation, timelines, capital requirements, sales and revenue targets, and financial projections must be reasonable, realistic, and conservative. These will lend credibility to your business plan and yourself as an entrepreneur. Because there are a lot of factors beyond your control, always assume that things will get completed longer and cost more ( consider inflation over time! ).

This is where your research prior to writing the draft comes extremely helpful. You have something solid and factual to benchmark against. For example, if your analysis based on the facts you’ve gathered indicates that you’ll be able to get 40% share off the market in your first year of operations, consider making your estimates a bit more conservative and attainable.

Related: The Ultimate Guide to Business Valuation in the Philippines

10 Mistakes to Avoid When Writing a Business Plan

Now, let’s explore the mistakes entrepreneurs often commit when writing a business plan. Listing them all down here to let you know what to avoid.

1. Prioritizing Form Over Substance

Spend most of your time and energy on building solid research and facts rather than obsessing about which font type or background color will look best for your document.

2. Overthinking

Many entrepreneurs take too long to complete their business plans because they worry too much about it. Don’t get intimidated by business planning—you don’t have to be an expert or a degree holder in business management or business administration to be able to write an outstanding business plan. Overthinking will just lead to analysis paralysis and get nothing done.

As long as you know your business well and are passionate about it, then writing a business plan won’t be as difficult as you think, especially if you’re using a template.

3. Submitting the Document Without Proofreading It

If your business plan is filled with typos and grammatical errors, readers will get distracted even if you’re presenting substantial information. It may also give your audience an impression that you’re careless—and who wants to deal with a person who isn’t professional and careful enough?

Even if it costs you money, pay a professional proofreader to check your work and correct any errors so that the message you wanted to convey through your business plan will get across.

4. Making Empty Claims

Any statement that isn’t sufficiently supported by solid research or documentation has to go. For example, if you want to claim to be the top player in your industry but you don’t have any evidence to back it up, rethink about including it in your business plan.

5. Writing an Overly Long and Wordy Plan

Make sure that everything you put into your business plan is relevant and serves your purpose. Otherwise, remove unnecessary statements that just add fluff to the document.

Also, don’t waste your readers’ time by using too many words—including highfalutin ones. Remember, your goal is to make your audience understand your business, not to impress them with beautiful or complex prose.

6. Using Too Many Superlatives

Even if you really feel that your business, business idea, or projection is incredible, amazing, the best, great, fantastic, or one of a kind, avoid using these superlatives because they aren’t appropriate for formal documents like a business plan.

7. Doing the Financial Projections on Your Own

Unless you’re an accountant yourself, it’s best that you get a professional to do the job for you. It will save you time and the headache of dealing with numbers and formatting your financial plan properly.

8. Overestimating Your Projections

The business plan is not a place to make impossible promises—while they look good on paper, you might run into trouble fulfilling them. To avoid this mistake, always do your research. Find out how other businesses do it and what the typical timeframes and financial projections are before you come up with your estimates.

9. Long-Term Business Planning

As much as possible, limit your projections to only a year. A lot of things can happen and make your business different from how you initially planned it. Stick with your short-term or one-year targets and estimates, then just tweak your business plan as time goes by.

10. Including Unfounded Rumors About Your Competitors

Not only do rumors make your business plan look unprofessional, but they also distract your readers from your intended message, which is to highlight what makes your business different from the competition. Avoid including details based only on hearsay. Everything in your plan must be backed up by solid, quantifiable facts.

Key Takeaway

A business plan is more than just a document that you prepare once and will never look at again. Rather, it’s a strategic tool that you should use from time to time to guide your business operations, get the buy-in of your stakeholders, and grow your business over time.

Once you’re done with writing your business plan, make the most of it for your business. Use it and modify it as often as needed!

Ready and confident to start writing your business plan? Share your thoughts and questions below!

Other Useful Business Resources from Grit PH:

• How to Sell a Business in the Philippines

About Venus Zoleta

Venus Zoleta is an experienced writer and editor, specializing in personal finance and digital marketing.

She has been a regular columnist for some of the biggest business & finance publications in the Philippines, such as MoneyMax.ph and Filipiknow.net.

Hoping to retire early, she started investing and bought a home in her early 20s. This crazy cat mom eats ramen like there's no tomorrow.

Education: University of the Philippines (B.A. Journalism) Focus: Personal Finance, Personal Development, and Entrepreneurship

Reader Interactions

March 3, 2020 at 10:00 am

I like it, and i want to learn more about for business

March 6, 2020 at 9:46 am

Hello Ms. Venus, Rise Against Hunger Philippines, N.G.O. , branching out into a new high ways… and i am newly hired as a social enterprise development officer… whose main tasks to launch a product line; an up-cycled tarpaulin bags.. manufactured by a group of community women (skills training’s, coordinated by life coached; aiming w-holistic transformation and sustainability program.. . with such a big tasks, i need a step by step guides, and if possible a coach for i cannot do it alone… thank you, henry reandino chua

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Crafting a Competitive Employee Compensation Plan Guide (with Templates)

Table of Contents

If you want to hire and retain top talent, improve employee productivity , and build trusting relationships with your employees, then crafting a competitive compensation plan is what you need.

Still, a compensation package involves far more than just an employee salary or pay rate, and it is equally important to both employees and business owners.

This text will cover everything you need to know about crafting a compensation package and benefits, including:

• The definition of compensation plan,
• Benefits of crafting a compensation package,
• Types of compensation,
• Steps on how to create compensation plans, and
• Compensation plan templates and examples.

Let’s begin! 

• A compensation plan is a formal document that outlines the components of an employee’s pay structure.
• Effective compensation plans help attract top talent, boost employee morale and productivity, promote a healthy company culture, and more.
• Direct compensation is financial or monetary compensation given to an employee for the time worked, such as hourly wages, salary, commissions, and bonuses.
• Indirect compensation, on the other hand, is non-monetary compensation that includes a retirement plan, time off, health insurance, and other employee benefits.
• Crafting a competitive compensation package includes several steps, such as deciding on your company’s compensation philosophy, researching the job market, defining the compensation structure, and including employee benefits.
• Time tracking is crucial for your business as it covers keeping track of your employees’ work hours, PTO, and more.

What is a compensation plan?

A compensation plan is a formal document that includes all the components of the employee compensation packages . This involves: 

• Hourly wages, 
• Salaries, 
• Commissions and bonuses, as well as 
• Employee benefits and other incentives.

Compensation plans are somewhat flexible, as it’s up to the employers to decide what they want to offer to their employees in order to stay competitive in the labor market.

Nowadays, as more employees work remotely, companies must make sure they offer competitive compensation packages that cater to their remote workers . For some, that may be offering location-based or location-agnostic compensation. While location-based pay will require you to pay your employees based on the cost of living in their place of residence, location-agnostic pay calls for equal pay no matter the location.

The 2 types of compensation

There are 2 major types of employee compensation for an employer to consider when setting up a compensation plan:

• Direct compensation, and
• Indirect compensation.

Apart from these 2 major types of compensation, there is an additional type that doesn’t fall into any of these categories and which we’ll discuss in more detail below.

Let’s break down each in more detail. 

Type #1: Direct compensation

Direct compensation is financial compensation given to an employee for time worked. It can be in the form of a salary, overtime pay , bonuses, or commissions (we’ll go over each more thoroughly in The 4 types of direct compensation section below).

Type #2: Indirect compensation

As opposed to direct or financial compensation, indirect compensation is the non-monetary payment provided to an employee. This type of compensation usually involves the benefits an employee receives in addition to the direct compensation, commonly known as employee benefits .

Such benefits may include health insurance, life insurance, vacation or paid time off , retirement funds, fringe benefits, etc. Some companies may also offer company stocks and profit-sharing in their benefits packages.

💡 Clockify Pro Tip

Want to know how to request time off and track it properly? Stick around and read the following blog post on the matter:

• How to request time off and track it successfully

Bonus compensation type: Incentives

Speaking of the additional type of compensation, incentive pay is also a form of employee compensation — one that doesn’t strictly fall under the above-listed categories.

Incentive pay is a form of compensation that is usually either indirect or non-financial and based on performance rather than on time worked. Incentives serve as a form of encouragement and motivation for employees to strive for excellence in their work. They usually imply a specific goal — if an employee reaches the said goal, they get the incentive, which may be in the form of travel, merchandise, or even cash. 

If you want to learn more about goals, their types, and most importantly, how to achieve them, pay attention to the following text:

• Different Types of Goals and How to Achieve Them

The 4 types of direct compensation

As we mentioned earlier, direct compensation is monetary or financial employee compensation, and these are main types of direct compensation:

• Hourly compensation,
• Salary compensation,
• Commissions, and
• Bonuses.  

Direct compensation type #1: Hourly compensation

Hourly compensation is a type of direct compensation associated with base pay, meaning companies pay their employees a predetermined rate for each hour worked.

Unless additional rules apply (some hourly workers are exempt from minimum wage and overtime ), hourly employees are treated as non-exempt as they are entitled to the federal minimum wage under the Fair Labor Standards Act . In addition to the hourly wage, the same act entitles hourly workers to receive overtime compensation — 1.5 times their standard hourly rates. This rule applies for each hour they spend working beyond 40 hours per week .

The required federal minimum wage in the US is $7.25 per hour worked . Still, if a state law requires a higher minimum wage per hour worked, then the more favorable law for the employee prevails. 

To find out if you are eligible for either federal or state minimum wage, read the following text that will give you more insight into the topic:

• Minimum wages by state in USA for 2023

Direct compensation type #2: Salary compensation

Salary compensation is another type of direct compensation associated with base pay, meaning employees receive a fixed amount of money each pay period (weekly, monthly, bi-weekly, etc.).

This fixed salary is always based on a salary range defined for a particular job position.

A salary range is the pay range defined by the employer that describes the minimum and maximum pay rate for a job position. It also includes a series of mid-range pay increases employees may expect to get during their time at a company.

In case salaried employees are exempt from the FLSA , they do not get paid either minimum wage or overtime for the hours they spend working past 40 hours per week. This is the case if they earn more than $684 per week or $27.63 per hour . If they earn less than this amount, they are treated as non-exempt and are entitled to minimum wage and overtime pay.

To learn more about the differences between hourly and salaried employee compensation, as well as their pros and cons, check out our blog post on the subject:

• Salary vs hourly employment: pros and cons

Direct compensation type #3: Commission 

Compensation based on commission is a type of direct compensation associated with variable pay . It is common among people in the sales industry who get paid in this manner based on the sales quotas, sales percentages, and goals they reach.

Commission rates may be based on:

• Revenue — for example, if a sales professional gets 5% worth of commission for each sale, and they make a $50,000 sale, they get $1,000 worth of commission for that sale,
• Gross margins or profit — the higher a sales professional sells a product or service, the higher the commission rate, and
• Commission fee — the sales professional makes a fixed commission amount regardless of the monetary value of the sales they made.

Direct compensation type #4: Bonuses

Compensation based on bonuses is another direct type of compensation associated with variable pay. Professionals who have precise goals to reach — such as managers and salespeople — usually receive bonuses.

Bonuses are frequently paired up with other types of compensation, such as commissions or salary.

In some companies, bonuses may be implemented as an incentive meant to help employees reach higher performance standards at their jobs. In such companies, employees usually receive bonuses when they live up to certain metrics (such as company OKRs or KPIs ).

How do I create an employee compensation plan?

In this section, we’ll talk about the steps you need to undertake in order to design a competitive compensation package properly.

The following steps will help your organization stay competitive in the market and attract the top-talent professionals you need. 

Let’s go over each step in more detail.

Step #1: Define the company’s compensation philosophy

Competitive compensation is based on market pay rates. Therefore, when defining the compensation in your company, you can choose to: 

• Lead, 
• Lag, or 
• Match the market .

While leading the market would entail offering higher compensation than the competitors, lagging would include offering lower compensation as compared to competitors. Finally, matching the market would mean giving the same compensation as the competitors. 

Establishing the company’s compensation philosophy is completely up to you, but bear in mind that if you want to attract and retain top talent, you should at least match the numbers on the market.

You can always offer additional, non-monetary compensation such as more days off or other employee benefits that may sound more appealing to a job candidate than the actual monetary compensation.  

Step #2: Define the type of employees you will hire

When outlining your compensation strategy, it’s also important to decide which employees you tend to hire. Remember that, as an employer, you must be aware of the different legal regulations and obligations concerning each type of worker. 

Therefore, when choosing which employees to hire, you ask yourself the following questions: 

• Are your employees full-time or part-time employees?
• Will you tap into the gig economy and employ contractors and freelancers?
• What are the average hourly rates you’ll need to offer to your freelancers and contractors?
• Does your business need to hire seasonal workers during peak times such as summer or winter holidays?

In case you’re wondering how to pay contractors and freelancers, here’s a text that will help you: 

• How to pay contractors and freelancers in 5 simple steps

Step #3: Research and analyze the job market

As said above, you need to scrutinize the market before defining your compensation package and benefits since it’s crucial for attracting top talent. 

If you are operating in the US, you can obtain useful general compensation statistics from the US Bureau of Labor Statistics .

Still, the best way to do so is to analyze and research salary data and market surveys — this is also known as compensation benchmarking.

When looking for market surveys and salary data to buy and analyze, make sure you pay close attention to the following elements:

• Industries — look for surveys that cater to your company’s industry,
• Location — look for surveys that cater to the country, state, or city your company is operating in, 
• Employee size — look for surveys that cater to the size of your company,
• Revenue size — look for surveys that show data from companies that have a similar business volume as you, or
• Job summaries — look for the job summaries closest to the positions you need.

Furthermore, if you want to find compensation statistics on salary-focused websites, bear in mind that this data is not the true representation of the market, as anyone can edit it. 

Step #4: Define your compensation structure 

Compensation structure refers to the compensation strategy you will use to define how employees will be paid. No matter how you choose to compensate for your employees’ work, you’ll need to think carefully about how best to define the hourly rates, salaries, and salary ranges you want to offer.

Also, make sure you take the following elements into consideration before you make your decision:

• The industry you are operating in,
• The size of your company,
• The revenue your company makes,
• The specific job positions you are looking for, and
• The importance and worth of these positions for the successful operation of your company.

Here’s how you can best define the salaries and hourly rates in your company .

Defining employee salaries

If you’ve decided to compensate your employees through salaries, you’ll need to think about the salary ranges you want to offer.

To best define employee salaries , make sure you: 

• Carry out job analysis — determining more information about the job position you are opening, 
• Group the jobs into job families — grouping the jobs by department and type (such as executive, administrative, technical) or location,
• Gauge employee experience and expertise for a certain job position — focusing on the skillfulness and the collection of experiences that an employee possesses for the successful operations of the company,
• Group jobs by job grades — the US federal government recognizes 15 job pay grades, each characterized by the General Schedule (GS) payscale . For instance, for an entry-level position with a bachelor’s degree, the average pay rate in 2023 was from $40,082 to $52,106 per year,
• Calculate the actual salary ranges — most companies will use +/- 15% or 20%, starting from the midpoint, and
• Decide how you want employees to progress within their salary range — for example, you can base this progression on the number and difficulty of skills, duties, and responsibilities, on a preplanned schedule, etc.

Defining employee hourly wages

If you decide to hire hourly workers, you must make sure you determine hourly wages carefully. To be able to do that (and make sure you are offering competitive hourly rates), you must also take in factors such as your industry, skills, and the experience you are looking for in a candidate.

Here are some hourly rates effective for 2024 based on federal pay grades that you can use as a reference when defining your own compensation packages:

• Entry-level positions (an associate’s or bachelor’s degree) — hourly rates range from $18.10 to $23.52,
• Mid-level positions (a bachelor’s or master’s degree) — hourly rates range from $24.60 to $31.97, and
• Top-level positions (a master’s degree or Ph.D.) — hourly rates range from $42.41 to $55.14.

Step #5: Add in employee benefits

Apart from direct compensation, in order to attract top talent, you’ll also need to offer competitive benefits packages when crafting your compensation strategy.

Therefore, make sure you include the most common employee benefits in your employee compensation package. Such benefits include (but are not limited to): 

• COBRA health insurance — additional 18 months of health coverage to eligible employees after job termination, either voluntary or involuntary (applicable to companies with 20 employees or more),
• Workers’ compensation insurance — medical insurance and compensation to employees who suffered an injury or illness in the workplace,
• Disability insurance — compensation benefits provided to employees due to ‘temporary disability’ that occurred in the workplace, 
• Paid holidays — in order to stay competitive, employers may provide employees with paid holidays as a way to boost employee morale,
• Family and medical leave — includes maternal, paternal, and adoption leave (not required to be paid leave, by law),
• Flexible schedules — employers may choose to offer flexible work arrangements such as a 4-day workweek or a 9/80 work schedule that contribute to a better work/life balance,
• Hazard pay — provided to employees whose job duties require them to work in unsafe conditions (such as security and military professions),
• Regular work breaks — times off during work time provided for lunch breaks, short breaks, and others.

If you are not sure about the holidays (paid or unpaid) you are entitled to while living and working in the US, head on to the following blog post to learn more about it:

• What are paid holidays and how do they work?

Bonus tip #1: Calculating commissions

If you’ve decided to include commissions in your compensation planning (either as the only form of compensation or a supplementary form of compensation), there are several factors you should consider when defining commissions for your employees:

• The commission rate — this is the percentage (e.g., 5%) of fixed compensation (e.g.,$25) employees will get for each sale they make.
• The total number of sales,
• The gross margin of the product being sold,
• The total net profit of the product being sold (when you want to inspire your sales team to focus on selling more profitable products in your offer),
• The cash received from sales (when you want to inspire the sales team to collect all overdue receivables), and
• The inventory (when you’re looking to eliminate a product from stock).
• The overrides — one percentage (e.g., 5%) of fixed compensation (e.g., $25) may apply before the employees reach a certain goal, after which they can count on a higher percentage (e.g., 8%) or fixed compensation (e.g., $30).
• The splits — in the case when two or more employees are responsible for the sale they split the commission.
• The payment delay — commissions are usually calculated subsequently at the end of the month.

Bonus tip #2: Calculating bonuses

Sometimes, you’ll want to include bonuses in your employee compensation packages as additional incentives for high-quality performance.

Here are some of the bonuses you can consider offering:

• Signing bonuses — bonuses offered to job candidate executives as incentives to inspire them to accept positions,
• Salary-based bonuses — based on the amount of hourly wages or annual salaries the employees are making (the higher the wages or salaries, the higher the bonuses),
• Bonuses based on department goals — once a team or department meets the predefined goal, all members of the team receive bonuses,
• Referral bonuses — the higher the number of customers referred, the higher the bonuses for the employees who referred them,
• Performance bonuses — bonuses based on the employee’s overall performance or achieved specific goals at work,  
• Holiday bonuses — non-performance-based bonuses typically paid around a beloved national holiday, such as Christmas,
• Quarterly or annual bonuses — if the company reaches a certain net profit goal, the employees receive a flat rate bonus or percentage,
• Retention bonuses — bonuses paid to top performers in order to keep them, and others. 

Benefits of a fair compensation system

A fair compensation strategy must be developed and implemented without any prejudice or favor to anyone or anything, showing equity in the workplace.

As such, a compensation system has a handful of benefits for both the organization and the employees:

• It helps you attract top talent through competitive compensation packages,
• It helps employees understand exactly how valued they are within the organization,
• It motivates employees to perform better at work ,
• It raises the morale and cooperation level among the people,
• It elevates employee satisfaction for a job well done, and
• It promotes workplace equity.

If you want to learn more about calculating work hours and streamlining your payroll processes, head to the following link:

• How to calculate work hours: A step-by-step guide to calculating payroll and hours worked

Compensation plan template 

Now that you know what you need to include in your compensation plan, here is an example of a compensation plan template that you can follow when defining your compensation packages.

You can download the template and choose the form that suits you best, whether that’s Google Sheets, Google Docs, PDF, Excel, or Word.

⏬ Download an Employee Compensation Plan in Google Sheets

⏬ Download an Employee Compensation Plan in Google Docs

⏬ Download an Employee Compensation Plan in PDF

⏬ Download an Employee Compensation Plan in Excel

⏬ Download an Employee Compensation Plan in Word

What is an example of a compensation plan?

The following is an example of a filled out compensation package template. The example plan below contains some of the most important information when preparing a compensation package for your employees, including: 

• Basic information, 
• Direct compensation information, 
• Benefits, 
• Retirement planning, and 
• Other relevant information.

Most of the information in the compensation plan example we already discussed in the above text, and we hope this example helps you craft your compensation package successfully and make sure you offer equity to your employees at the same time.

As for the direct compensation section in the template, you can see that the employee is an hourly worker hence there’s no salary information. Since she is a sales specialist, you can see all the details about her commission-based compensation, too.

The next section in the template is about the employee’s benefits — whether the employee in question is given dental care, information about medical insurance, time off, and others.

As for the retirement planning section, the template provides information about the employer-paid retirement savings plan, eligibility to buy shares of the companies and under which conditions, or whether the employee may obtain a percentage of the company’s total earnings or not.

Finally, the template allows you to write any additional information about certain benefits, break and meal periods, reimbursement of transportation, and others. 

Tracking work hours vigilantly is the cornerstone of fair employee compensation

Whether you need to fill in employee timesheets, track overtime, PTO, or billable hours, having a reliable tool is critical. Clockify is an efficient business solution that can help you with that, as it allows employees to track their work time in real-time (with a timer), add it manually afterward, or enter it in a timesheet template .

With Clockify, you’ll also be able to define hourly rates for all people within your company and have their pay calculated automatically based on the number of hours they worked in a given time period.

What’s more, no matter if you hire salaried or hourly workers, exempt or non-exempt, Clockify’s free employee hours tracker will also help you stay on top of compensatory time (provided that your employees are eligible for comp time, of course).

Clockify can be your ally in making sure your employees are compensated accurately and timely, no matter which employees you hire.

Marija Kojic is a productivity writer who's always researching about various productivity techniques and time management tips in order to find the best ones to write about. She can often be found testing and writing about apps meant to enhance the workflow of freelancers, remote workers, and regular employees. Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places.

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How To Answer “What Are Your Salary Requirements?” (With Examples)

• What Exactly Is a Job Offer?
• How To Negotiate Salary
• Exempt Employee
• How To Answer Salary Requirements
• Employment History
• What Are Your Salary?
• Salary Counter Offer
• How To Answer Salary Expectations
• How Many Hours Is Part Time
• Signing Bonus
• Cost Of Living Adjustment
• How To Ask For A Salary Advance
• What Is Fair Labor Standards Act

Find a Job You Really Want In

Getting asked “What are your salary requirements?” or “What are your salary expectations?” in an interview can leave you feeling unsure of how to answer and maybe even you’ll feel awkward to answer. Your salary requirements should be based on your research of the pay rates for the job title and location and give a range that puts your target salary on the low end.

To help you feel more confident about answering questions regarding your compensation requirements, we’ll go over how to answer salary requirements questions, why employers ask about this, and some example answers for any scenario you may face.

Key Takeaways

Do your research on what a reasonable salary range is, aim high, and express your flexibility when giving your salary requirements.

Use ranges whenever possible when answering questions about what compensation are you seeking.

Don’t lie about your past salaries — hiring managers can easily look them up.

How to answer “what are your salary requirements?”

Example answers to “what are your salary requirements” interview question, what are salary requirements, why do employers ask for your expected salary, where and how to include salary information, how to negotiate a higher salary, salary requirement faq, final thoughts, tips from an expert.

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To answer “What are your salary requirements?” you should first do your research, provide a range, and aim slightly higher than your actual minimum compensation requirement. Here are steps you should take when answering “What are your salary requirements?” in more detail:

Research similar positions salaries. Learn as much as you can about the position and compare salaries with other companies and similar job titles.

Look for salary information on the company’s website and use online salary calculators like Payscale to factor in your cost of living.

Provide a range. After researching reasonable salaries, consider giving a salary range rather than a specific number.

For example, you could say:

“My salary requirement is in the $35,000 – $40,000 range.”

Giving a range as your answer gives you some flexibility, while also keeping you from being offered too low of a salary or being kicked out of the hiring process for expecting too much.

Aim high. In your range, you should include as high of a salary as you can justify based on your education, experience, and skills .

The trick is to put your target salary at the bottom of your range. For example, if you’d like to make $50,000, state your range as $50,000-$57,000. The employer is likely to offer you the lower end of that range, but anything more than the absolute bottom is just icing on the cake for you.

Leave room for negotiations. Let them know that your salary requirements are flexible and that you’re open to negotiating. This will help keep you in the running for the job and will help when negotiating if you end up getting a job offer .

Stating that your requirements are flexible will give more you room for salary negotiations later on if you end up getting the job .

Provide a history if asked. If you’re asked to include your salary history, you could also list your previous salaries as ranges instead of giving a specific amount.

However, if the employer gives specific instructions on how to include salary information, such as a specific dollar amount instead of a range, it’s best to follow the guidelines.

Always be honest . If you lie about your salary history, your potential employer could easily check in with your previous employers. Lying is a good way to get screened out of the hiring process.

Let’s take a look at a few examples of different ways to answer this seemingly straightforward question during an interview:

Research-Based Example Answer

Based on my salary research, I feel that an annual salary of between $39,000 and $45,000 is appropriate for someone with my experience. I am open to learning more about ABC Corp.’s salary expectations and included benefits for this position.

Skills-Focused Example Answer

While certainly open to negotiation, a starting salary of $46,000 to $51,000 seems fair to me. I bring a unique blend of management, business, and customer service experience and skills to a position that requires all three, based on our conversations.

Other Benefits Example Answer

I’ll open by saying that I’m impressed with the benefits package that your company offers. Still, as an experienced project manager , I expect a base salary of between $56,000-$60,000.

Delay (No Number) Example Answer

At the moment, I’m focused on finding a position that fits my skill level and passion. Based on our conversation and my research of your company, I’m sure you can provide a competitive offer.

Delay (Salary Range) Example Answer

My salary research indicated that a typical annual salary for an employee with my level of experience working in this position is between $67,000 and $72,000.

Being Flexible While Still Giving a Range Example Answer

I am flexible for my compensation, but I am looking to receive between $50,000 and $55,000 annually. Due to my experience and skill level, I feel this is a comfortable and acceptable range.

Being Open to The Company’s Range Example Answer

While I believe that a salary range between $70,000 and $75,000 is in line with the industry average and it is an accurate representation of my skills and experience, I am open to hearing more about the company’s compensation and salary expectations for this position.

Minimum Salary Requirements Example

While I am flexible about my salary, my minimum salary requirement that would reflect my experience and skill levels would be $50,000. While that is my minimum salary requirement, I am flexible with a range going up to $55,000.

A salary requirement is the amount of money a person needs to be paid in order to accept a job offer . Some companies ask for people to include their salary requirements either with the application or in the cover letter .

Salary requirements depend on a few different factors such as:

The industry.

Your salary history.

Your work experience.

The cost of living in a specific area.

Benefits packages.

Employers ask for your salary requirements because they want to make sure your compensation expectations are within their allotted budget and they want to see how you assess your worth as an employee.

They have a budget. The interviewer wants to make sure your compensation aligns with what they have already calculated for the position. If your salary requirements are too high, they may no longer consider you for the job because they don’t want to pay that much or think you won’t like working for less money.

On the other hand, if you give a salary requirement that’s lower than what the company is willing to pay you, they might offer you a lower salary than you deserve.

They want to see how you assess and communicate your worth. A good candidate knows what their skill set is worth. Factor in years of experience and any achievements to determine what range you should put.

They want to determine you’re if right for the position. If the asking salary is higher than the other candidates, there is a chance that the person is too qualified for the position, and they would need to go with someone else.

The key to answering this question is all about finding a good middle ground. You don’t want to sell yourself short , but you don’t want to make less than you deserve or get screened out of the hiring process .

Employers will often tell you where to mention your salary requirements and history — they’re usually included in your cover letter , in the application, or during an interview. If the employer asks for your salary requirements in a different way, follow their directions.

You can give your salary requirement in your cover letter by stating something along the lines of:

“My salary requirement is flexible based on the compensation package and is in the $25,000 – $30,000 range.”

Try to keep your salary requirements brief, so that the employer can spend more time focusing on your cover letter and your application.

You want them to see why you’re a good fit for the job and deserve the salary requirements you give them, not that you’re a money-hungry psycho.

To negotiate a higher salary you need to do your research, state your case, and start with a higher number than you’d be willing to accept. Follow these tips when negotiating a higher salary:

Start with a high number. Determine the highest reasonable salary you can justify and focus on that. As long as you state that your salary requirements are flexible and you can defend your request, there’s no risk of aiming high, and you’ll also show that you see yourself as a valuable employee.

Giving a higher number gives you more room to negotiate if you get the job and you’re more likely to get what you want.

Don’t sell yourself short. If you give a salary requirement that’s lower than what a prospective employer is willing to pay you, you could cheat yourself out of more money and come off as unprepared.

Too low of a salary requirement could make potential employers see your flaws instead of your strengths.

Be aggressive. Don’t be afraid to give a number that you think you deserve.

People who make more aggressive offers for the highest number in their range are more likely to get what they want than people who focus on the minimum amount they’re willing to take.

Be flexible. Take a lesson from your friendly neighborhood yogi and remember to be flexible.

You might have to concede your first offer, but you’ll probably still get a good deal and your potential employer will be happy with the results.

There’s little risk if you give them the highest number you can defend, but there’s a lot to lose if you’re too afraid to aim high.

Finally, remember that there are several things that go into compensation, like benefits and opportunities for growth.

Should you tell a company your salary expectations?

Experts generally say to avoid stating your salary expectations at first. If the interviewer asks, be prepared to give an answer.

Is it OK to put negotiable for your salary requirements?

Yes, it is OK to put negotiable for your salary requirements. The only disadvantage this might have is if you appear overqualified for the position and the recruiter might assume your salary expectations are too high.

How do you respond to salary requirements in an email?

Answer your salary requirement in an email by citing the points you think are important to salary expectations. Keep a positive tone and try to keep it brief.

How do I decide my salary range?

You decide your salary range by doing your research. This means finding out how much similar positions in the area are paid and how much others in the company are paid.

Note the level of experience, skills, and education that each of these positions requires and how they compare to yours as well. Then, create a research-based range with your target salary at the bottom and note that it’s flexible or negotiable.

Can you decline a job because the salary is too low?

Yes, you can decline a job offer because the salary offer was too low. When you decide to decline a job because of the low salary, make sure you are as polite as possible when explaining that you can’t accept because of the low range.

Remember that even though compensation is important, this is not the most important part of your application or your interview. You want the employer to be able to spend a lot of time reading or hearing about your strengths and qualifications .

Don’t sell yourself short and let your employer know why you deserve to be paid the salary you require. Be willing to negotiate and justify your salary requirements.

Now that you know what to do — get out there and request a reasonable salary!

How To Answer “What Are Your Salary Requirements?” Tips From An Expert

Wendi Weiner Attorney and Career Expert

As a lawyer who spent 11 years settling large insurance claims and negotiating attorney’s fees with some of the most contentious opposing counsel, I learned various tricks and tools that helped me excel in the process and even during the dreaded salary negotiations talks in job interviews. My strategies enabled me to acquire hefty salary increases at subsequent roles and even during performance reviews. I have since leveraged that experience and skill set in job search strategy sessions with career coaching and resume clients, which have included a payoff to many in the form of $20,000 or more.

I believe that one of the key issues job seekers have is feeling that they are not getting paid what they are worth. But here’s the flip side to that: if you don’t have the experience or skill set, it’s hard to leverage that worth. As they say, you must “pay your dues” and gain the experience in order to have the leverage. So, how exactly do you negotiate the salary you deserve? Well, I want to tell you exactly how to do it through the following steps:

Know Your Strategy Ahead Of Time

Like any good negotiator , you must plan ahead and work your plan at the time of the salary talk. My top tip is always to go into the salary discussion knowing the information. That means you need to research what competitor companies are paying someone at your level, and what the fair market value is for someone at your level. Remember, it’s not about what you think you deserve, but rather what companies are actually paying employees who have similar credentials and skills that you possess.

Don’t Focus On Your Current Salary Or Past Salary

Many times, career professionals will focus only on the number they are making (or were making in the past) and dwell on that number rather than looking to what the fair market value is paying. If you focus too much on your current salary or past salary, you will find that the conversation centers around negativity, frustration, and disgust. Yes, companies may ask what you are currently making, but when you give your current salary number, do not forget to add what similar companies are paying someone at your level and don’t forget to factor in the additional compensation perks (bonuses, benefits, vacation time, award earnings, etc.) that you are earning. It’s not just about your current paycheck. You need to look at the big picture of your entire compensation package.

Do Not Bid Against Yourself

This is the most important piece of advice. Never (I repeat NEVER) throw a number out there that causes you to bid against yourself. You could be giving too low of a number or even worse: a number that is out of the ball park that completely disqualifies you from moving forward in the interview process. Remember this bold statement: in business, it’s all about what you negotiate not what you think you deserve. Let the prospective employer know the range of what other employers are currently considering you for. Tell them you are open and negotiable, but also remind them of your clear objective: to have long-term growth at an organization. An important takeaway from this is that giving a range is always better than a hard number. Why? When you give a range, you are demonstrating flexibility and employers always prefer flexibility and versatility in an employee.

Consider The Power Of The Counteroffer

Like any good negotiator, it’s often expected that you will not accept the first offer given to you. Allowing the employer to provide you an offer gives you the power to counteroffer. But, don’t get into a bidding war of going back and forth multiple times with the number. Give one counteroffer and then make your decision.

At the end of the day, salary is important in a job or career, but your happiness and long-term goals are just as important. Consider all of the options, and create a pro and con list before making any decision to accept a salary offer. Remember, show your enthusiasm, but do not be afraid to ask for a few days to consider the offer. Thinking things through and weighing your options will help you make the right objective decision rather than being impulsive and possibly regretting that decision at some later point.

The New York Times – What Do You Think You Should Be Paid?

Salary.com – Make Fair Pay a Reality

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Maddie Lloyd was a writer for the Zippia Advice blog focused on researching tips for interview, resume, and cover letter preparation. She's currently a graduate student at North Carolina State University's department of English concentrating in Film and Media Studies.

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When and How to Disclose Your Salary Requirements

Why Companies Want Your Salary Information

What are salary requirements, is it legal for an employer to ask for your salary requirements, salary requirements: include or leave out, tips for including salary requirements, tips for listing salary history, where and how to include compensation requirements.

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Some job postings ask you to include a salary requirement as part of your application. Others may ask you to list your most recent salary or several years of salary history when you apply for the position.

You may not feel comfortable naming your price, especially early in the process. So, how do you know when and how to disclose your compensation requirements when you apply for jobs?

Companies request compensation information for various reasons. If your salary requirement (or salary history) is too high, employers can screen you out because they don't want to pay that much, or because they think you won't be happy working for less money.

On the other hand, if your salary requirement (or salary history) is lower than the company is willing to pay, they may offer you a lower salary than another candidate.

To avoid being screened out or offered a low salary, you need to be careful how you describe your salary information.

Read below for tips on how to provide this information without hurting your chances of getting a job while still receiving a fair salary.

A salary requirement is the amount of compensation a person needs in order to accept a position. Salary requirements are based on several factors such as:

• Salary history
• Previous work experience
• The industry
• Cost of living

Occasionally, an employer might ask you to include your  salary history  instead of (or along with) your salary requirements. A salary history is a document that lists your past earnings. The document typically includes the name of each company you worked for, your job title, salary, and benefits package.

The difference between the two is that your salary history is what you actually earned in your previous job. Your salary requirements are what you expect to earn in your next position.

Employers can legally ask you to state your salary requirements or expectations. However, some states and cities  restrict employers from requesting information  about your past salary.

Depending on your location, it may not be legal for employers to ask about your salary history.

Check with your  state department of labor  for the latest information on this issue, as well as on the laws that apply in your city and state.

If the job listing doesn't mention it, don't offer any salary information at all. There's no need to make an issue out of something that may not be one. Ideally, you want the prospective employer to bring up the topic of compensation first.

If you’re asked to include salary requirements with your application, you could ignore the request, but that means you risk not getting an  interview . There is nothing employers like less than candidates not following the instructions in the job posting.

However, there are a few ways you can provide the required information while limiting your risk of being screened out or offered a low salary.

To stay in the running for the job—without committing to a lower salary—try one of the following options:

List a Salary Range

When asked to include salary requirements, you could include a salary range rather than a specific amount. This kind of answer gives you some flexibility and it prevents you from locking yourself into a low salary (or being screened out).

This range should be based on the  salary research  you've done. For example, you can state in your cover letter, “My salary requirement is in the $35,000 to $45,000 range.” When stating a  salary range , make sure that the range is realistic:

• Use salary surveys to determine the typical salary for the position you are interviewing for, or for a similar position if you can't find information on the exact job title.
• Use salary calculators to factor in cost-of-living expenses and to estimate what you should be paid in a particular location. There are a variety of salary surveys and calculators, including industry-specific and geographic resources, available online.

Say That Your Requirements Are Negotiable

Another option is to state that your salary requirements are negotiable based on the position and the overall compensation package,  including benefits .

Don't Mention Salary

You could also not mention a specific salary, leaving it as an open question for negotiations. Keep in mind though, that this may not be the best strategy if the employer only considers applications with the requested information.

However you choose to respond, note that your salary requirements are flexible. That may help keep you in the running for the position and will give you more options when  negotiating compensation  later on if you get a job offer.

If you’re asked to include your salary history, you can also list your previous salaries as ranges rather than specific amounts. But again, always follow any specific instructions about how to include salary history. And remember that you are not required to share it in some locations.

If the employer gives specific instructions on how to provide salary requirements, follow those guidelines. For example, if he or she says to give a specific dollar amount (rather than a range), do so.

No matter how you include your salary history, always be honest. It's easy for potential employers to check your salary with previous employers. Any false information will get you screened out of the application process.

Salary requirements can be included in your cover letter with sentences such as "My salary requirement is negotiable based upon the job responsibilities and the  total compensation package ," or "My salary requirement is in the $40,000 to $45,000+ range."

Keep your reference to salary requirements brief, so the employer can focus on the rest of your cover letter. If the employer asks you to include your salary requirement in a different way (for example, in your resume), be sure to do so.

There are a few ways you can include your salary history:

• You can include the history in your cover letter, briefly stating what you earn now. For example, you might say, “I currently earn in the mid-40s.”
• You can include an itemized list of your previous salaries (or salary ranges), either in your resume or on a separate salary history page that you enclose with your resume and cover letter.

Review this  example of a cover letter including salary requirements , along with a free template to download.

Key Takeaways

• Some employers may ask you to include your salary requirements or salary history when you apply for a job opening.
• In some locations, employers are legally prohibited from asking for your salary history.
• There are several ways to provide salary requirements, including naming a salary range and saying that you are open to negotiation.
• Always follow the instructions in the job posting—if the employer asks for salary requirements, it’s best to provide them.

The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.

SHRM. " How To Determine What Your Asking Salary Should Be ."

SHRM. " Employers Adjust to Salary History Bans ."

How to Create a Salary Proposal

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How Should Salary Requirements Be Emailed?

How should i answer about flexibility for salary requirements, how to respond to an e-mail for desired salary.

• How to List Salary in a Job Posting
• How to Negotiate a Salary Based on the Salary Range

Once you're in the final stages of the hiring process for your dream job, one of the most challenging steps in this process could be justifying your worth, or convincing the hiring committee that you deserve the salary that you want. Research is fundamental to creating a salary proposal, but confidence in your skills, abilities, experience and capabilities is the factor that will benefit you throughout the process.

Define the Purpose of a Salary Proposal

When you receive a job offer, your future employer will likely have a salary range they have already decided is appropriate for your new position. The salary range may be based on previous employees' earnings or it might be a generic range that the company and its HR leadership feel is sufficient compensation for the position they offer to you. In this case, creating your own salary proposal could be instrumental in helping the company restructure its compensation practices, or at the very least, revisiting the compensation level for your position.

Alternatively, creating a salary proposal might be your counterproposal to a salary offer that's on the table. If it's a job you've set your sights on for quite some time, or an organization you have wanted to join but never had the opportunity, and you're willing to put in the extra work, creating a salary proposal letter to the employer might further illustrate why you're the right person for the job.

Set Up a Salary Proposal Template

Unless you're creating a salary proposal letter or email for several different jobs and companies, you probably don't need to create a compensation proposal template. Although if you embark on a job search that entails numerous interviews and you intend to compare the salary expectations or offers for all the positions you're considering, a salary proposal template is a useful tool for organizing the last stages of your job search. Ideally, a pay proposal template would include the employer's name, location, and contact information for HR as well as the hiring manager.

The position or job title, a brief job description, including the number of direct reports or team members, also is helpful information for a well-thought-out salary proposal template. Insert columns for the employer's proposed salary level, your salary expectation and researched salary information and sources.

Compare Similar Job Titles

Conducting a broad search for positions with the same or similar job titles is the first step in creating a salary proposal. Job titles can vary, particularly if you're comparing private sector to public sector roles. For example, a junior accountant for a mid-size accounting firm might be considered Accountant I within state government, and a Management Analyst for the federal government might be the equivalent of an executive assistant with a law firm. Your research will need to include a cursory view of the job titles, duties and responsibilities to find equivalent salaries.

Research Salary Tables

The U.S. Office of Personnel Management (OPM) publishes its General Schedule (GS) Local Pay Tables , which contains salaries for every level – except senior executive level and political appointees – in the federal system. The OPM salary tables also include differentials for various localities in the U.S. Another federal resource is the U.S. Bureau of Labor Statistics Occupational Outlook Handbook; it contains average wages and median wages for thousands of occupations.

Industry-specific professional associations often publish salary information, although you might need to be a member to access complete salary data and information on comparable benefits and total compensation plans for people in your field. For example, the Society for Human Resource Management offers to members the SHRM Compensation Data Center, which contains information about salaries and compensation packages for numerous occupations – not just HR-related jobs. In addition, there are online calculators that enable comparisons of jobs in different locales. If you are moving from, say, Kansas City to Atlanta, and are staying in the same field, you can obtain salary and cost-of-living information that you can present to a prospective employer.

Present Your Proposal

The foundation of a salary proposal letter to an employer is the combination of your research, qualifications and experience, and if applicable, your education and professional certifications. A salary proposal letter – or, even a salary proposal email – is, ideally, a formal proposal that sets out your position and the reasons for your salary expectations.

Avoid presenting your salary expectation as a precise number, such as $101,450 per year. Instead, create a proposal that indicates the salary range that you deem acceptable. For example, if you earn $90,000 a year and you are seeking an increase, determine the lowest percentage increase that you will accept, along with the increase you would like to have. If you can live with a five percent increase, but would love to make 15 percent more, indicate the salary you would accept is between $94,500 and $103,500 . Or, simply between $95,000 and $104,000 .

• U.S. Office of Personnel Management: Pay & Leave, Salaries & Wages
• U.S. Bureau of Labor Statistics: Occupational Outlook Handbook
• Society for Human Resource Management: SHRM Membership

Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Ruth resides in the nation's capital, Washington, D.C.

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10 Smart Answers to “What Are Your Salary Requirements?”

By Status.net Editorial Team on June 15, 2023 — 5 minutes to read

Why Do Employers Ask for Your Expected Salary?

Employers ask for your expected salary during a job interview to determine if your expectations align with their budget for the position. By asking for your salary requirements, they can assess if your desired salary range is reasonable and within their capability to offer.

Usually, this interview question is asked to ensure that both parties are on the same page regarding compensation expectations before proceeding with the hiring process. It helps employers save time by not pursuing candidates with unreasonably high salary expectations that might lead to disappointment and eventual turnover.

Keep in mind that providing a salary range can open the door for further negotiations, so it’s essential to research and prepare before discussing your expectations.

When answering questions about your desired salary range, follow these steps to guide your response:

• Research the market value for the position in your industry and geographical location.
• Consider your experience, skills, and education level.
• Factor in additional perks or benefits that may affect your salary requirements.

Related: What Is a Sign-On Bonus? (Negotiation Examples)

• How to Negotiate Salary [Examples]

“What Are Your Salary Requirements?”: 10 Smart Answers

1. “I am open to discussing salary, but I am more interested in finding the right opportunity that aligns with my career goals and provides me with a challenging work environment.”

2. “Based on my research, I believe the industry standard for this position is around [insert range]. However, I am open to negotiation based on the specific responsibilities and requirements of the role.”

3. “I am looking for a fair salary that is commensurate with my experience and skills. Would you be able to provide me with a range for this position?”

4. “I am willing to consider a salary that is competitive with the market rate for this position and takes into account my experience and qualifications.”

5. “I am looking for a salary that reflects the value I can bring to the company and the impact I can make in this role.”

6. “I am open to discussing salary, but I would like to learn more about the company culture, benefits, and growth opportunities first.”

7. “I am looking for a salary that is in line with my previous experience and the responsibilities of this position.”

8. “I am willing to negotiate on salary based on the total compensation package, including benefits, bonuses, and other incentives.”

9. “I am open to discussing salary, but I would like to understand more about the expectations and goals for this role to ensure that my compensation aligns with them.”

10. “My salary requirements are flexible, and I am open to discussing a range that is fair and reasonable based on the market rate and my qualifications.”

How to Answer Your Desired Salary Range Questions

Research and preparation.

Before attending an interview, it’s essential to do your homework. Research the average salary range for the position you’re applying for in your industry and location. Make use of websites like Glassdoor, Payscale, and Indeed to get an idea of the salary range. Ensure you’re aware of your own value and experience, so you can confidently answer the salary question when it arises.

Strategies for Answering

When answering the desired salary range question, consider these strategies:

• Be honest: Provide a realistic salary range based on your research and experience. It’s important to be honest about your expectations to avoid disappointment later.
• Give a range, not a fixed number: Offering a range instead of a specific number gives you more room for negotiation. For example, you can say, “Based on my research and experience, I’m looking for a salary range between $50,000 and $60,000.”
• Factor in other benefits: Remember that salary is just part of the overall compensation package. Consider discussing other benefits like health insurance, bonuses, and professional development opportunities.
• Be prepared to justify your expectations: If your desired salary is on the higher end of the range, be prepared to explain the reasons for your expectations. This could be based on your years of experience, relevant skills, or any certifications you hold.
• Be open to negotiation: Be prepared to compromise if the employer proposes a counter-offer. Remember, showing flexibility can make you a more attractive candidate.

Frequently Asked Questions

What factors should be considered when determining salary expectations.

When determining your salary expectations, consider factors such as the industry standard, your experience, education, and location. Take into account the cost of living in the area, the job’s responsibilities, and any additional benefits like healthcare and paid time off.

How can you confidently discuss your salary requirements in an interview?

To confidently discuss your salary requirements, research the average salary for the position beforehand. Practice communicating your desired salary range, focusing on your strengths and accomplishments that warrant that amount. Be prepared to provide reasons for your expectations and be open to negotiating.

How should you address salary requirements in an email?

When addressing salary requirements in an email, be direct and concise. Provide a salary range, stating your flexibility and willingness to negotiate. You can also mention any additional benefits or compensation you would consider if the base salary isn’t within your desired range.

Can you provide examples of successful salary negotiation tactics?

Some successful salary negotiation tactics include:

• Using data to support your desired salary, such as industry averages or past experience.
• Emphasizing your value and unique skills to the company.
• Offering to take on additional responsibilities in exchange for a higher salary.
• Being open to discussing total compensation, including benefits and bonuses, instead of focusing solely on the base salary.

What is the best way to approach salary requirements on job applications?

When approaching salary requirements on job applications, be honest and research the market value for the role. It’s best to provide a salary range, showing flexibility and openness to negotiation. Avoid listing an unrealistically high or low number, as it may disqualify you from consideration for the position.

What strategies can be used for negotiating salary?

When negotiating salary, emphasize your qualifications, any unique skills, and your value to the company. Show flexibility by offering a salary range instead of a specific number. Be prepared to compromise and consider additional benefits, like flexible hours or bonuses, if the base salary isn’t what you expected.

Related: How to Negotiate Salary [Examples]

• 10 Smart Answers to “What Motivates You?”
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How to Answer “What Are Your Salary Expectations?”

Strategies to navigate this complicated (and awkward) question.

There are many interview questions that inspire dread in an interviewee — from “What’s your greatest weakness?” to “Tell me about yourself.” But one in particular is especially complicated: “What are your salary expectations?” If you go too low, you might end up making less than they’re willing to pay. But if you go too high, you could price yourself out of the job. In this piece, the author offers practical strategies for how to approch this question along with sample answers to use as a guide.

Job interviews can feel awkward. You’re trying to prove you’re the right person for the role, but you never quite know what to expect or what your interviewer is really thinking about you. One of the most common interview questions — and one of the more awkward ones — is about salary. You know the one: What are your salary expectations?

• Amy Gallo is a contributing editor at Harvard Business Review, cohost of the Women at Work podcast , and the author of two books: Getting Along: How to Work with Anyone (Even Difficult People) and the HBR Guide to Dealing with Conflict . She writes and speaks about workplace dynamics. Watch her TEDx talk on conflict and follow her on LinkedIn . amyegallo

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Salary Structures: Creating Competitive and Equitable Pay Levels

Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally. A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary cost by providing a cap on the range paid for particular jobs or locations. The following highlights are drawn from the 2010 Culpepper Salary Range Structure Practices Survey .

Key Survey Findings

• 72 percent of surveyed North American companies reported having formal base salary range structures.
• Most companies with formal base salary structures review their structures annually.
• 93 percent use compensation survey market data when designing salary structures.
• 82 percent use traditional salary structures, while 7 percent use broadband structures.
• 55 percent have multiple structures varying by job and/or geographic location.
• Salary range spreads and midpoint-to-midpoint differentials vary significantly by job level.

Salary Ranges and Structures Defined

A salary range is the span between the minimum and maximum base salary an organization will pay for a specific job or group of jobs. A salary range structure (or salary structure ) is a hierarchal group of jobs and salary ranges within an organization. Salary structures often are expressed as pay grades or job grades that reflect the value of a job in the external market and/or the internal value to an organization.

Percent of Companies with Formal Salary Range Structures

Seventy-two percent of surveyed companies reported having formal salary range structures (Table 1). As companies increase in size they are more likely to have salary range structures. Less than half of companies with fewer than 100 employees use salary range structures. In contrast, about four out of five companies with more than 500 employees use salary range structures.

Frequency Salary Range Structures Are Reviewed

Salary range structures should be reviewed regularly to maintain a competitive edge in attracting and retaining top talent. Most companies with formal base salary range structures review their ranges and structures annually (Table 2).

Nineteen percent of participants with formal salary range structures reported that they do not use formal salary structures with executives.

Companies choosing "other/varies" indicated that the frequency for reviewing structures varies by type of job, business unit, location or union status. Examples include:

• Some companies with union employees review salary structures based on the length of multiyear labor contracts and review other nonunion jobs annually.
• Some companies in very competitive job markets review salary structures for critical jobs semiannually.

Methods Used to Design Salary Range Structures

The two most common methods companies use to design base salary structure ranges are market pricing using external market data and point factor focusing on internal pay equity.

Most companies use a market-pricing approach with current salary survey data for individual jobs, to design and adjust salary range structures (Figure 1). Only 3 percent of companies rely solely on the point-factor method, which assigns a point value to specific jobs within a company.

In addition, 19 percent of companies blend market-based and point-factor approaches when designing their salary range structures.

Traditional vs. Broadband Salary Structures

Traditional salary structures are organized with numerous layers and range structures (or pay grades) with a relatively small distance between each range. This provides a hierarchal system enabling employees to be promoted from one pay grade to another. When designed correctly, traditional structures enable the recognition of differing rates of pay for performance and guarantee a reasonable level of control over internal compression and salary expenditures.

Broadband salary structures are more flexible and consolidate pay grades into fewer structures with wider salary ranges.

On average, 82 percent of surveyed companies use traditional salary structures, while only 7 percent use broadband structures (Figure 2). Nine percent use a hybrid or mix of traditional and broadband structures.

Single vs. Multiple Salary Structures

Fifty percent of companies with salary range structures have multiple structures varying by job and/or geographic location. There is a strong correlation between job level and number of salary structures. Single salary structures are more common for executives and multiple salary structures are more common for nonexecutive positions (Table 3).

As companies increase in size, they typically have a higher number of salary structures to accommodate more locations and job structures.

Data source: 2010 Culpepper Salary Range Structure Practices Survey of 360 organizations.

Survey dates: August 26 through October 25, 2010.

Breakdown by size:

• Up to 100 employees: 11%
• 101 to 500 employees: 18%
• 501 to 2,500 employees: 28%
• 2,501 to 10,000 employees: 27%
• Over 10,000 employees: 15%

Breakdown by sector:

• Technology: 34%
• Life science: 10%
• Health care services: 8%

Breakdown by ownership/corporate status:

• Public: 43%
• Private: 35%
• Not-for-profit: 15%

Participants by location:

• United States: 95%

Culpepper and Associates conducts worldwide salary surveys and provides benchmark data for compensation and employee benefits programs.

Reposted with permission.

Source: 2010 Culpepper Salary Range Structure Practices Survey, November 2010. www.culpepper.com

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Cover Letter Example With Salary Requirements in 2024

Salary requirements are a crucial aspect of any job application process. Hiring managers want to know if candidates are within their budget and expecting realistic compensation for the role they are applying for. However, it can be challenging to mention salary requirements in cover letters, as it’s a sensitive topic that can be tricky to navigate.

Including salary requirements in your cover letter can have both advantages and disadvantages. A well-communicated salary expectation can help candidates avoid a wasteful interview process, which saves time and resources for both the employer and applicant. On the other hand, mentioning salary expectations too early or without understanding the value of the position may lead to disqualification or negative perceptions by the employer.

Understanding Salary Requirements

When looking for a new job, it’s common to come across a request for salary requirements in the application process. Understanding what salary requirements are and how to approach them can help candidates navigate this aspect of job searching with ease.

A. Definition and types of salary requirements

Salary requirements refer to the amount of compensation an applicant is looking to receive for a particular job. There are different types of salary requirements that candidates may encounter, such as a desired salary range, a specific salary amount, or even a willingness to negotiate based on the job’s requirements and responsibilities.

B. Why employers ask for salary requirements

Employers ask for salary requirements for various reasons. For example, it helps them gauge if a candidate’s expectations align with the company’s budget and compensation range. Additionally, it can help them identify if a candidate is serious about the job or if they are just looking to make a lateral move with no intention of growth.

C. Factors to consider when determining salary requirements

When determining salary requirements, it’s essential to consider multiple factors. One of the most significant factors is the candidate’s experience and qualifications. A more experienced candidate may have higher salary requirements than someone who is just starting in the field. Education and location are other essential factors to consider, as the cost of living can vary significantly depending on the region.

Another factor to keep in mind is the company’s size and revenue. Larger companies may have more significant compensation packages available than smaller companies with more limited budgets. Finally, the job’s responsibilities, such as leadership or management roles, may also affect salary requirements.

Determining appropriate salary requirements can be challenging. However, staying informed and taking the time to research industry standards and company culture is crucial to guide candidates in their decision-making process.

How to Include Salary Requirements in a Cover Letter

As a job seeker, one of the most challenging aspects of writing a cover letter is how to address your salary requirements. It’s crucial to be transparent about your expectations right from the start, but mentioning a specific number can be tricky. Here are some tips on how to include salary requirements in a cover letter:

A. Best practices for mentioning salary requirements

Do your research: Before you mention any salary requirements, it’s important to know the market rate for your role in your industry, your experience level, and the location where the job is based. This information can help you determine a realistic and fair salary range.

Use a range: Instead of citing a specific number, consider using a salary range. This gives you some negotiation room while being transparent about your expectations. For example, you can mention “My salary expectations are within the range of $60,000 to $70,000.”

Be flexible: Don’t be too rigid in your salary requirements. Mention that you’re open to negotiation or that your salary requirements are negotiable, depending on other benefits or perks offered by the employer.

Don’t overshare: You don’t need to mention your current or past salary in your cover letter. This can limit your negotiation power and could potentially lead to discrimination.

B. Different formats to include salary requirements

In a sentence: You can include your salary requirements in a sentence in your cover letter. For example, “My salary requirements are within the range of $60,000 to $70,000.”

In a table: If you’re submitting your application online, you can include a table that outlines your salary requirements, along with other relevant information, such as your experience, education, and skills.

Separately: If you’re not comfortable mentioning your salary requirements in your cover letter, you can mention it separately in your application or during the interview process.

C. Tips to follow while including salary requirements in a cover letter

Follow the instructions: If the job listing specifically mentions that you should include your salary requirements, make sure to do so. Otherwise, it’s better to wait until you’re asked for it.

Tone matters: Make sure the tone of your cover letter is professional and friendly. Avoid using language that might come across as demanding or entitled.

Keep it brief: Don’t spend too much time discussing your salary requirements in your cover letter. The focus should be on highlighting your skills and expertise.

Use keywords: Use keywords in your cover letter that align with the job description and the company’s mission statement. This can help your application stand out from the crowd.

Mentioning your salary requirements in a cover letter can be challenging, but it’s important to be honest and transparent about your expectations right from the start.

Structuring a Cover Letter with Salary Requirements

When applying for a job, one of the most important aspects to consider is salary requirements. A cover letter is an opportunity to showcase your skills and qualifications, but also to mention your salary expectations. In this section, we will discuss the typical structure of a cover letter, where to mention salary requirements, and how to transition from salary requirements to professional experience and qualifications.

A. Typical structure of a cover letter

A typical cover letter structure includes the following elements:

• Contact information: Include your name, address, phone number, and email address at the top of the letter.
• Salutation: Address the letter to the hiring manager by name if possible.
• Introduction: Begin with a strong opening statement that grabs the reader’s attention and explains why you are interested in the position.
• Body: Use the body of the letter to highlight your skills, experience, and qualifications.
• Closing: Close the letter by thanking the hiring manager for their time and consideration, and expressing your willingness to discuss your application further.

B. Where to mention salary requirements in a cover letter

It’s important to be transparent about your salary requirements, but it’s also important not to lead with this information. Instead, consider mentioning your salary requirements in the closing paragraph. For example, you could say something like, “I am confident my qualifications and experience align with the position, and my salary requirements fall within the range you have specified.”

C. How to transition from salary requirements to professional experience and qualifications

After mentioning your salary requirements, you should use the rest of the cover letter to showcase your professional experience and qualifications. Start by highlighting your most relevant experience and qualifications, using bullet points to make the information easier to read. Be sure to mention any key achievements that demonstrate your ability to succeed in the role.

In the next paragraph, provide more detail about your experience and education, including any specific skills or certifications that are relevant to the position. Use this space to show the hiring manager that you are excited about the position and that you are the best candidate for the job.

When writing a cover letter with salary requirements, it’s important to strike the right balance between transparency about your needs and showcasing your qualifications. By following this structure and highlighting your skills and experience, you can create a compelling cover letter that sets you apart from other candidates.

Mistakes to Avoid while Discussing Salary Requirements in a Cover Letter

A. common mistakes while mentioning salary requirements.

When mentioning salary requirements in a cover letter, there are several common mistakes you should avoid:

Being too vague:  A vague mention of salary expectations without any specific numbers or range can leave the employer confused and uncertain about your expectations.

Mentioning an unrealistic amount:  Mentioning a high salary expectation that is beyond the employer’s budget or industry standards can leave a negative impression and may result in rejection.

Making salary expectations the primary focus:  Focusing only on salary requirements can make you appear more interested in money than the job itself, which can hurt your chances of getting an interview.

Discussing salary requirements before establishing interest:  Mentioning salary requirements before demonstrating genuine interest in the position and the company can be seen as presumptuous and unprofessional.

B. How to Avoid Negative Impact on Your Application

To avoid negative impact on your job application, follow these tips:

Do your research:  Research the industry standards and job market to determine a reasonable salary range for the position and your experience level.

Don’t be the first to mention salary:  Let the employer bring up the topic of salary before you mention your expectations. This will demonstrate that you are more interested in the job and the company than just the money.

Include a salary range:  If asked to provide salary requirements, offer a salary range rather than a specific number. This will allow for negotiation and flexibility.

Focus on your qualifications:  Instead of focusing only on salary requirements, emphasize your qualifications and what you can offer to the position and the company.

End with a positive note:  End your cover letter with a positive statement expressing your enthusiasm for the position and your willingness to discuss salary and other details further.

By avoiding common mistakes and following these tips, you can effectively discuss salary requirements in your cover letter without negatively impacting your job application.

Sample Cover Letters with Salary Requirements

When it comes to job applications, including salary requirements in your cover letter can be a tricky aspect to navigate. However, providing this information up front can save both you and the hiring manager time and potential disappointment down the line. Here are three sample cover letters to give you an idea of how to approach including your salary requirements:

A. Example 1: Fresh graduate without salary expectations

Dear Hiring Manager,

As a recent graduate with a Bachelor’s degree in Marketing, I am thrilled to apply for the Marketing Coordinator position at ABC Company. My experience as an intern at XYZ Company has provided me with a great foundation in marketing strategy, social media management, and project coordination.

Although I am a recent graduate without a specific salary requirement, I am confident that my skills and dedication will contribute positively to your organization. I look forward to the opportunity to discuss this further in person.

Thank you for your time and consideration.

Sincerely, [Your Name]

B. Example 2: Experienced professional with salary expectations

With 7+ years of experience in marketing, I am excited to apply for the Senior Marketing Manager position at DEF Company. My background in digital marketing, brand management, and team leadership make me a strong fit for this role.

In terms of salary expectations, my current base salary is $85,000 with opportunities for performance-based bonuses. Given the scope of responsibilities and level of experience required for this position, I am hoping to negotiate a compensation package in the range of $95,000-$105,000.

Thank you for your time and consideration, and I look forward to discussing this opportunity further with you.

Best regards, [Your Name]

C. Example 3: Career changer with salary flexibility

As a seasoned customer service professional, I am excited to apply for the Business Development Representative position at GHI Company. Although my experience may not be directly in business development, my skills in relationship building, client management, and communication make me a great fit for this role.

In terms of salary expectations, I am flexible and open to discussing the most appropriate compensation for the value I can bring to your team. My priority is to join a company that values employee development, growth, and contributions to the overall mission.

Thank you for considering my application, and I look forward to further discussions.

Including salary requirements in your cover letter can be a great way to showcase your professionalism and start off on the right foot with potential employers. By tailoring your approach to your experience and goal for growth, you can show that you are not only a great fit for the position, but also a worthwhile investment for the company.

Researching Salary Information

Before including salary requirements in your cover letter, it’s important to research salary information to ensure you’re requesting a reasonable and fair compensation. Consider the following tips when researching salary information:

A. Where to find salary data

Job Search Websites: Websites like Indeed, Glassdoor, and PayScale offer insight into salaries for various positions across industries. These websites are especially useful for comparing salaries in different locations and companies.

Company Websites: Some companies may publicly share salary information for their employees, which can be found on their websites.

Professional Associations: Professional associations in your industry may have salary surveys or data that can provide insight into average salaries for different positions.

Recruiters: Working with a recruiter can also provide insight into salary ranges for your desired position or industry.

B. How to use salary data in your cover letter

Once you’ve gathered salary information, it’s important to incorporate it into your cover letter effectively. Follow these tips for including salary requirements in your cover letter:

Be Flexible: Instead of listing a specific salary requirement, consider providing a salary range that you would be comfortable with. This allows for negotiation and shows that you are open to discussion.

Avoid Being First: If possible, try to avoid being the first to mention salary requirements. If the employer asks for your salary requirements, respond with a range and ask what the budget for the position is. This can prevent you from underselling yourself.

Be Confident: When discussing salary requirements, approach the conversation with confidence. Highlight your skills and experience that make you a valuable candidate and justify your salary range based on your qualifications and the research you’ve done.

Emphasize Other Factors: While salary is important, it’s not the only factor to consider. Emphasize other benefits, such as health insurance or retirement plans, that may be part of the compensation package.

By effectively researching and incorporating salary information into your cover letter, you can ensure that you set yourself up for fair and equitable compensation for your skills and experience.

Preparing for Salary Negotiations

When it comes to the job search process, negotiating salary is often one of the most intimidating and complex steps. However, by taking the time to adequately prepare for your salary negotiations, you can effectively communicate your value and increase your chances of securing a salary that accurately reflects your level of experience and expertise.

A. Importance of preparing for salary negotiations

Preparing for salary negotiations is crucial for a variety of reasons. Firstly, it shows that you value yourself and your skills, and that you are committed to achieving a fair compensation package. Additionally, by taking the time to research industry standards and company culture, you can confidently argue your case and present a compelling argument for why you deserve a certain salary.

B. Strategies to Follow While Discussing Salaries

During salary negotiations, it’s important to approach the conversation with a strategic mindset. One effective strategy is to first establish a range for your desired salary, based on your skills and experience, and then present this information to the employer. From there, you can work together to find a mutually agreeable compensation package.

It’s also important to remain flexible and open to compromise. Consider negotiating other benefits and perks in lieu of a higher salary, such as more vacation days or opportunities for professional development.

C. Tips to Keep in Mind While Negotiating Salaries

While negotiating salaries, there are several important tips to keep in mind. Firstly, always stay professional and polite, even if negotiations become tense. Secondly, come prepared with research and data to back up your desired salary range. This could include industry standards, comparable salaries for similar positions in the area, and your own achievements and qualifications.

It’s also important to set realistic expectations for your salary negotiations. While it’s important to advocate for yourself and your worth, understand that there may be limitations on what the employer can offer. Finally, always remember that salary negotiations are a two-way street, and make an effort to understand the employer’s needs and concerns as well.

By following these tips and strategies, you can confidently navigate the salary negotiation process and achieve a compensation package that accurately reflects your value as a professional.

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Salary Business Plans Samples For Students

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Tesla is going all out to push Elon Musk's $55 billion pay package through — even spending money on ads

• Tesla is spending money on ads to promote Elon Musk's $55 billion pay plan.
• The company aims to reapprove Musk's compensation package after it was voided by a judge.
• Shareholders vote on July 13 to determine whether the package will be reinstated.

Tesla is going all in on efforts to push through an approval of Elon Musk's $55 billion pay package .

The automaker, which has traditionally avoided advertising , has even spent some money on ads calling for Tesla investors to vote in favor of the compensation plan. Tesla showed in a filing with the Securities and Exchange Commission that it had paid for some ads on Google and on Musk's social-media site, X.

Related stories

"You deserve the final say on matters affecting your investment in Tesla," an ad on X read. "Vote FOR the protection of stockholder rights and to preserve present and future value creation by supporting Tesla proposals 3 and 4."

The company aims to pass two separate proposals: One moving its state of incorporation from Delaware to Texas and another reapproving Musk's pay, which was struck down by a Delaware judge earlier this year. In January, when the pay plan was voided, Kathleen McCormick, a Delaware Court of Chancery judge, said that Musk had undue influence over the package because of his close ties to several board members and that Musk's sway over Tesla's board resulted in an "unfair price."

A spokesperson for Tesla did not immediately respond to a request for comment.

Musk does not receive a salary from Tesla and his pay package centered on a series of goalposts around the carmaker's financial growth. The compensation plan was initially set in place in 2018. It involves a 10-year grant of 12 tranches of stock options that are vested when Tesla hits specific targets. When the company hits each milestone, Musk gets stock equal to 1% of outstanding shares at the time of the grant. Tesla says it has hit all of the 12 targets as of 2023.

The package was valued at around $55 billion at the time it was struck down by the judge.

The ad spend is one of several methods Tesla is using to push shareholders to vote in favor of the proposal. On Wednesday, The Wall Street Journal reported that Robyn Denholm, Tesla's board chair, is planning to spend the weeks leading up to the June 13 shareholder vote traveling in order to drum up support for the initiative. Bloomberg also reported on Wednesday that Tesla had brought on a strategic advisor to promote the agenda.

Earlier in May, Denholm even sat down for a video promoting the pay plan.

"We don't believe one judge's opinion should void the will of millions of votes cast by all of the owners of the company," the Tesla chair said in the video. "So once again, we're asking you to make your voices heard by voting for the ratification of the 2018 performance award."

Do you work for Tesla or have a tip? Reach out to the reporter via a non-work email and device at [email protected] or 248-894-6012

Watch: How Elon Musk makes and spends his billions

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