Business Plans 101

What a business plan actually needs to answer, and why the exercise matters even for a very small business.

A business plan is a written description of what a business will do, who it will serve, and how it will make money. Its real value isn’t the document itself - it’s the discipline of answering hard questions before spending real money finding out the answers the expensive way.

The core questions every plan has to answer

Who is the target market? - the specific group of customers the business serves, described concretely enough that you could picture one of them, not “everyone who needs X.”
What problem does it solve, and how well do current alternatives solve it already?
How will it make money? - the actual mechanism: a one-time sale, a subscription, a commission on transactions.
What will it cost to run, and what has to be true for it to be profitable?

Unit economics, in one sentence

Unit economics means the profit or loss on a single unit of what you sell - one item, one customer, one order - after subtracting the direct cost of producing or delivering it. A bakery selling a $4 loaf that costs $3.50 in ingredients and packaging to produce has a unit economics problem before it has anything else to figure out, no matter how many loaves it sells.

Testing the plan before committing fully

A minimum viable product, often shortened to MVP, is the smallest version of a product that can be offered to real customers to test whether the core idea works, before investing in a fully built-out version. Testing a food truck concept with a single pop-up stand for a weekend, rather than leasing a truck and a commercial kitchen immediately, is an MVP applied to a small business.

Treating the business plan as a one-time document instead of a working assumption

A business plan written once and never revisited quickly becomes disconnected from reality. The more useful approach treats it as a living set of assumptions - about the target market, the costs, the pricing - that gets tested and updated as real customer behavior reveals what the plan got wrong.

Why a plan matters even for a one-person business

It’s tempting to treat a formal plan as something only needed to raise money from a bank or investor. But even a business with no outside funding benefits from writing down the target market, the unit economics, and the assumptions being tested - because it forces the same hard questions a lender would ask, before the money is already spent.

Why this connects to the rest of this module

The next two lessons build directly on this one: funding a small business, and the different legal structures a business can take, both depend on having a clear plan for who the business serves and how it makes money.

Key takeaways

A business plan's real value is the discipline of answering hard questions before spending real money.
Unit economics - profit or loss per unit sold - has to work before scale can fix anything.
An MVP tests the core idea with real customers before a full, expensive build-out.
A plan works best treated as a living set of assumptions, not a document written once and shelved.