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Why Critical Thinking Matters in Your Business

Critical thinking should become a second-nature skill for leaders and employees across your organization.

Table of Contents

Many professionals hope to pursue careers they’re passionate about so they can find joy and meaning in their work. Caring deeply about your work is vital for engagement and productivity, but balancing emotions with critical thinking is essential in the workplace. 

When employees engage in critical thinking, they use an independent, reflective thought process to evaluate issues and solve problems based on knowledge and objective evidence. 

Critical thinking skills can guide your organization toward success, but to truly maximize the problem-solving benefits of critical thinking, it’s crucial to teach this skill to your entire team. We’ll explore critical thinking skills and how to teach them in the workplace to help your business improve its decision-making and problem-solving. 

What is critical thinking?

Jen Lawrence, co-author of Engage the Fox: A Business Fable About Thinking Critically and Motivating Your Team , defines critical thinking as “the ability to solve problems effectively by systematically gathering information about an issue, generating further ideas involving a variety of perspectives, evaluating the information using logic, and making sure everyone involved is on board.”

This is a complex definition for a challenging concept. Though critical thinking might seem as straightforward as stepping back and using a formal thinking process instead of reacting instinctively to conflicts or problems, it is actually a much more challenging task.

Critical thinking’s ultimate goal is ensuring you have the best answer to a problem with maximum buy-in from all parties involved – an outcome that will ultimately save your business time, money and stress.

Why is critical thinking essential in the workplace?

A World Economic Forum report revealed that critical thinking is one of the most in-demand career skills employers seek when trying to attract and retain the best employees – and employers believe critical thinking skills will become even more necessary in the coming years. 

Critical thinking in the workplace guarantees objective and efficient problem-solving, ultimately reducing costly errors and ensuring that your organization’s resources are used wisely. Team members employing critical thinking can connect ideas, spot errors and inconsistencies, and make the best decisions most often. 

Employees with critical thinking are also more likely to accomplish the following:

• Analyzing information
• Thinking outside the box
• Coming up with creative solutions to sudden problems
• Devising thought-through, systematic plans
• Requiring less supervision

What are critical thinking skills?

Critical thinking is a soft skill that comprises multiple interpersonal and analytical abilities and attributes. Here are some essential critical thinking skills that can support workforce success.

• Observation: Employees with critical thinking can easily sense and identify an existing problem – and even predict potential issues – based on their experience and sharp perception. They’re willing to embrace multiple points of view and look at the big picture. 
• Analytical thinking: Analytical thinkers collect data from multiple sources, reject bias, and ask thoughtful questions. When approaching a problem, they gather and double-check facts, assess independent research, and sift through information to determine what’s accurate and what can help resolve the problem. 
• Open-mindedness: Employees who demonstrate critical thinking are open-minded – not afraid to consider opinions and information that differ from their beliefs and assumptions. They listen to colleagues; they can let go of personal biases and recognize that a problem’s solution can come from unexpected sources. 
• Problem-solving attitude: Critical thinkers possess a positive attitude toward problem-solving and look for optimal solutions to issues they’ve identified and analyzed. They are usually proactive and willing to offer suggestions based on all the information they receive. [Related article: How to Develop a Positive Attitude in the Workplace ]
• Communication: When managers make a decision, they must share it with the rest of the team and other stakeholders. Critical thinkers demonstrate excellent communication skills and can provide supporting arguments and evidence that substantiate the decision to ensure the entire team is on the same page. 

What are the benefits of critical thinking in the workplace?

Many workplaces operate at a frantic tempo that reinforces hasty thinking and rushed business decisions, resulting in costly mistakes and blunders. When employees are trained in critical thinking, they learn to slow the pace and gather crucial information before making decisions. 

Along with reducing costly errors, critical thinking in the workplace brings the following benefits: 

• Critical thinking improves communication. When employees think more clearly and aren’t swayed by emotion, they communicate better. “If you can think more clearly and better articulate your positions, you can better engage in discussions and make a much more meaningful contribution in your job,” said David Welton, managing partner at Grove Critical Thinking.
• Critical thinking boosts emotional intelligence. It might seem counterintuitive to associate analytical rationality with emotional intelligence . However, team members who possess critical thinking skills are less prone to rash, emotion-driven decisions. Instead, they take time to analyze the situation and make the most informed decision while being mindful and respectful of the emotional and ethical implications. 
• Critical thinking encourages creativity. Critical thinkers are open to new ideas and perspectives and accumulate a significant amount of information when facing decisions. Because of this, they’re more likely to come up with creative solutions . They are also curious and don’t shy away from asking open-ended questions. 
• Critical thinking saves time and money. By encouraging critical thinking in the workplace, you minimize the need for supervision, catch potential problems early, promote independence and initiative, and free managers to focus on other duties. All this helps your company save valuable time and resources. 

How do you teach critical thinking in the workplace?

Experts agree that critical thinking is a teachable skill. Both Lawrence and Welton recommend exploring critical thinking training programs and methods to improve your workplace’s critical thinking proficiency. Here’s a breakdown of how to teach critical thinking in the workplace: 

• Identify problem areas. Executives and managers should assess workplace areas most lacking in critical thinking. If mistakes are consistently made, determine whether the issue is a lack of critical thinking or an inherent issue with a team or process. After identifying areas that lack critical thinking, research the type of training best suited to your organization. 
• Start small. Employees newly embracing critical thinking might have trouble tackling large issues immediately. Instead, present them with smaller challenges. “Start practicing critical thinking as a skill with smaller problems as examples, and then work your way up to larger problems,” Lawrence said.
• Act preemptively. Teaching and implementing critical thinking training and methodology takes time and patience. Lawrence emphasized that critical thinking skills are best acquired during a time of calm. It might feel urgent to seek critical thinking during a crisis, but critical thinking is a challenging skill to learn amid panic and stress. Critical thinking training is best done preemptively so that when a crisis hits, employees will be prepared and critical thinking will come naturally.
• Allow sufficient time. From a managerial perspective, giving employees extra time on projects or problems might feel stressful in the middle of deadlines and executive pressures. But if you want those working for you to engage in critical thinking processes, it’s imperative to give them ample time. Allowing employees sufficient time to work through their critical thinking process can save the company time and money in the long run.

How do you identify successful critical thinking?

Successful critical thinking happens during a crisis, not after.

Lawrence provided an example involving restaurants and waitstaff: If a customer has a bad experience at a restaurant, a server using critical thinking skills will be more likely to figure out a solution to save the interaction, such as offering a free appetizer or discount. “This can save the hard-earned customer relationship you spent a lot of marketing dollars to create,” Lawrence said. This concept is applicable across many business and organizational structures. 

You should also be aware of signs of a lack of critical thinking. Lawrence pointed out that companies that change strategy rapidly, moving from one thing to the next, are likely not engaging in critical thinking. This is also the case at companies that seem to have good ideas but have trouble executing them.

As with many issues in business, company leadership determines how the rest of the organization acts. If leaders have excellent ideas but don’t follow critical thinking processes, their team will not buy into those ideas, and the company will suffer. This is why critical thinking skills often accompany positive communication skills.

“Critical thinking doesn’t just help you arrive at the best answer, but at a solution most people embrace,” Lawrence said. Modeling critical thinking at the top will help the skill trickle down to the rest of the organization, no matter your company’s type or size.

Critical thinking is the key to your business success

When critical thinking is actively implemented in an organization, mistakes are minimized, and operations run more seamlessly. 

With training, time and patience, critical thinking can become a second-nature skill for employees at all levels of experience and seniority. The money, time and conflict you’ll save in the long run are worth the extra effort of implementing critical thinking in your workplace.

Rebecka Green contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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4 Ways to Develop Your Strategic Thinking Skills

• 10 Sep 2020

Think back to the last time you participated in a strategic planning meeting for your organization. You were likely presented with a challenge to solve or goal to achieve.

Do you remember your contributions during that meeting? Did you offer compelling ideas and plot a course of action, or find it difficult to think strategically and develop a solution? Did you have a good idea, but struggle to communicate it in a logical way? Were you an active participant in the conversation, or did others helm it?

Strategic thinking skills are among the most highly sought-after management competencies. Why? Because employees capable of thinking critically, logically, and strategically can have a tremendous impact on a business’s trajectory.

If you want to improve your strategic thinking skills, the good news is that, with the right mindset and practice, you can.

Here are four ways to improve your strategy skills , so the next time you’re involved in a strategic planning meeting, you can ensure your contributions are noticed.

Access your free e-book today.

What Are Strategic Thinking Skills?

Strategic thinking skills are any skills that enable you to use critical thinking to solve complex problems and plan for the future. These skills are essential to accomplish business objectives, overcome obstacles, and address challenges—particularly if they’re projected to take weeks, months, or even years to achieve.

Strategic thinking skills include:

• Analytical skills: To ideate a strategy that helps your organization reach its objectives, you must be capable of analyzing a variety of inputs—from financial statements and KPIs , to market conditions, emerging business trends, and internal resource allocation. This initial analysis is crucial to creating a strategy that aligns with the current reality facing your organization.
• Communication skills: Putting a strategy into place for your company, regardless of its size, requires solid communication skills . The ability to communicate complex ideas, collaborate with internal and external stakeholders, build consensus, and ensure everyone is aligned and working toward shared goals are all central to strategic thinking.
• Problem-solving skills: Strategic planning is often used to solve problems or address challenges, such as missed financial targets, inefficient workflows, or an emerging competitor. Implementing a strategy that addresses the central challenge you face requires you to first understand the problem and its potential solutions. From there, you can craft a strategy that solves it.
• Planning and management skills: Strategy isn’t just about thinking of a solution—it involves implementation, too. Once data has been analyzed, the problem is understood, and a solution has been identified, you need strong planning and management skills to bring everything together.

How to Improve Your Strategic Thinking Skills

1. ask strategic questions.

If you want to improve your strategic thinking skills, one of the simplest things you can do is ask more strategic questions. Doing so allows you to exercise your planning skills, become adept at spotting opportunities, and develop a more strategic mindset you can leverage throughout your career.

According to the Harvard Business School Online course Disruptive Strategy , strategic questions can relate to a challenge, opportunity, or ambiguity you face in your current situation, whether personal or professional. They might, for instance, relate to launching a new business or product, beating a competitor, or structuring your organization for innovation.

It’s also important that your questions apply to your role and responsibilities so you can act on them.

Some examples of strategic questions you might ask include:

• How can we strategically position ourselves to enter a new market?
• What’s the direction for growth for each of our products or services?
• Where will the organization's growth come from in the next five years, and how does it compare with where growth has historically come from?
• How should the organization respond to the threat presented by potentially disruptive competitors ?

2. Observe and Reflect

In addition to asking strategic questions, you need to answer and address them skillfully. One of the most effective ways of accomplishing this is to observe and reflect on your current situation, ensuring any strategy you conceive is grounded in facts.

For example, imagine that the business you work for has begun losing market share for one of its products among its traditional customers. At the same time, it’s gained market share from an entirely new customer base. It’s easy to assume why this might be happening, but doing so can lead you down the wrong path at a critical moment in your organization’s existence.

Instead of blindly following an assumption, gather as much information as possible to use when crafting your strategy. For example, this might include conducting user interviews with new customers to identify the different jobs they hire your product to perform.

Understanding why new customers are attracted to your product can enable you to tailor your marketing strategy and product development to better embrace their needs .

3. Consider Opposing Ideas

Once you’ve landed on a strategy that can help your organization reach its goals, question your assumptions, and put your hypothesis through rigorous testing. By doing so, you can ensure you’re not overlooking another possibility.

Playing devil’s advocate with your ideas can allow you to preemptively identify weaknesses in your argument, and equip you to defend your strategy when others ask questions. It can also help you sharpen the logic skills you need to communicate and execute your strategy.

To develop this skill, get in the habit of questioning yourself any time you’re about to make an assertion. Should you consider a different perspective? Is there another possibility you may have overlooked?

4. Embrace Formal Training

By practicing the methods described above, you can improve your strategic thinking skills at your own pace. However, there are other learning options you can pursue.

If you need to quickly ramp up your strategy skills—to address a pressing need your organization is facing, position yourself for a new role, or finally launch your own business—formal training might be your best option.

For example, by enrolling in the online course Disruptive Strategy , you can discover how to make innovation a reality for your organization. Over six weeks, you’ll learn about the jobs to be done framework and disruptive innovation theory, and build skills to identify and execute high-level strategy.

Cultivating a Strategic Mindset

Whether in the long- or short-term, a strategic mindset can be developed through self-exploration, critical questioning, and formal training.

The advantage of having a strategic mindset is learning how to think rather than what to think. Although you might not always have the right answers, strategic thinking skills can empower you to spot new opportunities, address emerging challenges, and plan for future success.

Are you looking to develop a strategic mindset? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

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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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6 Critical Questions Your Business Plan Must Answer If you want to lay the groundwork for a stable business and attract investors, make sure you're hitting these points.

By Larry Alton Edited by Dan Bova Mar 18, 2015

Opinions expressed by Entrepreneur contributors are their own.

Never underestimate the importance of your business plan . It is the backbone of your company, a foundational pillar from which your enterprise will be built. It's going to serve as the first impression for countless potential partners and investors, and it's going to serve as a roadmap for your whole business -- at least for the first several years.

In some ways, writing a business plan is easy -- there are no rules or requirements for length, format, presentation, or even subject matter. But finding the right answers to the right questions is critical if you want to lay the groundwork for a stable business and attract sufficient attention from investors.

Related: 25 Common Characteristics of Successful Entrepreneurs

1. What need are you addressing?

This is an important question because it extends beyond the simple "What does your business do?" It's one thing to outline your business in general, describing what products you make or what services you offer, but if you want a solid business plan you have to take it to the next level.

It's nice to imagine your business as providing something useful, and if you're excited about the idea, it's that much easier to think about people buying it. But you need to be logical and critical when you consider the driving force behind your customers' purchasing decisions: what fundamental customer need is your business addressing? You'll want to back this up with research that shows the need actually exists.

2. What makes you different?

It's a big world out there, and startups are constantly coming on and off the radar. Chances are, there are multiple businesses out there who are already serving the crucial need you outlined from question one. That doesn't mean you can't serve it better, or serve it in a different way, but therein lies the challenge—figuring out what makes you different.

First, you'll need to acknowledge all the major players in your space, and this is going to require some research. Acknowledge what they're doing right, what they're doing wrong, and how they're going about their business. Identify the differentiating factor that will allow you to stand out, and emphasize it.

Related: Struggling to Define Your Business Goals? Ask Yourself These Questions.

3. Who is your audience?

Here's a hint: the answer can't be "everybody." No matter how useful or practical your product or service is, there's no way you're going to be able to sell to everyone in the world. Think about factors like age, sex, education, geographic location, working status, marital status, and perform some preliminary market research to determine the best path forward.

Your key demographic may evolve over time, so don't stay too committed to one niche. Also remember, that it's easy to expand to other markets once you've established yourself in one, so if you have multiple key demographics, it may be wise to focus on one to start things off.

4. How is your business going to make money?

This seems like an obvious question to answer, but you'd be surprised how many entrepreneurs fail to elaborate on their plan. The brief answer to this question is "sell products/services," but how are you going to sell? Where are you going to sell? How much are you going to sell for?

The other side of the question is what are your operating expenses? Who are you going to pay? What services or partners will you need to pay for? And ultimately, will the amount you sell be able to surpass the amount you owe? When will you break even?

5. How will you promote your business?

Promoting your business is just as important as creating it. Otherwise, people will never know who you are. Your marketing strategy should start off based on what similar businesses before you have done. Do they rely on traditional advertising or online marketing? Do they attend tradeshows and local events, or use technology to spread the word about their existence?

Related: The Ultimate Guide to Writing a Business Plan

6. What do you need to get started?

For many potential partners and investors, this is the bottom line. All businesses have to start somewhere, but that starting line varies dramatically from industry to industry and from entrepreneur to entrepreneur. Do you need any advanced equipment? Who will you need to hire? How much will you need for an initial run? These questions should give you an idea exactly how much capital and what resources you need initially.

It may seem counterintuitive, but answering these questions isn't a one-time process. Your business plan should be a living, changing document that evolves along with your company. Throughout your course of entrepreneurship, you're going to encounter new challenges, new opportunities, and hundreds of factors you never considered as significant to your business when you were writing the initial plan. To survive, you're going to have to revise your answers to these questions and update your business plan accordingly.

Related: The Essential Ingredients to Startup Success

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How to Develop Critical Thinking Skills in Business That Make You Smarter

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W e’ve heard about the importance of critical thinking skills in school, but it’s not always a common topic in the business world. The truth is, graduation day doesn’t mean critical thinking gets filed away in your past with standardized testing, homework, and essays. Critical thinking in business is an important skill for success.

This level of thinking goes much deeper than our normal thought process. It relies on a broad wealth of information, including the accumulation of new evidence in addition to our own reservoir of knowledge, experiences, memories, reflections, and reasonings.

Critical thinking in business helps us constantly evaluate and reevaluate the way we work so we can seek out more efficient and profitable solutions. A 2020 survey found that critical thinking and analysis is the #1 most important skill group that will be in high demand by 2025.

• Critical thinking is a deliberate and systematic approach for processing information to make educated, well-informed decisions.
• We don’t need to be critical thinkers 100% of the time. But when it comes to important decisions, especially in business, critical thinking skills are necessary.
• We can improve our critical thinking skills by questioning assumptions, seeking out alternative viewpoints, being aware of our biases, reversing our problem-solving approach, and evaluating evidence. 

What is critical thinking?

Critical thinking is the process of intentionally and systematically processing information to develop a well-informed understanding and make educated decisions.

It’s the opposite of snap judgments and regular day-to-day decisions. Most of our thinking happens automatically based on a gut feeling and limited amount of information available to us at a given moment.

Critical thinking requires a more in-depth approach that relies on facts, evidence, experience, and observations instead of emotions, assumptions, and biases.

5 ways to improve your critical thinking in business

Nobody relies on critical thinking 100% of the time. It takes considerable time and effort—you don’t need to spend that much energy when deciding what to make for dinner or which shirt to wear. That constant energy expenditure would leave us drained.

Instead, critical thinking is a tool that you should reserve for specific circumstances. There’s a time and a place for both critical thinking and automatic decision-making.

For example, you can be on autopilot when it comes to mundane tasks like filing paperwork, but for important decisions that have an impact on your bottom line—investments, employees, and the future of your business—you can’t afford to simply “go with your gut.”

Here are five ways you can improve your critical thinking in business.

1. Question basic assumptions

Assumptions are a natural part of our thinking process, but they’re detrimental to critical thinking.

Critical thinking in business requires objectivity, which means removing emotions and baseless assumptions from the equation.

When a company’s response to a new idea is to say, “But we’ve always done it this way,” they’re not thinking critically. Learn to recognize such assumptions and be critical of them.

2. Examine alternate points of view

It’s perfectly natural to want to seek out information that aligns with our own opinions and desires. We want to be right.

But part of critical thinking involves researching opposing views to understand the full picture from every angle. Talk to those who oppose you, and make sure you’re actively listening when they present their case. Seek out peer-reviewed research.

Even if you still don’t agree with the alternative points of view, they may illuminate new solutions or challenges to consider when making a decision.

3. Be aware of your biases and mental processes

The human brain is an incredible machine, but it’s certainly not perfect. In addition to natural biases, like prejudices and stereotypes, our brains are sometimes subject to heuristics . These mental shortcuts can be used to circumvent a long, detailed thought process.

Shortcuts might be sufficient for immediate decisions with short-term goals, but not for critical thinking. The best way to manage them is to be aware of your biases and mental processes. Simple awareness isn’t enough—you will also need to understand how they influence your decision-making process. From there, you can make a conscious effort to adapt and overcome.

Some of the most common biases to overcome are:

• Confirmation Bias: Acknowledge that you won’t always be right.
• Action Bias: Don’t act on impulse. Take a moment to think through the consequences first.
• Association Bias: Did an action cause a desired outcome to occur, or did that outcome happen regardless of the action?

4. Reverse your approach

If you’re still feeling stuck when applying your critical thinking skills to a problem, try looking from a different perspective by reversing your approach. 

For example, maybe you’re mulling over what investments to make in your business, and you can’t decide if they’ll help you reach a particular goal. Try turning your thought process around. Focus on the end goal instead, and then work backwards. What needs to happen in order to reach that goal?

Reversing your approach can illuminate any flaws in your thought process and help you reach a logical solution.

5. Evaluate existing evidence

Evidence is a key factor in critical thinking. Our decision-making process should involve seeking out information and evidence to fill gaps in our knowledge.

This doesn’t mean you have to conduct your own studies. Researchers with access to more resources have already laid that groundwork for you. 

But to accurately incorporate this evidence into your critical-thinking process, the burden falls on you to know the answers to these questions:

• Where did this evidence come from? Is the source credible?
• How was the information gathered?
• What were the parameters and sample size?
• How does this evidence fit into the problem I’m trying to solve?

In today’s digital world, you can find skewed data to support any point of view, even the most illogical conspiracy theories.

This is why critical thinking must go beyond simply finding evidence. It requires mindful evaluation of the facts and a commitment to seek out relevant, credible information, even if it disproves your point and changes your perspective.

Critical thinking skills result in better business decisions

Developing a critical thinking mindset helps you focus on progress instead of perfection . Nobody’s perfect. And being a critical thinker doesn’t mean you’ll make the right decision every time. 

But it does mean that you are making educated, rational decisions that have a much higher chance of success.

Are you a critical thinker? Do you want to improve your critical thinking skills? Join our team and grow professionally!

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Strategic Thinking in Business Planning: Explained

Unlock the power of Strategic Thinking in Business Planning with our insightful blog. Discover how this essential approach empowers organisations to navigate challenges, seize opportunities, and achieve long-term success. Explore the importance of Strategic Thinking and the process of Strategic Thinking.

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Table of Content  

1) What is Strategic Thinking  

    a) Importance of Strategic Thinking in Business Planning  

2) The process of Strategic Thinking  

3) Tools and techniques for Strategic Thinking  

4) Conclusion  

What is Strategic Thinking?  

Strategic Thinking is the process of stepping back from the day-to-day operations of a business analysis and taking a broader, long-term view. It involves analysing the current state of the business, setting clear objectives, and then figuring out the best way to achieve those objectives. It's like looking at a map to plan a journey; you need to know where you are, where you want to go, and the best route to get there. 

Importance of Strategic Thinking in Business Planning  

a) Long-term direction: It helps a business define its long-term goals and vision. Without a strategic plan, a company might drift without a clear destination. 

b) Adaptation: In a constantly changing business environment, Strategic Thinking allows a company to adapt to new challenges and opportunities. It's like having a flexible roadmap that can be adjusted as needed. 

c) Resource allocation: It helps in allocating resources like time, money, and talent more effectively. By focusing on what's most important, a business can use its resources wisely. 

d) Competitive advantage: Strategic Thinking enables a business to stay ahead of the competition. It helps in identifying unique selling points and ways to stand out in the market. 

e) Risk management: By anticipating potential risks and having plans to mitigate them, Strategic Thinking reduces the chances of major setbacks. 

The process of Strategic Thinking  

The process of Strategic Thinking involves a structured approach to developing a long-term plan for a business or organisation. Here's a more detailed explanation of the steps involved in the process of Strategic Thinking: 

a) Environmental analysis: This is the first step in the process. It involves a comprehensive assessment of the external environment in which the business operates. This includes analysing market trends, studying competitors, understanding economic conditions, and considering any other factors that could impact the business. The goal is to gather data and insights that will inform strategic decisions. 

b) Setting clear objectives: Once the external environment is understood, the next step is to set clear and specific objectives. These objectives define what the business wants to achieve over a certain period. Objectives should be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) to provide a clear sense of direction. 

c) Identifying core competencies: It's essential to identify the strengths and weaknesses of the business, often referred to as its core competencies. This step involves an internal assessment of what the company does well and where it might have weaknesses. Knowing these core competencies helps guide strategic decisions and capitalise on strengths. 

d) Generating strategic options: With objectives in mind and an understanding of core competencies, the next step is to brainstorm and explore different strategic options. This is a creative process that involves considering various approaches to achieving the defined objectives. Think of it as plotting different routes on a map to reach a destination. 

Get ready for your interview with our top Business Analyst Interview Questions .

e) Evaluating and selecting strategies: After generating a list of strategic options, the business needs to evaluate each one. This evaluation involves considering various factors, including feasibility, potential risks, alignment with the business's strengths, and their potential to achieve the defined objectives. The best-fit strategy is then chosen based on this evaluation. 

f) Developing an actionable plan: Once a strategy is selected, it's time to create a detailed plan for implementation. This plan outlines the specific steps, resources, and timelines required to execute the chosen strategy. It essentially breaks down the strategy into actionable tasks and responsibilities. 

g) Communication and alignment: Effective communication is crucial. The chosen strategy and the accompanying plan need to be communicated to all relevant stakeholders within the organisation. This ensures that everyone is aligned and understands their role in implementing the strategy. 

h) Monitoring and adaptation: Strategic Thinking is an ongoing process. It requires constant monitoring of progress and the business's external environment. If circumstances change or new opportunities or challenges arise, the business should be ready to adapt its strategy as needed. 

Unlock your potential with the BCS Advanced International Diploma in Business Analysis Course – Take the next step towards becoming a master in your field today   

Tools and Techniques for Strategic Thinking in Business   

Tools and techniques for Strategic Thinking in Business are essential for making informed decisions, analysing the competitive landscape, and identifying opportunities and challenges. Here are some commonly used tools and techniques for Strategic Thinking: 

a) Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis: SWOT analysis is a fundamental tool that helps businesses assess their internal strengths and weaknesses and external opportunities and threats. This analysis provides a clear snapshot of the current state of the business and guides strategic planning. 

b) PESTEL analysis: PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. This tool helps businesses analyse the macro-environment and identify external forces that could impact their operations and strategies. 

c) Porter's five forces: Developed by Michael Porter, this business analysis framework assesses the competitive forces within an industry, including the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitutes, and the intensity of rivalry. It helps in understanding the industry's attractiveness and competitive dynamics. 

d) Scenario planning: Scenario planning involves creating multiple plausible future scenarios and assessing how each would impact the business. It's a way to prepare for various possible outcomes and develop strategies to adapt to changing circumstances. 

e) PEST analysis: PEST stands for Political, Economic, Social, and Technological factors. Similar to PESTEL analysis, this tool focuses on the external environment and helps identify critical factors that can affect a business's strategy. 

f) Balanced scorecard: The balanced scorecard is a performance measurement framework that goes beyond financial metrics. It includes four perspectives: financial, customer, internal processes, and learning and growth. It helps align strategies with an organisation's mission and vision. 

Dive into the Detailed Case Study of Business Analysis

g) SWOT matrix: A SWOT matrix is a visual representation of a SWOT analysis. It categorises strengths, weaknesses, opportunities, and threats into a matrix, making it easier to identify strategic priorities. 

h) Mind mapping: Mind mapping is a creative technique that helps in visually organising and connecting ideas. It's useful for brainstorming and generating innovative strategic options. 

i) Critical Success Factors (CSF) analysis: CSF analysis identifies the essential factors that a business must focus on to achieve its objectives. It helps in prioritising strategic efforts. 

j) Benchmarking: Benchmarking involves comparing the performance of your business or specific processes to industry leaders or competitors. It provides insights into areas that need improvement and areas where your business excels. 

k) Value Chain analysis: Value chain analysis helps businesses understand the activities and processes that create value for customers. It can identify areas for cost reduction or differentiation. 

l) Competitor analysis: Analysing competitors' strategies, strengths, and weaknesses can provide valuable insights for shaping your own strategic plans. 

Explore the Key Roles and Responsibilities of a Business Analyst Today!

Conclusion  

Strategic Thinking in Business Planning is like having a roadmap for a successful journey. It helps you plan for the long term and make smart decisions. By using business analysis tools and techniques like SWOT analysis and scenario planning, you can navigate the business world effectively. Remember, Strategic Thinking in Business Planning is not a one-time thing; it's an ongoing process that helps your business adapt and thrive in a changing world.  

Unlock your potential with the BCS Certificate in Business Analysis Practice Training and chart a course for success in the world of Business Analysis.  

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Catch These Benefits! 13 Examples of Critical Thinking in the Workplace

Max 8 min read

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Your team is dealing with a sudden decrease in sales, and you’re not sure why.

When this happens, do you quickly make random changes and hope they work? Or do you pause, bring your team together , and analyze the problem using critical thinking?

In the pages ahead, we’ll share examples of critical thinking in the workplace to show how critical thinking can help you build a successful team and business.

Ready to make critical thinking a part of your office culture?

Let’s dive in!

What Is Critical Thinking? A Quick Definition

Critical thinking is the systematic approach of being a sharp-minded analyst. It involves asking questions, verifying facts, and using your intellect to make decisions and solve problems.

The process of thinking critically is built upon a foundation of six major steps:

• Comprehension
• Application
• Creation/Action

First, you gather “knowledge” by learning about something and understanding it. After that, you put what you’ve learned into action, known as “application.” When you start looking closely at the details, you do the “analysis.”

After analyzing, you put all those details together to create something new, which we call “synthesis.” Finally, you take action based on all your thinking, and that’s the “creation” or “action” step.

Examples of Critical Thinking in the Workplace

Even if the tasks are repetitive, or even if employees are required to follow strict rules, critical thinking is still important. It helps to deal with unexpected challenges and improve processes.

Let’s delve into 13 real examples to see how critical thinking works in practice.

1. Evaluating the pros and cons of each option

Are you unsure which choice is the best? Critical thinking helps you look at the good and bad sides of each option. This ensures that you make decisions based on facts and not just guesses.

Product development : For example, a product development team is deciding whether to launch a new product . They must evaluate the pros and cons of various features, production methods, and marketing strategies to make an informed decision. Obviously, the more complete their evaluation is, the better decisions they can make.

2. Breaking down complex problems into smaller, manageable parts

In the face of complex problems, critical thinkers are able to make the problem easier to solve. How? They create a step-by-step process to address each component separately.

Product deliveries and customer support . Imagine you work in a customer service department, and there has been a sudden increase in customer complaints about delayed deliveries. You need to figure out the root causes and come up with a solution.

So, you break down the problem into pieces – the shipping process, warehouse operations, delivery routes, customer communication, and product availability. This helps you find out the major causes, which are:

• insufficient staff in the packaging department, and
• high volume of orders during specific weeks in a year.

So, when you focus on smaller parts, you can understand and address each aspect better. As a result, you can find practical solutions to the larger issue of delayed deliveries.

3. Finding, evaluating and using information effectively

In today’s world, information is power. Using it wisely can help you and your team succeed. And critical thinkers know where to find the right information and how to check if it’s reliable.

Market research : Let’s say a marketing team is conducting market research to launch a new product. They must find, assess, and use market data to understand customer needs, competitor tactics, and market trends. Only with this information at hand can they create an effective marketing plan.

4. Paying attention to details while also seeing the bigger picture

Are you great at noticing small things? But can you also see how they fit into the larger picture? Critical thinking helps you do both. It’s like zooming in and out with a camera. Why is it essential? It helps you see the full story and avoid tunnel vision.

Strategic planning . For instance, during strategic planning, executives must pay attention to the details of the company’s financial data, market changes, and internal potential. At the same time, they must consider the bigger picture of long-term goals and growth strategies.

5. Making informed decisions by considering all available information

Ever made a choice without thinking it through? Critical thinkers gather all the facts before they decide. It ensures your decisions are smart and well-informed.

Data analysis . For example, data analysts have to examine large datasets to discover trends and patterns. They use critical thinking to understand the significance of these findings, get useful insights, and provide recommendations for improvement.

6. Recognizing biases and assumptions

Too many workplaces suffer from unfair and biased decisions. Make sure yours isn’t on this list. Critical thinkers are self-aware and can spot their own biases. Obviously, this allows them to make more objective decisions.

Conflict resolution . Suppose a manager needs to mediate a conflict between two team members. Critical thinking is essential to understand the underlying causes, evaluate the validity of each person’s opinion, and find a fair solution.

Hiring decisions . Here’s another example. When hiring new employees, HR professionals need to critically assess candidates’ qualifications, experience, and cultural fit. At the same time, they have to “silence” their own assumptions to make unbiased hiring decisions.

7. Optimizing processes for efficiency

Critical thinking examples in the workplace clearly show how teams can improve their processes.

Customer service . Imagine a company that sells gadgets. When customers have problems, the customer service team reads their feedback. For example, if many people struggle to use a gadget, they think about why that’s happening. Maybe the instructions aren’t clear, or the gadget is too tricky to set up.

So, they work together to make things better. They make a new, easier guide and improve the gadget’s instructions. As a result, fewer customers complain, and everyone is happier with the products and service.

8. Analyzing gaps and filling them in

Discovering problems in your company isn’t always obvious. Sometimes, you need to find what’s not working well to help your team do better. That’s where critical thinking comes in.

Training and development . HR professionals, for instance, critically analyze skill gaps within the organization to design training programs. Without deep analysis, they can’t address specific needs and upskill their employees .

9. Contributing effectively to team discussions

In a workplace, everyone needs to join meetings by saying what they think and listening to everyone else. Effective participation, in fact, depends on critical thinking because it’s the best shortcut to reach collective decisions.

Team meetings . In a brainstorming session, you and your colleagues are like puzzle pieces, each with a unique idea. To succeed, you listen to each other’s thoughts, mix and match those ideas, and together, you create the perfect picture – the best plan for your project.

10. Contributing effectively to problem-solving

Effective problem-solving typically involves critical thinking, with team members offering valuable insights and solutions based on their analysis of the situation.

Innovative SaaS product development . Let’s say a cross-functional team faces a challenging innovation problem. So, they use critical thinking to brainstorm creative solutions and evaluate the feasibility of each idea. Afterwards, they select the most promising one for further development.

11. Making accurate forecasts

Understanding critical thinking examples is essential in another aspect, too. In fact, critical thinking allows companies to prepare for what’s coming, reducing unexpected problems.

Financial forecasting . For example, finance professionals critically assess financial data, economic indicators, and market trends to make accurate forecasts. This data helps to make financial decisions, such as budget planning or investment strategies.

12. Assessing potential risks and recommending adjustments

Without effective risk management , you’ll constantly face issues when it’s too late to tackle them. But when your team has smart thinkers who can spot problems and figure out how they might affect you, you’ll have no need to worry.

Compliance review . Compliance officers review company policies and practices to ensure they align with relevant laws and regulations. They want to make sure everything we do follows the law. If they find anything that could get us into trouble, they’ll suggest changes to keep us on the right side of the law.

13. Managing the crisis

Who else wants to minimize damage and protect their business? During a crisis, leaders need to think critically to assess the situation, make rapid decisions, and allocate resources effectively.

Security breach in a big IT company . Suppose you’ve just discovered a major security breach. This is a crisis because sensitive customer data might be at risk, and it could damage your company’s reputation.

To manage this crisis, you need to think critically. First, you must assess the situation. You investigate how the breach happened, what data might be compromised, and how it could affect your customers and your business. Next, you have to make decisions. You might decide to shut down the affected systems to prevent further damage. By taking quick, well-planned actions, you can minimize the damage and protect your business.

Encouraging Critical Thinking in Your Team: A Brief Manager’s Guide

According to Payscale’s survey, 60% of managers believe that critical thinking is the top soft skill that new graduates lack. Why should you care? Well, among these graduates, there’s a good chance that one could eventually become a part of your team down the road.

So, how do you create a workplace where critical thinking is encouraged and cultivated? Let’s find out.

Step 1: Make Your Expectations Clear

First things first, make sure your employees know why critical thinking is important. If they don’t know how critical it is, it’s time to tell them. Explain why it’s essential for their growth and the company’s success.

Step 2: Encourage Curiosity

Do your employees ask questions freely? Encourage them to! A workplace where questions are welcomed is a breeding ground for critical thinking. And remember, don’t shut down questions with a “That’s not important.” Every question counts.

Step 3: Keep Learning Alive

Encourage your team to keep growing. Learning new stuff helps them become better thinkers. So, don’t let them settle for “I already know enough.” Provide your team with inspiring examples of critical thinking in the workplace. Let them get inspired and reach new heights.

Step 4: Challenge, Don’t Spoon-Feed

Rethink your management methods, if you hand your employees everything on a silver platter. Instead, challenge them with tasks that make them think. It might be tough, but don’t worry. A little struggle can be a good thing.

Step 5: Embrace Different Ideas

Do you only like ideas that match your own? Well, that’s a no-no. Encourage different ideas, even if they sound strange. Sometimes, the craziest ideas lead to the best solutions.

Step 6: Learn from Mistakes

Mistakes happen. So, instead of pointing fingers, ask your employees what they learned from the mistake. Don’t let them just say, “It’s not my fault.”

Step 7: Lead the Way

Are you a critical thinker yourself? Show your employees how it’s done. Lead by example. Don’t just say, “Do as I say!”

Wrapping It Up!

As we’ve seen, examples of critical thinking in the workplace are numerous. Critical thinking shows itself in various scenarios, from evaluating pros and cons to breaking down complex problems and recognizing biases.

The good news is that critical thinking isn’t something you’re born with but a skill you can nurture and strengthen. It’s a journey of growth, and managers are key players in this adventure. They can create a space where critical thinking thrives by encouraging continuous learning.

Remember, teams that cultivate critical thinking will be pioneers of adaptation and innovation. They’ll be well-prepared to meet the challenges of tomorrow’s workplace with confidence and competence.

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How to Demonstrate Your Strategic Thinking Skills

• Nina A. Bowman

Don’t be shy about bringing your ideas to the table.

Developing your strategic thinking skills isn’t enough to get you promoted. In order to advance in your career, you need to demonstrate them. Leaders want to know what you think, and they view your worthiness for promotion through the lens of how ready you are to make bigger decisions. Ask yourself: “Do people know where I stand?” If not, what do you need to do to bring your perspective to the table? It’s also important to demonstrate that you can put new ideas into action. Take the initiative on new projects that show how your understanding extends beyond your current function.

We all know that developing strategic thinking skills is important , but many don’t realize how critical it is to your career advancement to show these skills to your boss and other senior leaders. Showing strategic thinking skills tells your bosses that you’re able to think for yourself and make decisions that position the organization for the future. It assures them that you aren’t making decisions in a vacuum but are considering how other departments might be affected or how the outside world will respond.

• NB Nina A. Bowman is a Managing Partner at Paravis Partners, an executive coaching and leadership development firm. Previously, she held various advisory and leadership roles in strategy. She is an executive coach and speaker on issues of strategic leadership, leadership presence, and interpersonal effectiveness. She is also a contributing author to the HBR Guide to Coaching Employees and HBR Guide to Thinking Strategically .

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Building Critical Thinking Skills to Solve Problems at Work

Follow this six-step discussion process to foster critical thinking among your team.

Table of Contents

Critical thinking is a vital soft skill that uses one’s experiences and analytical skills to deduce information and make educated decisions. It’s an essential skill to have in the workplace, as the ability to use information from a broader and more impartial perspective allows your employees to make more informed decisions and see a comprehensive view of any situation. 

The U.S. Department of Labor identified critical thinking as a key component for essential workplace skills, including problem-solving and decision-making. Here’s how to build – and implement – critical thinking skills in the workplace.

>> Learn more: 12 Business Skills You Need to Master

How to use critical thinking to problem-solve

Here is a six-step problem-solving process to try with your team to build and use this skill.

1. Name the situation.

When you name the situation, you present a single discussion point that everyone in the discussion can identify. This statement can be written on a whiteboard as a visual prompt so that the team can focus on the point and redirect the discussion when the topic shifts. Critical thinking involves keeping an open mind about situations. You help participants remember the goal of the group by naming the situation.

2. List all possible solutions.

Brainstorming takes place during this part of the process. There is nothing outside the realm of possibilities at this point in the discussion. When you open the conversation to unlimited options, you expand thinking beyond one person. The ability to expand your thinking offers the conversation many possible solutions that you may not have considered without the expression of thoughts and opinions. Make sure that all potential solutions discussed during this time stay on task for the situation that has been named in the first step. Critical thinking includes the ability to keep an open mind to other considerations and viewpoints without losing track of the end goal. You expand the discussion to see new options and stay on task by identifying multiple opportunities.

3. Narrow your solutions to three options.

Everyone on the team needs to agree with at least one of the three options. Individuals who can find a compromise and create solutions from many perspectives are better able to bring a team together. Write each solution at the top of a whiteboard and include below each one a list of its advantages and disadvantages. Critical-thinking skills offer the ability to look at situations rationally without judgments of good and bad or wrong and right. You can maintain a rational discussion when you bring consensus to a few intentionally chosen solutions.

4. Choose one option from the three choices.

Make a final choice that offers the best chance of success based on rational discussion about the situation. Review this choice in relation to how well it solves the designated problem. Critical thinking skills help individuals use a more systematic way to come to conclusions. This reduces the chance of making decisions based on incorrect inferences arising from emotional conclusions.

5. Put a plan in place to implement the chosen solution.

Your chosen solution should have timelines and a list that identifies which participants are responsible for what parts of the final plan. Critical-thinking skills include the ability to commit to the chosen solution. You increase attention to detail and interest from the participants in implementing the solution when they are an integral part of the process.

6. Complete the plan.

Some employees find this part of the process the most difficult. Think of the number of times a great plan floundered because there was no follow-up. Make sure each person from the team has a part to play in the process that emphasizes their areas of expertise and interest. Complete regular reviews of people and timelines for project management. Critical thinking involves the ability to see the value of the overall plan. At this point in the process, individuals should be able to see the value of the solution and have buy-in since they were part of the process.

This problem-solving process creates an environment where critical thinking becomes a working part of finding a solution. For individuals who struggle with this method, you may want to consider some training in critical thinking. Overall, though, this process promotes critical thinking in your employees. You can also integrate this activity for making plans and creating a mission. The value added to your organization includes improved engagement , insight and productivity from your team.

Why critical thinking is essential in the workplace

In recent decades, companies have recognized the need for integrating critical thinking into the workplace to help build the success of their organizations. Strong critical-thinking skills can greatly benefit everybody in the workplace. Not only does thinking more openly introduce ideas and solutions that widen the opportunities for success, but it also provides an increase in teamwork and productivity and a decrease in conflict . Here are some additional benefits of critical thinking in the workplace.

Required in certain professions

In many professions – particularly those based on research or that require deductive reasoning, such as finance, education, research and law – acquiring critical-thinking skills is necessary. With critical thinking, employees can solve problems objectively by considering varying perspectives and analyzing facts without bias, allowing for smart decision-making and problem-solving.

Improves decision-making

Those with critical-thinking skills mull over their decisions thoroughly by researching, looking at information objectively, asking questions, and weighing the pros and cons before acting. This skill can help businesses stay on track when making decisions by thoroughly reviewing the risk versus reward of each decision. 

Boosts happiness

Critical thinking can boost happiness , as it is empowering to have the skills to make your own, well-informed decisions. Those who possess this skill are more in tune with their goals, needs and personal ethics, and they have a better understanding of what in their situation needs to change to make themselves happy or grow. [Read related article: How Hiring a Chief Happiness Officer Can Save Your Business ]

How to build critical-thinking skills

Here are a few ways you can polish your critical-thinking skills.

Practice active listening.

Practice actively listening by keeping an open mind and being attentive to those around you, from associates to executives. Listen to what others are saying to gain an understanding of each person’s individual perspective, needs and expectations, and show them empathy. This level of understanding will allow you to work together more effectively and make decisions that everyone is satisfied with.

Ask critical questions.

Instead of taking information at face value, be curious and ask questions to ensure you have everything you need to make a well-informed decision. Using open-ended questions offers an opportunity for further exploration, as they dive deeper and provide insightful details that can be helpful when making decisions.

Vet new information.

Don’t assume all new information you hear is true; instead, take time to thoroughly vet it by ensuring it’s up to date and it comes from a trustworthy source. Look at the existing evidence and the new facts being presented, then question thought processes and consider whose voice is missing.

Consider more than one perspective.

While you may feel that you have the “right” perspective, consider all points of view to fully understand others and their reasoning. This will help you improve your working relationships, better understand where your peers are coming from and tailor your communication to meet their needs.

Question your own biases.

Regardless of whether or not you try to avoid it in your decision-making process, everybody has their own biases, which are the foundation of their thinking. By uncovering your own biases and being actively aware of them, you can grow as a critical thinker and work to keep them separate from your decision-making process. 

Conduct research.

If there are any unanswered questions or gaps in the information provided, conduct research to further your understanding and reach a decision. Consider a source’s intention when conducting research, avoiding any that are sales-based or contain ill will. Don’t use social media to obtain information; stick to reputable publications free of bias and cite their sources.

Form your own opinion.

Be an independent thinker and form your own opinions by considering the information presented to you, including facts and evidence. Listen to and consider the opinions of others, but use deductive reasoning to form your own opinion – and stay true to it.

Lynette Reed contributed to the writing and reporting in this article. 

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Everything You Need to Know About Critical Thinking Skills for Business Leaders

9 Min Read | Oct 3, 2023

We all have moments of bad decision-making. (Like that time you hired your best friend’s cousin’s neighbor without interviewing them. Wrong move.) But consistently making decisions by the seat of your pants is no way to live your life—or build your business. What you can build your company on is the momentum that comes from critical thinking, aka making smart decisions and solving tough problems like it’s your job. Because if you’re a leader, it is.

Now, don’t get tripped up on the word critical . We’re not talking about overthinking every little thing and never really deciding on anything. And we’re also not talking about being critical or judgmental of your team. Both suck the life out teams and businesses. Critical thinking is really just about asking great questions, analyzing possible solutions, and taking action.

Let’s explore what critical thinking is, why it matters to you as a business leader, and how to apply how to apply critical-thinking skills examples to your work.           

What Is Critical Thinking?

One scholarly explanation of critical thinking goes something like: a system of thought incorporated in scientific, mathematical, historical, anthropological, moral, philosophical and economic thinking. Yeah, that definition’s a 0 out of 10 on the helpfulness scale. Critical thinking is more than knowing about something. It’s actively exploring facts and making discoveries. It’s getting to the bottom of problems by asking smart questions so you can make a good judgment based on facts—not feelings.

You already use critical thinking in your everyday decisions without realizing it. As a leader, you probably have 50 “great” ideas before you get to work in the morning. But do you act on all of them? Of course not. Because after you take a closer look at your priorities and available time and resources, you realize some of those ideas aren’t worth pursuing, at least right now. That’s critical thought.

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When you use critical thinking, you don’t just take things at face value or go with your initial gut reaction. You weigh, measure and challenge information carefully, with the goal to improve what and how you think. One quick note though. Don’t mistake critical thinking for memorizing facts and figures. That’s what you do when you’re prepping for your fifth-grade multiplication test. It’s not how you make new discoveries.

If you want to solve problems and find better ways of doing things like the great leader you’re meant to be , you will rely on a combination of data, facts, research, wise counsel, and assumptions from your knowledge and experience.

Pro tip: Being wishy washy can paralyze your team, your business and your mission. That’s what’s called indecisive leadership, and that’s an oxymoron. Don’t do that. Once you think through your information and options, make up your mind.

Why Is Critical Thinking Important to Leaders?

As if paralyzing your team isn’t bad enough, indecision also costs your business time and money. You give life permission to make decisions for you when you don’t move. Yuk! But when you think and move your way through obstacles, you hold the reins and can overcome challenges when others just give up.

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Are you losing steam with your current ad strategy? Critical thinking can lead you to new advertising ideas and marketing streams—and create even more business traffic. Stressed out by supply chain issues? Critical thinking can help you find new vendors and ways of doing business. When you think boldly and keep control of the situation, you impose your will (and good sense) on the world around you.

Here’s one more example of why critical thinking is important: Say you notice a dip in sales one month. You could blow it off as a fluke and charge ahead blindly. Or you could panic, treat it as the beginning of the end, and pressure your sales team to turn the ship before you’re forced to close your doors. Which one is right? Probably neither. But you won’t know how to respond until you carefully look at your business trends, analyze market conditions, and talk with some other smart, experienced leaders.

Your team and your business are just as good as your reasoning and decision-making skills.

Critical thinking helps you:

• Keep emotions and chaos in check as you approach problems with facts, not feelings
• Understand the importance and relevance of ideas
• Know when to challenge information and when to stop overthinking
• See how ideas are linked and call out inconsistencies and mistakes
• Appreciate different perspectives
• Consider others’ needs and show respect

Ask yourself how much you prioritize running your business with clarity, fairness, accuracy, and relevance. Your answer will give you a good picture of how much you value critical thinking.

Related article: What is Transformational Leadership?

Critical thinking has plenty of enemies though. Beware of these traits and behaviors that can lead to bad thinking and bad business:

• Self-interest
• Blind acceptance of what’s “normal”

Have you ever heard the phrase, “ready, fire, aim”? Probably not—but that’s what it looks like to act before you get a clear picture of the situation. Things run smoother the less you shoot from the hip and the more you carefully consider your decisions.

Examples of Critical Thinking Skills in Business

Here are some examples leaders in different lines of work who use critical thinking to solve everyday business problems:

• A funeral home director who considers a grieving family’s budget and wishes and guides them to the best choices
• A home health care manager who analyzes their cases and matches team members with clients based on their needs and schedule preferences
• A home contractor who weighs out which subcontractors are the right fit for the job
• A customer service leader who uses feedback forms to decide on training needs for their team
• A landscaper who evaluates the risk versus the potential revenue growth of adding team members

The Critical Thinking Process

We’ve looked at why and when to put some extra thought into your business decisions, but let’s be real. Not every decision requires deep-level thinking. The amount of time and energy you spend deciding should be based on the size of the decision’s impact on your business.

If it’s your job to choose whether your company’s Christmas card envelope is white or red, for the love of holiday cheer, just decide. But if you’re about to make a major purchase or new hire, you’ve got some big investments on the line. Pause to think over the details before you advance.

Related article : Product Launch: 10 Questions to Ask Before You Launch a New Product

Also, as you prepare to solve a tricky problem, ask yourself these questions:

• What’s the real issue?
• Why does this problem or challenge exist?
• What information do I need to gather to understand more?
• How should I keep my notes organized?

Let’s say, for example, that your business issue is consistently unhappy customers. On the surface, it looks like your team members serve customers too slowly. Since both team members and customers are involved, you need to get perspective from both sides to learn why the problem exists. So, you gather details from them on when and where the issue shows up and how they think it is or isn’t being handled. As for how to keep track of the information you learn, you could simply take notes on your phone or computer to review later. Or, you might need to put them in a shared document so your key leaders can see them as you work on a solution together.

After doing some high-level digging, you may find that your team members really are slow, but why ? That’s the next thing you need to discover. Are they poorly trained? Working in a role they’re not good at? Using faulty equipment?

Following these steps of deeper-level critical thinking will help you uncover root issues—so you can fix any problems:

• Observe: Look at the issue from different angles and ask questions about it.
• Analyze: Test how true your information is.
• Reason: Come up with your top theories for why there’s a problem, then list possible conclusions and solutions. (We’ve already established that you’re an idea machine. That’s great!  Keep those possible solutions flowing.)
• Communicate: Talk with people who are smarter and further ahead in their career than you for deeper insight. That doesn’t mean to just ask anyone with an opinion—find someone with experience.
• Solve: Decide and act.

Now for an important reminder: Thinking critically means you’re always discovering, changing and improving. Afterall, the one thing thriving businesses count on is change . That means you might solve a customer concern one way today but find better ways to solve it in the future. The same is true in any situation where you use critical thinking steps. The more you want to grow, the more you challenge your ideas and ways of doing things to get the positive change!

How to Think More Critically

We get it. You’re reading this because you’re serious about taking new ground and winning in business. You’re serious about going the extra mile to raise your critical thinking game even more. Here are four practical ways to build stronger critical thinking skills:

• Take a course or play video and board games that challenge your brain.
• Volunteer to solve problems at work and home for practice.
• Talk to others who are really good at thinking critically.
• Expand your job knowledge and skills so you can see problems more clearly.

Related article :  Mastermind Groups: What Are They, and How Can They Help You Grow Your Business?

What’s Next: Decision Time

Great leaders are people of action. They’re neither knee-jerk and emotional or passive and indecisive. They get the facts, think them through, then make the call. Of course, your personality style will influence whether you naturally make decisions quickly or need more time—and that’s okay. But, when it’s go time, leaders lead. Those who don’t end up like the squirrel in the middle of the road looking back and forth, then moving in circles or not at all. We all know what happens to that squirrel.

One way to stretch your critical thinking skills is to learn from today’s top voices in business and leadership through The EntreLeadership Podcast . You’ll hear practical decision-making insights that help you lead with confidence, solve big problems and grow your business.

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Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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How to develop critical thinking skills

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What are critical thinking skills?

How to develop critical thinking skills: 12 tips, how to practice critical thinking skills at work, become your own best critic.

A client requests a tight deadline on an intense project. Your childcare provider calls in sick on a day full of meetings. Payment from a contract gig is a month behind. 

Your day-to-day will always have challenges, big and small. And no matter the size and urgency, they all ask you to use critical thinking to analyze the situation and arrive at the right solution. 

Critical thinking includes a wide set of soft skills that encourage continuous learning, resilience , and self-reflection. The more you add to your professional toolbelt, the more equipped you’ll be to tackle whatever challenge presents itself. Here’s how to develop critical thinking, with examples explaining how to use it.

Critical thinking skills are the skills you use to analyze information, imagine scenarios holistically, and create rational solutions. It’s a type of emotional intelligence that stimulates effective problem-solving and decision-making . 

When you fine-tune your critical thinking skills, you seek beyond face-value observations and knee-jerk reactions. Instead, you harvest deeper insights and string together ideas and concepts in logical, sometimes out-of-the-box , ways. 

Imagine a team working on a marketing strategy for a new set of services. That team might use critical thinking to balance goals and key performance indicators , like new customer acquisition costs, average monthly sales, and net profit margins. They understand the connections between overlapping factors to build a strategy that stays within budget and attracts new sales. 

Looking for ways to improve critical thinking skills? Start by brushing up on the following soft skills that fall under this umbrella: 

• Analytical thinking: Approaching problems with an analytical eye includes breaking down complex issues into small chunks and examining their significance. An example could be organizing customer feedback to identify trends and improve your product offerings. 
• Open-mindedness: Push past cognitive biases and be receptive to different points of view and constructive feedback . Managers and team members who keep an open mind position themselves to hear new ideas that foster innovation . 
• Creative thinking: With creative thinking , you can develop several ideas to address a single problem, like brainstorming more efficient workflow best practices to boost productivity and employee morale . 
• Self-reflection: Self-reflection lets you examine your thinking and assumptions to stimulate healthier collaboration and thought processes. Maybe a bad first impression created a negative anchoring bias with a new coworker. Reflecting on your own behavior stirs up empathy and improves the relationship. 
• Evaluation: With evaluation skills, you tackle the pros and cons of a situation based on logic rather than emotion. When prioritizing tasks , you might be tempted to do the fun or easy ones first, but evaluating their urgency and importance can help you make better decisions. 

There’s no magic method to change your thinking processes. Improvement happens with small, intentional changes to your everyday habits until a more critical approach to thinking is automatic. 

Here are 12 tips for building stronger self-awareness and learning how to improve critical thinking: 

1. Be cautious

There’s nothing wrong with a little bit of skepticism. One of the core principles of critical thinking is asking questions and dissecting the available information. You might surprise yourself at what you find when you stop to think before taking action. 

Before making a decision, use evidence, logic, and deductive reasoning to support your own opinions or challenge ideas. It helps you and your team avoid falling prey to bad information or resistance to change .

2. Ask open-ended questions

“Yes” or “no” questions invite agreement rather than reflection. Instead, ask open-ended questions that force you to engage in analysis and rumination. Digging deeper can help you identify potential biases, uncover assumptions, and arrive at new hypotheses and possible solutions. 

3. Do your research

No matter your proficiency, you can always learn more. Turning to different points of view and information is a great way to develop a comprehensive understanding of a topic and make informed decisions. You’ll prioritize reliable information rather than fall into emotional or automatic decision-making. 

4. Consider several opinions

You might spend so much time on your work that it’s easy to get stuck in your own perspective, especially if you work independently on a remote team . Make an effort to reach out to colleagues to hear different ideas and thought patterns. Their input might surprise you.

If or when you disagree, remember that you and your team share a common goal. Divergent opinions are constructive, so shift the focus to finding solutions rather than defending disagreements. 

5. Learn to be quiet

Active listening is the intentional practice of concentrating on a conversation partner instead of your own thoughts. It’s about paying attention to detail and letting people know you value their opinions, which can open your mind to new perspectives and thought processes.

If you’re brainstorming with your team or having a 1:1 with a coworker , listen, ask clarifying questions, and work to understand other peoples’ viewpoints. Listening to your team will help you find fallacies in arguments to improve possible solutions.

6. Schedule reflection

Whether waking up at 5 am or using a procrastination hack, scheduling time to think puts you in a growth mindset . Your mind has natural cognitive biases to help you simplify decision-making, but squashing them is key to thinking critically and finding new solutions besides the ones you might gravitate toward. Creating time and calm space in your day gives you the chance to step back and visualize the biases that impact your decision-making. 

7. Cultivate curiosity

With so many demands and job responsibilities, it’s easy to seek solace in routine. But getting out of your comfort zone helps spark critical thinking and find more solutions than you usually might.

If curiosity doesn’t come naturally to you, cultivate a thirst for knowledge by reskilling and upskilling . Not only will you add a new skill to your resume , but expanding the limits of your professional knowledge might motivate you to ask more questions. 

You don’t have to develop critical thinking skills exclusively in the office. Whether on your break or finding a hobby to do after work, playing strategic games or filling out crosswords can prime your brain for problem-solving. 

9. Write it down

Recording your thoughts with pen and paper can lead to stronger brain activity than typing them out on a keyboard. If you’re stuck and want to think more critically about a problem, writing your ideas can help you process information more deeply.

The act of recording ideas on paper can also improve your memory . Ideas are more likely to linger in the background of your mind, leading to deeper thinking that informs your decision-making process. 

10. Speak up

Take opportunities to share your opinion, even if it intimidates you. Whether at a networking event with new people or a meeting with close colleagues, try to engage with people who challenge or help you develop your ideas. Having conversations that force you to support your position encourages you to refine your argument and think critically. 

11. Stay humble

Ideas and concepts aren’t the same as real-life actions. There may be such a thing as negative outcomes, but there’s no such thing as a bad idea. At the brainstorming stage , don’t be afraid to make mistakes.

Sometimes the best solutions come from off-the-wall, unorthodox decisions. Sit in your creativity , let ideas flow, and don’t be afraid to share them with your colleagues. Putting yourself in a creative mindset helps you see situations from new perspectives and arrive at innovative conclusions. 

12. Embrace discomfort

Get comfortable feeling uncomfortable . It isn’t easy when others challenge your ideas, but sometimes, it’s the only way to see new perspectives and think critically.

By willingly stepping into unfamiliar territory, you foster the resilience and flexibility you need to become a better thinker. You’ll learn how to pick yourself up from failure and approach problems from fresh angles. 

Thinking critically is easier said than done. To help you understand its impact (and how to use it), here are two scenarios that require critical thinking skills and provide teachable moments. 

Scenario #1: Unexpected delays and budget

Imagine your team is working on producing an event. Unexpectedly, a vendor explains they’ll be a week behind on delivering materials. Then another vendor sends a quote that’s more than you can afford. Unless you develop a creative solution, the team will have to push back deadlines and go over budget, potentially costing the client’s trust. 

Here’s how you could approach the situation with creative thinking:

• Analyze the situation holistically: Determine how the delayed materials and over-budget quote will impact the rest of your timeline and financial resources . That way, you can identify whether you need to build an entirely new plan with new vendors, or if it’s worth it to readjust time and resources. 
• Identify your alternative options: With careful assessment, your team decides that another vendor can’t provide the same materials in a quicker time frame. You’ll need to rearrange assignment schedules to complete everything on time. 
• Collaborate and adapt: Your team has an emergency meeting to rearrange your project schedule. You write down each deliverable and determine which ones you can and can’t complete by the deadline. To compensate for lost time, you rearrange your task schedule to complete everything that doesn’t need the delayed materials first, then advance as far as you can on the tasks that do. 
• Check different resources: In the meantime, you scour through your contact sheet to find alternative vendors that fit your budget. Accounting helps by providing old invoices to determine which vendors have quoted less for previous jobs. After pulling all your sources, you find a vendor that fits your budget. 
• Maintain open communication: You create a special Slack channel to keep everyone up to date on changes, challenges, and additional delays. Keeping an open line encourages transparency on the team’s progress and boosts everyone’s confidence. 

Scenario #2: Differing opinions 

A conflict arises between two team members on the best approach for a new strategy for a gaming app. One believes that small tweaks to the current content are necessary to maintain user engagement and stay within budget. The other believes a bold revamp is needed to encourage new followers and stronger sales revenue. 

Here’s how critical thinking could help this conflict:

• Listen actively: Give both team members the opportunity to present their ideas free of interruption. Encourage the entire team to ask open-ended questions to more fully understand and develop each argument. 
• Flex your analytical skills: After learning more about both ideas, everyone should objectively assess the benefits and drawbacks of each approach. Analyze each idea's risk, merits, and feasibility based on available data and the app’s goals and objectives. 
• Identify common ground: The team discusses similarities between each approach and brainstorms ways to integrate both idea s, like making small but eye-catching modifications to existing content or using the same visual design in new media formats. 
• Test new strategy: To test out the potential of a bolder strategy, the team decides to A/B test both approaches. You create a set of criteria to evenly distribute users by different demographics to analyze engagement, revenue, and customer turnover. 
• Monitor and adapt: After implementing the A/B test, the team closely monitors the results of each strategy. You regroup and optimize the changes that provide stronger results after the testing. That way, all team members understand why you’re making the changes you decide to make.

You can’t think your problems away. But you can equip yourself with skills that help you move through your biggest challenges and find innovative solutions. Learning how to develop critical thinking is the start of honing an adaptable growth mindset. 

Now that you have resources to increase critical thinking skills in your professional development, you can identify whether you embrace change or routine, are open or resistant to feedback, or turn to research or emotion will build self-awareness. From there, tweak and incorporate techniques to be a critical thinker when life presents you with a problem.

Cultivate your creativity

Foster creativity and continuous learning with guidance from our certified Coaches.

Elizabeth Perry, ACC

Elizabeth Perry is a Coach Community Manager at BetterUp. She uses strategic engagement strategies to cultivate a learning community across a global network of Coaches through in-person and virtual experiences, technology-enabled platforms, and strategic coaching industry partnerships. With over 3 years of coaching experience and a certification in transformative leadership and life coaching from Sofia University, Elizabeth leverages transpersonal psychology expertise to help coaches and clients gain awareness of their behavioral and thought patterns, discover their purpose and passions, and elevate their potential. She is a lifelong student of psychology, personal growth, and human potential as well as an ICF-certified ACC transpersonal life and leadership Coach.

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41+ Critical Thinking Examples (Definition + Practices)

Critical thinking is an essential skill in our information-overloaded world, where figuring out what is fact and fiction has become increasingly challenging.

But why is critical thinking essential? Put, critical thinking empowers us to make better decisions, challenge and validate our beliefs and assumptions, and understand and interact with the world more effectively and meaningfully.

Critical thinking is like using your brain's "superpowers" to make smart choices. Whether it's picking the right insurance, deciding what to do in a job, or discussing topics in school, thinking deeply helps a lot. In the next parts, we'll share real-life examples of when this superpower comes in handy and give you some fun exercises to practice it.

Critical Thinking Process Outline

Critical thinking means thinking clearly and fairly without letting personal feelings get in the way. It's like being a detective, trying to solve a mystery by using clues and thinking hard about them.

It isn't always easy to think critically, as it can take a pretty smart person to see some of the questions that aren't being answered in a certain situation. But, we can train our brains to think more like puzzle solvers, which can help develop our critical thinking skills.

Here's what it looks like step by step:

Spotting the Problem: It's like discovering a puzzle to solve. You see that there's something you need to figure out or decide.

Collecting Clues: Now, you need to gather information. Maybe you read about it, watch a video, talk to people, or do some research. It's like getting all the pieces to solve your puzzle.

Breaking It Down: This is where you look at all your clues and try to see how they fit together. You're asking questions like: Why did this happen? What could happen next?

Checking Your Clues: You want to make sure your information is good. This means seeing if what you found out is true and if you can trust where it came from.

Making a Guess: After looking at all your clues, you think about what they mean and come up with an answer. This answer is like your best guess based on what you know.

Explaining Your Thoughts: Now, you tell others how you solved the puzzle. You explain how you thought about it and how you answered. 

Checking Your Work: This is like looking back and seeing if you missed anything. Did you make any mistakes? Did you let any personal feelings get in the way? This step helps make sure your thinking is clear and fair.

And remember, you might sometimes need to go back and redo some steps if you discover something new. If you realize you missed an important clue, you might have to go back and collect more information.

Critical Thinking Methods

Just like doing push-ups or running helps our bodies get stronger, there are special exercises that help our brains think better. These brain workouts push us to think harder, look at things closely, and ask many questions.

It's not always about finding the "right" answer. Instead, it's about the journey of thinking and asking "why" or "how." Doing these exercises often helps us become better thinkers and makes us curious to know more about the world.

Now, let's look at some brain workouts to help us think better:

1. "What If" Scenarios

Imagine crazy things happening, like, "What if there was no internet for a month? What would we do?" These games help us think of new and different ideas.

Pick a hot topic. Argue one side of it and then try arguing the opposite. This makes us see different viewpoints and think deeply about a topic.

3. Analyze Visual Data

Check out charts or pictures with lots of numbers and info but no explanations. What story are they telling? This helps us get better at understanding information just by looking at it.

4. Mind Mapping

Write an idea in the center and then draw lines to related ideas. It's like making a map of your thoughts. This helps us see how everything is connected.

There's lots of mind-mapping software , but it's also nice to do this by hand.

5. Weekly Diary

Every week, write about what happened, the choices you made, and what you learned. Writing helps us think about our actions and how we can do better.

6. Evaluating Information Sources

Collect stories or articles about one topic from newspapers or blogs. Which ones are trustworthy? Which ones might be a little biased? This teaches us to be smart about where we get our info.

There are many resources to help you determine if information sources are factual or not.

7. Socratic Questioning

This way of thinking is called the Socrates Method, named after an old-time thinker from Greece. It's about asking lots of questions to understand a topic. You can do this by yourself or chat with a friend.

Start with a Big Question:

"What does 'success' mean?"

Dive Deeper with More Questions:

"Why do you think of success that way?" "Do TV shows, friends, or family make you think that?" "Does everyone think about success the same way?"

"Can someone be a winner even if they aren't rich or famous?" "Can someone feel like they didn't succeed, even if everyone else thinks they did?"

Look for Real-life Examples:

"Who is someone you think is successful? Why?" "Was there a time you felt like a winner? What happened?"

Think About Other People's Views:

"How might a person from another country think about success?" "Does the idea of success change as we grow up or as our life changes?"

Think About What It Means:

"How does your idea of success shape what you want in life?" "Are there problems with only wanting to be rich or famous?"

Look Back and Think:

"After talking about this, did your idea of success change? How?" "Did you learn something new about what success means?"

8. Six Thinking Hats 

Edward de Bono came up with a cool way to solve problems by thinking in six different ways, like wearing different colored hats. You can do this independently, but it might be more effective in a group so everyone can have a different hat color. Each color has its way of thinking:

White Hat (Facts): Just the facts! Ask, "What do we know? What do we need to find out?"

Red Hat (Feelings): Talk about feelings. Ask, "How do I feel about this?"

Black Hat (Careful Thinking): Be cautious. Ask, "What could go wrong?"

Yellow Hat (Positive Thinking): Look on the bright side. Ask, "What's good about this?"

Green Hat (Creative Thinking): Think of new ideas. Ask, "What's another way to look at this?"

Blue Hat (Planning): Organize the talk. Ask, "What should we do next?"

When using this method with a group:

• Explain all the hats.
• Decide which hat to wear first.
• Make sure everyone switches hats at the same time.
• Finish with the Blue Hat to plan the next steps.

9. SWOT Analysis

SWOT Analysis is like a game plan for businesses to know where they stand and where they should go. "SWOT" stands for Strengths, Weaknesses, Opportunities, and Threats.

There are a lot of SWOT templates out there for how to do this visually, but you can also think it through. It doesn't just apply to businesses but can be a good way to decide if a project you're working on is working.

Strengths: What's working well? Ask, "What are we good at?"

Weaknesses: Where can we do better? Ask, "Where can we improve?"

Opportunities: What good things might come our way? Ask, "What chances can we grab?"

Threats: What challenges might we face? Ask, "What might make things tough for us?"

Steps to do a SWOT Analysis:

• Goal: Decide what you want to find out.
• Research: Learn about your business and the world around it.
• Brainstorm: Get a group and think together. Talk about strengths, weaknesses, opportunities, and threats.
• Pick the Most Important Points: Some things might be more urgent or important than others.
• Make a Plan: Decide what to do based on your SWOT list.
• Check Again Later: Things change, so look at your SWOT again after a while to update it.

Now that you have a few tools for thinking critically, let’s get into some specific examples.

Everyday Examples

Life is a series of decisions. From the moment we wake up, we're faced with choices – some trivial, like choosing a breakfast cereal, and some more significant, like buying a home or confronting an ethical dilemma at work. While it might seem that these decisions are disparate, they all benefit from the application of critical thinking.

10. Deciding to buy something

Imagine you want a new phone. Don't just buy it because the ad looks cool. Think about what you need in a phone. Look up different phones and see what people say about them. Choose the one that's the best deal for what you want.

11. Deciding what is true

There's a lot of news everywhere. Don't believe everything right away. Think about why someone might be telling you this. Check if what you're reading or watching is true. Make up your mind after you've looked into it.

12. Deciding when you’re wrong

Sometimes, friends can have disagreements. Don't just get mad right away. Try to see where they're coming from. Talk about what's going on. Find a way to fix the problem that's fair for everyone.

13. Deciding what to eat

There's always a new diet or exercise that's popular. Don't just follow it because it's trendy. Find out if it's good for you. Ask someone who knows, like a doctor. Make choices that make you feel good and stay healthy.

14. Deciding what to do today

Everyone is busy with school, chores, and hobbies. Make a list of things you need to do. Decide which ones are most important. Plan your day so you can get things done and still have fun.

15. Making Tough Choices

Sometimes, it's hard to know what's right. Think about how each choice will affect you and others. Talk to people you trust about it. Choose what feels right in your heart and is fair to others.

16. Planning for the Future

Big decisions, like where to go to school, can be tricky. Think about what you want in the future. Look at the good and bad of each choice. Talk to people who know about it. Pick what feels best for your dreams and goals.

Job Examples

17. solving problems.

Workers brainstorm ways to fix a machine quickly without making things worse when a machine breaks at a factory.

18. Decision Making

A store manager decides which products to order more of based on what's selling best.

19. Setting Goals

A team leader helps their team decide what tasks are most important to finish this month and which can wait.

20. Evaluating Ideas

At a team meeting, everyone shares ideas for a new project. The group discusses each idea's pros and cons before picking one.

21. Handling Conflict

Two workers disagree on how to do a job. Instead of arguing, they talk calmly, listen to each other, and find a solution they both like.

22. Improving Processes

A cashier thinks of a faster way to ring up items so customers don't have to wait as long.

23. Asking Questions

Before starting a big task, an employee asks for clear instructions and checks if they have the necessary tools.

24. Checking Facts

Before presenting a report, someone double-checks all their information to make sure there are no mistakes.

25. Planning for the Future

A business owner thinks about what might happen in the next few years, like new competitors or changes in what customers want, and makes plans based on those thoughts.

26. Understanding Perspectives

A team is designing a new toy. They think about what kids and parents would both like instead of just what they think is fun.

School Examples

27. researching a topic.

For a history project, a student looks up different sources to understand an event from multiple viewpoints.

28. Debating an Issue

In a class discussion, students pick sides on a topic, like school uniforms, and share reasons to support their views.

29. Evaluating Sources

While writing an essay, a student checks if the information from a website is trustworthy or might be biased.

30. Problem Solving in Math

When stuck on a tricky math problem, a student tries different methods to find the answer instead of giving up.

31. Analyzing Literature

In English class, students discuss why a character in a book made certain choices and what those decisions reveal about them.

32. Testing a Hypothesis

For a science experiment, students guess what will happen and then conduct tests to see if they're right or wrong.

33. Giving Peer Feedback

After reading a classmate's essay, a student offers suggestions for improving it.

34. Questioning Assumptions

In a geography lesson, students consider why certain countries are called "developed" and what that label means.

35. Designing a Study

For a psychology project, students plan an experiment to understand how people's memories work and think of ways to ensure accurate results.

36. Interpreting Data

In a science class, students look at charts and graphs from a study, then discuss what the information tells them and if there are any patterns.

Critical Thinking Puzzles

Not all scenarios will have a single correct answer that can be figured out by thinking critically. Sometimes we have to think critically about ethical choices or moral behaviors. 

Here are some mind games and scenarios you can solve using critical thinking. You can see the solution(s) at the end of the post.

37. The Farmer, Fox, Chicken, and Grain Problem

A farmer is at a riverbank with a fox, a chicken, and a grain bag. He needs to get all three items across the river. However, his boat can only carry himself and one of the three items at a time. 

Here's the challenge:

• If the fox is left alone with the chicken, the fox will eat the chicken.
• If the chicken is left alone with the grain, the chicken will eat the grain.

How can the farmer get all three items across the river without any item being eaten? 

38. The Rope, Jar, and Pebbles Problem

You are in a room with two long ropes hanging from the ceiling. Each rope is just out of arm's reach from the other, so you can't hold onto one rope and reach the other simultaneously. 

Your task is to tie the two rope ends together, but you can't move the position where they hang from the ceiling.

You are given a jar full of pebbles. How do you complete the task?

39. The Two Guards Problem

Imagine there are two doors. One door leads to certain doom, and the other leads to freedom. You don't know which is which.

In front of each door stands a guard. One guard always tells the truth. The other guard always lies. You don't know which guard is which.

You can ask only one question to one of the guards. What question should you ask to find the door that leads to freedom?

40. The Hourglass Problem

You have two hourglasses. One measures 7 minutes when turned over, and the other measures 4 minutes. Using just these hourglasses, how can you time exactly 9 minutes?

41. The Lifeboat Dilemma

Imagine you're on a ship that's sinking. You get on a lifeboat, but it's already too full and might flip over. 

Nearby in the water, five people are struggling: a scientist close to finding a cure for a sickness, an old couple who've been together for a long time, a mom with three kids waiting at home, and a tired teenager who helped save others but is now in danger. 

You can only save one person without making the boat flip. Who would you choose?

42. The Tech Dilemma

You work at a tech company and help make a computer program to help small businesses. You're almost ready to share it with everyone, but you find out there might be a small chance it has a problem that could show users' private info. 

If you decide to fix it, you must wait two more months before sharing it. But your bosses want you to share it now. What would you do?

43. The History Mystery

Dr. Amelia is a history expert. She's studying where a group of people traveled long ago. She reads old letters and documents to learn about it. But she finds some letters that tell a different story than what most people believe. 

If she says this new story is true, it could change what people learn in school and what they think about history. What should she do?

The Role of Bias in Critical Thinking

Have you ever decided you don’t like someone before you even know them? Or maybe someone shared an idea with you that you immediately loved without even knowing all the details. 

This experience is called bias, which occurs when you like or dislike something or someone without a good reason or knowing why. It can also take shape in certain reactions to situations, like a habit or instinct. 

Bias comes from our own experiences, what friends or family tell us, or even things we are born believing. Sometimes, bias can help us stay safe, but other times it stops us from seeing the truth.

Not all bias is bad. Bias can be a mechanism for assessing our potential safety in a new situation. If we are biased to think that anything long, thin, and curled up is a snake, we might assume the rope is something to be afraid of before we know it is just a rope.

While bias might serve us in some situations (like jumping out of the way of an actual snake before we have time to process that we need to be jumping out of the way), it often harms our ability to think critically.

How Bias Gets in the Way of Good Thinking

Selective Perception: We only notice things that match our ideas and ignore the rest. 

It's like only picking red candies from a mixed bowl because you think they taste the best, but they taste the same as every other candy in the bowl. It could also be when we see all the signs that our partner is cheating on us but choose to ignore them because we are happy the way we are (or at least, we think we are).

Agreeing with Yourself: This is called “ confirmation bias ” when we only listen to ideas that match our own and seek, interpret, and remember information in a way that confirms what we already think we know or believe. 

An example is when someone wants to know if it is safe to vaccinate their children but already believes that vaccines are not safe, so they only look for information supporting the idea that vaccines are bad.

Thinking We Know It All: Similar to confirmation bias, this is called “overconfidence bias.” Sometimes we think our ideas are the best and don't listen to others. This can stop us from learning.

Have you ever met someone who you consider a “know it”? Probably, they have a lot of overconfidence bias because while they may know many things accurately, they can’t know everything. Still, if they act like they do, they show overconfidence bias.

There's a weird kind of bias similar to this called the Dunning Kruger Effect, and that is when someone is bad at what they do, but they believe and act like they are the best .

Following the Crowd: This is formally called “groupthink”. It's hard to speak up with a different idea if everyone agrees. But this can lead to mistakes.

An example of this we’ve all likely seen is the cool clique in primary school. There is usually one person that is the head of the group, the “coolest kid in school”, and everyone listens to them and does what they want, even if they don’t think it’s a good idea.

How to Overcome Biases

Here are a few ways to learn to think better, free from our biases (or at least aware of them!).

Know Your Biases: Realize that everyone has biases. If we know about them, we can think better.

Listen to Different People: Talking to different kinds of people can give us new ideas.

Ask Why: Always ask yourself why you believe something. Is it true, or is it just a bias?

Understand Others: Try to think about how others feel. It helps you see things in new ways.

Keep Learning: Always be curious and open to new information.

In today's world, everything changes fast, and there's so much information everywhere. This makes critical thinking super important. It helps us distinguish between what's real and what's made up. It also helps us make good choices. But thinking this way can be tough sometimes because of biases. These are like sneaky thoughts that can trick us. The good news is we can learn to see them and think better.

There are cool tools and ways we've talked about, like the "Socratic Questioning" method and the "Six Thinking Hats." These tools help us get better at thinking. These thinking skills can also help us in school, work, and everyday life.

We’ve also looked at specific scenarios where critical thinking would be helpful, such as deciding what diet to follow and checking facts.

Thinking isn't just a skill—it's a special talent we improve over time. Working on it lets us see things more clearly and understand the world better. So, keep practicing and asking questions! It'll make you a smarter thinker and help you see the world differently.

Critical Thinking Puzzles (Solutions)

The farmer, fox, chicken, and grain problem.

• The farmer first takes the chicken across the river and leaves it on the other side.
• He returns to the original side and takes the fox across the river.
• After leaving the fox on the other side, he returns the chicken to the starting side.
• He leaves the chicken on the starting side and takes the grain bag across the river.
• He leaves the grain with the fox on the other side and returns to get the chicken.
• The farmer takes the chicken across, and now all three items -- the fox, the chicken, and the grain -- are safely on the other side of the river.

The Rope, Jar, and Pebbles Problem

• Take one rope and tie the jar of pebbles to its end.
• Swing the rope with the jar in a pendulum motion.
• While the rope is swinging, grab the other rope and wait.
• As the swinging rope comes back within reach due to its pendulum motion, grab it.
• With both ropes within reach, untie the jar and tie the rope ends together.

The Two Guards Problem

The question is, "What would the other guard say is the door to doom?" Then choose the opposite door.

The Hourglass Problem

• Start both hourglasses. 
• When the 4-minute hourglass runs out, turn it over.
• When the 7-minute hourglass runs out, the 4-minute hourglass will have been running for 3 minutes. Turn the 7-minute hourglass over. 
• When the 4-minute hourglass runs out for the second time (a total of 8 minutes have passed), the 7-minute hourglass will run for 1 minute. Turn the 7-minute hourglass again for 1 minute to empty the hourglass (a total of 9 minutes passed).

The Boat and Weights Problem

Take the cat over first and leave it on the other side. Then, return and take the fish across next. When you get there, take the cat back with you. Leave the cat on the starting side and take the cat food across. Lastly, return to get the cat and bring it to the other side.

The Lifeboat Dilemma

There isn’t one correct answer to this problem. Here are some elements to consider:

• Moral Principles: What values guide your decision? Is it the potential greater good for humanity (the scientist)? What is the value of long-standing love and commitment (the elderly couple)? What is the future of young children who depend on their mothers? Or the selfless bravery of the teenager?
• Future Implications: Consider the future consequences of each choice. Saving the scientist might benefit millions in the future, but what moral message does it send about the value of individual lives?
• Emotional vs. Logical Thinking: While it's essential to engage empathy, it's also crucial not to let emotions cloud judgment entirely. For instance, while the teenager's bravery is commendable, does it make him more deserving of a spot on the boat than the others?
• Acknowledging Uncertainty: The scientist claims to be close to a significant breakthrough, but there's no certainty. How does this uncertainty factor into your decision?
• Personal Bias: Recognize and challenge any personal biases, such as biases towards age, profession, or familial status.

The Tech Dilemma

Again, there isn’t one correct answer to this problem. Here are some elements to consider:

• Evaluate the Risk: How severe is the potential vulnerability? Can it be easily exploited, or would it require significant expertise? Even if the circumstances are rare, what would be the consequences if the vulnerability were exploited?
• Stakeholder Considerations: Different stakeholders will have different priorities. Upper management might prioritize financial projections, the marketing team might be concerned about the product's reputation, and customers might prioritize the security of their data. How do you balance these competing interests?
• Short-Term vs. Long-Term Implications: While launching on time could meet immediate financial goals, consider the potential long-term damage to the company's reputation if the vulnerability is exploited. Would the short-term gains be worth the potential long-term costs?
• Ethical Implications : Beyond the financial and reputational aspects, there's an ethical dimension to consider. Is it right to release a product with a known vulnerability, even if the chances of it being exploited are low?
• Seek External Input: Consulting with cybersecurity experts outside your company might be beneficial. They could provide a more objective risk assessment and potential mitigation strategies.
• Communication: How will you communicate the decision, whatever it may be, both internally to your team and upper management and externally to your customers and potential users?

The History Mystery

Dr. Amelia should take the following steps:

• Verify the Letters: Before making any claims, she should check if the letters are actual and not fake. She can do this by seeing when and where they were written and if they match with other things from that time.
• Get a Second Opinion: It's always good to have someone else look at what you've found. Dr. Amelia could show the letters to other history experts and see their thoughts.
• Research More: Maybe there are more documents or letters out there that support this new story. Dr. Amelia should keep looking to see if she can find more evidence.
• Share the Findings: If Dr. Amelia believes the letters are true after all her checks, she should tell others. This can be through books, talks, or articles.
• Stay Open to Feedback: Some people might agree with Dr. Amelia, and others might not. She should listen to everyone and be ready to learn more or change her mind if new information arises.

Ultimately, Dr. Amelia's job is to find out the truth about history and share it. It's okay if this new truth differs from what people used to believe. History is about learning from the past, no matter the story.

Related posts:

• Experimenter Bias (Definition + Examples)
• Hasty Generalization Fallacy (31 Examples + Similar Names)
• Ad Hoc Fallacy (29 Examples + Other Names)
• Confirmation Bias (Examples + Definition)
• Equivocation Fallacy (26 Examples + Description)

Reference this article:

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Harnessing the Power of Critical Thinking for Business Plans

Related blogs.

• Writing a business plan that will make your business stand out
• Crafting a Winning Business Plan for Startups
• An Introduction to Tax Planning: Strategies for Optimizing your Returns
• Crafting a Risk Management Plan
• Developing a sound financial plan

Introduction

A business plan is a document that outlines the financial and operational goals of a company. It is a fundamental tool for the overall development and success of a business and to secure financing from investors or lenders. Defining your business plan requires critical thinking; it involves rigorous research and analytical skills.

Critical Thinking in the Business Planning Process

Business plans require analysis and evaluation of various factors, such as the competitive landscape, customer needs, and industry trends. The ability to think critically about market conditions and to evaluate the risks and opportunities associated with any decision is essential in creating a successful business plan. Critical thinking is an important tool in the development of an effective business plan.

Benefits of Critical Thinking for Writing a Business Plan

Critical thinking is the cornerstone of good business. When writing a business plan, critical thinking is essential to ensure success. Benefits of critical thinking when writing a business plan include establishing objectives, analyzing the market, and setting business strategies.

Establishing Objectives

Before beginning any business plan, the importance of establishing objectives cannot be overstated. Critical thinkers evaluate the facts and use them to set achievable and realistic goals. They also think ahead to the future and plan for future growth. When writing a business plan, understanding the goals of the company and mapping out a plan for achieving them is integral.

Analyzing the Market

A key part of writing any business plan is analyzing the market. Critical thinking helps entrepreneurs review past data, identify industry trends, and come up with a competitive strategy. Critical thinkers assess all the available information and form logical decisions to make informed decisions.

Setting Business Strategies

Once research is done and objectives are set, the business plan must be tailored to address the specific needs of the company. Critical thinkers examine the available data and develop strategies that are tailored to the company and that have realistic goals. This data-driven approach helps entrepreneurs assess the probability of success and identify any potential risks.

When writing a business plan, critical thinking is essential. Critical thinking helps entrepreneurs define goals, analyze the market, and set business strategies. Critical thinking also helps entrepreneurs assess the probability of success and identify any potential risks.

Identifying Variables in the Business Process

When preparing a business plan, one of the most important aspects is critical thinking. This involves assessing and identifying the various variables that can affect the success and longevity of the business. There are a few main variables to consider when creating a business plan.

Assessing Changes in the Market

It is important to consider any potential changes that can have an impact on the business. This can include changes in laws and regulations, changes in customer demand, and changes in the competitive landscape. By assessing these variables, business owners can deduce the best path for the business and plan for issues that may arise.

Assessing Customer Preferences

Another important element of critical thinking when writing a business plan involves assessing customer preferences. Business owners need to remain aware of the latest trends in consumer behaviour and preferences. This can include researching their target market, evaluating changes in customer buying habits, and monitoring any changes in the industry.

Assessing Risks in the Market

Finally, in order to create a successful business plan, business owners need to consider any risks that may arise. This means assessing environmental factors, economic conditions, technological developments, and any potential disruptions to the supply chain. By doing so, business owners can make educated predictions based on the data they collect.

In conclusion, it is essential to practice critical thinking when creating a business plan. By assessing and identifying variables such as changes in the market, customer preferences, and potential risks, business owners can ensure their business plan is comprehensive and reliable.

Developing Logical and Tactful Solutions

When writing a business plan, it is essential to demonstrate strong critical thinking skills in order to develop logical and tactful solutions for potential challenges. Critical thinking can help business owners to analyze challenges and make data-driven decisions to not only overcome challenges, but make strategic decisions that can give businesses a competitive advantage.

Differentiating between Solutions

At times, when writing a business plan, there may be multiple solutions to an identified challenge. Critical thinking can be used to help business owners differentiate between solutions and ultimately make the best decision. To differentiate between solutions, business owners should evaluate multiple solutions and consider the expected outcome of each option. Additionally, it is also advised to question assumptions and consider the impacts of solutions on multiple stakeholders.

Analyzing Impacts of Solutions

When writing a business plan, it is also important for business owners to analyze the potential impacts of solutions. Potential impacts can include how the solution may impact staff morale, customer satisfaction, the business’s budget, cash flow and so on. This will help business owners to identify the pros and cons of solutions, enabling them to make more informed decisions.

Evaluating Short-Term vs. Long-Term Solutions

Business owners should also remember to evaluate the short-term vs. long-term impact of solutions. It is often easy to focus on the immediate outcomes of solutions and make decisions based on short-term outlook. However, by taking a long-term view to solutions, business owners have the potential to make more strategic decisions that can provide long-term value. Therefore, critically evaluating short-term vs. long-term solutions can help ensure decisions are made with a long-term outlook.

Applying Critical Thinking to Find Answers

A business plan is a lengthy document that outlines the goals and objectives of a business, as well as blueprints for how those goals will be achieved. As such, it's important for the individual responsible for compiling and writing the business plan to be able to think critically and deliberately when going about the process. There are a few key strategies for doing this, such as conducting research, consulting experienced professionals, and utilizing creative thinking. Here's a closer look at each of them.

Conducting Research

Before delving into the actual writing of a business plan, it's wise to conduct a thorough amount of research. This may include market analysis of competitors and trends, or the latest news in the industry. This information can be used to help make informed decisions and create a solid plan for action. Researching a variety of sources can also be beneficial, as it enables the individual to distinguish between opinions, data and facts.

Consulting Experienced Professionals

While there is no shortage of resources available online, consulting with experienced professionals can also prove to be beneficial. Those who have thorough knowledge of the industry and have already gone through the process of developing a business plan can provide important insight and advice. With the guidance of an expert, one can ask the right questions and understand the information needed to make the best decision for their business.

Utilizing Creative Thinking

Creativity is not only integral for forming a unique and memorable plan, but it is also essential when tackling the various steps required for formulating a successful business. From coming up with new ideas to solving problems, creative thinkers are able to provide innovative solutions that may be just what the business needs to succeed. By approaching a plan with a creative mindset, it is possible to come up with something that stands apart from what others have done.

When writing a business plan, it is important to think critically and deliberately at every point of the process. Conducting research, consulting experienced professionals, and utilizing creative thinking can all be helpful when applying critical thinking to the task, and this could just be the key to success.

Generating Innovative Solutions

Having an imagination and the ability to think outside the box is an invaluable skill for all business professionals. By utilizing critical thinking when crafting your business plan, you can create innovative solutions for any problem. Whether it be with products, services, or ways to revolutionize the industry in some way, it's essential as a business leader to step back, think outside the box, and solve problems in creative ways.

Developing New Ideas

One of the most essential critical thinking skills when writing a business plan is the ability to develop new ideas. Ideas come in all shapes and sizes, and looking at old ones and spinning them in new directions is a great way to take your thinking outside of the box. Taking the time to review what is and isn't working in the industry and insights on future trends can open up more possibilities for new directions you can take with your own business.

Diversifying Present Solutions

Alongside idea generation, reviewing the solutions that are already on the market is an important tool when it comes to writing your business plan. Taking the time to look at other relevant solutions that are present and assessing what could be improved upon or diversified is a great way to affect change immediately and make those ideas part of your plan.

Exploring Breakthrough Directions

The most important tool when it comes to critical thinking when writing a business plan is exploring breakthrough directions. What options have yet to be considered or pursued in order to revolutionize the industry? By exploring uncharted territory, you can quickly develop ideas and solutions that will set you apart from the competition and make your business plan something that stands out.

• Scrutinize what is and isn't working with existing solutions on the market.
• Stay informed with industry trends and stay ahead of competitors.
• Brainstorm fresh ideas outside of secondary solutions.
• Utilize problem-solving skills to create new solutions and directions.

A comprehensive business plan must consider both short and long-term objectives, capital requirements, customer needs, and market analysis. By incorporating critical thinking into the creation of a business plan, it is easy to anticipate risks, develop creative solutions, and make sound decisions that take long-term success into account.

Summary of Critical Thinking Benefits

• Analyzing data and relying on logic
• Making better decisions
• Avoiding assumptions
• Thinking strategically

Summary of Creative Solutions Generated

• Innovative strategies for marketing
• Tying corporate social responsibility initiatives to goals
• Creating new processes for efficiency
• Utilizing technology to capitalize on opportunities

Significance of Critical Thinking in Business Planning

Critical thinking must be used throughout the business planning process to ensure that goals are realistic, measurable, and achievable. By involving the right parties, collecting the right data, and demonstrating disciplined analysis, critical thinking can help business owners make a clear, feasible business plan and help them prepare for any challenges that may arise.

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How to build your critical thinking skills in 7 steps (with examples)

Critical thinking is, well, critical. By building these skills, you improve your ability to analyze information and come to the best decision possible. In this article, we cover the basics of critical thinking, as well as the seven steps you can use to implement the full critical thinking process.

Critical thinking comes from asking the right questions to come to the best conclusion possible. Strong critical thinkers analyze information from a variety of viewpoints in order to identify the best course of action.

Don’t worry if you don’t think you have strong critical thinking abilities. In this article, we’ll help you build a foundation for critical thinking so you can absorb, analyze, and make informed decisions. 

What is critical thinking? 

Critical thinking is the ability to collect and analyze information to come to a conclusion. Being able to think critically is important in virtually every industry and applicable across a wide range of positions. That’s because critical thinking isn’t subject-specific—rather, it’s your ability to parse through information, data, statistics, and other details in order to identify a satisfactory solution. 

Definitions of critical thinking

Various scholars have provided definitions of critical thinking, each emphasizing different aspects of this complex cognitive process:

Michael Scriven , an American philosopher, defines critical thinking as "the intellectually disciplined process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and/or evaluating information gathered from, or generated by, observation, experience, reflection, reasoning, or communication as a guide to belief and action."

Robert Ennis , professor emeritus at the University of Illinois, describes critical thinking as "reasonable, reflective thinking focused on deciding what to believe or do."

Diane Halpern , a cognitive psychologist and former president of the American Psychological Association, defines it as "the use of cognitive skills or strategies that increase the probability of a desirable outcome."

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Top 8 critical thinking skills

Critical thinking is essential for success in everyday life, higher education, and professional settings. The handbook "Foundation for Critical Thinking" defines it as a process of conceptualization, analysis, synthesis, and evaluation of information.

In no particular order, here are eight key critical thinking abilities that can help you excel in any situation:

1. Analytical thinking

Analytical thinking involves evaluating data from multiple sources in order to come to the best conclusions. Analytical thinking allows people to reject cognitive biases and strive to gather and analyze intricate subject matter while solving complex problems. Analytical thinkers who thrive at critical thinking can:

Identify patterns and trends in the data

Break down complex issues into manageable components

Recognize cause-and-effect relationships

Evaluate the strength of arguments and evidence

Example: A data analyst breaks down complex sales figures to identify trends and patterns that inform the company's marketing strategy.

2. Open-mindedness

Open-mindedness is the willingness to consider new ideas, arguments, and information without prejudice. This critical thinking skill helps you analyze and process information to come to an unbiased conclusion. Part of the critical thinking process is letting your personal biases go, taking information at face value and coming to a conclusion based on multiple points of view .

Open-minded critical thinkers demonstrate:

Willingness to consider alternative viewpoints

Ability to suspend judgment until sufficient evidence is gathered

Receptiveness to constructive criticism and feedback

Flexibility in updating beliefs based on new information

Example: During a product development meeting, a team leader actively considers unconventional ideas from junior members, leading to an innovative solution.

3. Problem-solving

Effective problem solving is a cornerstone of critical thinking. It requires the ability to identify issues, generate possible solutions, evaluate alternatives, and implement the best course of action. This critical thinking skill is particularly valuable in fields like project management and entrepreneurship.

Key aspects of problem-solving include:

Clearly defining the problem

Gathering relevant information

Brainstorming potential solutions

Evaluating the pros and cons of each option

Implementing and monitoring the chosen solution

Reflecting on the outcome and adjusting as necessary

Example: A high school principal uses problem-solving skills to address declining student engagement by surveying learners, consulting with higher education experts, and implementing a new curriculum that balances academic rigor with practical, real-world applications.

4. Reasoned judgment

Reasoned judgment is a key component of higher order thinking that involves making thoughtful decisions based on logical analysis of evidence and thorough consideration of alternatives. This critical thinking skill is important in both academic and professional settings. Key aspects reasoned judgment include:

Objectively gathering and analyzing information

Evaluating the credibility and relevance of evidence

Considering multiple perspectives before drawing conclusions

Making decisions based on logical inference and sound reasoning

Example: A high school science teacher uses reasoned judgment to design an experiment, carefully observing and analyzing results before drawing conclusions about the hypothesis.

5. Reflective thinking

Reflective thinking is the process of analyzing one's own thought processes, actions, and outcomes to gain deeper understanding and improve future performance. Good critical thinking requires analyzing and synthesizing information to form a coherent understanding of a problem. It's an essential critical thinking skill for continuous learning and improvement.

Key aspects of reflective thinking include:

Critically examining one's own assumptions and cognitive biases

Considering diverse viewpoints and perspectives

Synthesizing information from various experiences and sources

Applying insights to improve future decision-making and actions

Continuously evaluating and adjusting one's thinking processes

Example: A community organizer reflects on the outcomes of a recent public event, considering what worked well and what could be improved for future initiatives.

6. Communication

Strong communication skills help critical thinkers articulate ideas clearly and persuasively. Communication in the workplace is crucial for effective teamwork, leadership, and knowledge dissemination. Key aspects of communication in critical thinking include:

Clearly expressing complex ideas

Active listening and comprehension

Adapting communication styles to different audiences

Constructing and delivering persuasive arguments

Example: A manager effectively explains a new company policy to her team, addressing their concerns and ensuring everyone understands its implications.

7. Research

Critical thinkers with strong research skills gather, evaluate, and synthesize information from various sources of information. This is particularly important in academic settings and in professional fields that require continuous learning. Effective research involves:

Identifying reliable and relevant sources of information

Evaluating the credibility and bias of sources

Synthesizing information from multiple sources

Recognizing gaps in existing knowledge

Example: A journalist verifies information from multiple credible sources before publishing an article on a controversial topic.

8. Decision-making

Effective decision making is the culmination of various critical thinking skills that allow an individual to draw logical conclusions and generalizations. It involves weighing options, considering consequences, and choosing the best course of action. Key aspects of decision-making include:

Defining clear criteria for evaluation

Gathering and analyzing relevant information

Considering short-term and long-term consequences

Managing uncertainty and risk

Balancing logic and intuition

Example: A homeowner weighs the costs, benefits, and long-term implications before deciding to invest in solar panels for their house.

7 steps to improve critical thinking

Critical thinking is a skill that you can build by following these seven steps. The seven steps to critical thinking help you ensure you’re approaching a problem from the right angle, considering every alternative, and coming to an unbiased conclusion.

First things first: When to use the 7 step critical thinking process

There’s a lot that goes into the full critical thinking process, and not every decision needs to be this thought out. Sometimes, it’s enough to put aside bias and approach a process logically. In other, more complex cases, the best way to identify the ideal outcome is to go through the entire critical thinking process. 

The seven-step critical thinking process is useful for complex decisions in areas you are less familiar with. Alternatively, the seven critical thinking steps can help you look at a problem you’re familiar with from a different angle, without any bias. 

If you need to make a less complex decision, consider another problem solving strategy instead. Decision matrices are a great way to identify the best option between different choices. Check out our article on 7 steps to creating a decision matrix .

1. Identify the problem or question

Before you put those critical thinking skills to work, you first need to identify the problem you’re solving. This step includes taking a look at the problem from a few different perspectives and asking questions like: 

What’s happening? 

Why is this happening? 

What assumptions am I making? 

At first glance, how do I think we can solve this problem? 

A big part of developing your critical thinking skills is learning how to come to unbiased conclusions. In order to do that, you first need to acknowledge the biases that you currently have. Does someone on your team think they know the answer? Are you making assumptions that aren’t necessarily true? Identifying these details helps you later on in the process. 

2. Gather relevant information

At this point, you likely have a general idea of the problem—but in order to come up with the best solution, you need to dig deeper. 

During the research process, collect information relating to the problem, including data, statistics, historical project information, team input, and more. Make sure you gather information from a variety of sources, especially if those sources go against your personal ideas about what the problem is or how to solve it.

Gathering varied information is essential for your ability to apply the critical thinking process. If you don’t get enough information, your ability to make a final decision will be skewed. Remember that critical thinking is about helping you identify the objective best conclusion. You aren’t going with your gut—you’re doing research to find the best option

3. Analyze and evaluate data

Just as it’s important to gather a variety of information, it is also important to determine how relevant the different information sources are. After all, just because there is data doesn’t mean it’s relevant. 

Once you’ve gathered all of the information, sift through the noise and identify what information is relevant and what information isn’t. Synthesizing all of this information and establishing significance helps you weigh different data sources and come to the best conclusion later on in the critical thinking process. 

To determine data relevance, ask yourself:

How reliable is this information? 

How significant is this information? 

Is this information outdated? Is it specialized in a specific field? 

4. Consider alternative points of view

One of the most useful parts of the critical thinking process is coming to a decision without bias. In order to do so, you need to take a step back from the process and challenge the assumptions you’re making. 

We all have bias—and that isn’t necessarily a bad thing. Unconscious biases (also known as cognitive biases) often serve as mental shortcuts to simplify problem solving and aid decision making. But even when biases aren’t inherently bad, you must be aware of your biases in order to put them aside when necessary. 

Before coming to a solution, ask yourself:

Am I making any assumptions about this information? 

Are there additional variables I haven’t considered? 

Have I evaluated the information from every perspective? 

Are there any viewpoints I missed?

5. Draw logical conclusions

Finally, you’re ready to come to a conclusion. To identify the best solution, draw connections between causes and effects. Use the facts you’ve gathered to evaluate the most objective conclusion. 

Keep in mind that there may be more than one solution. Often, the problems you’re facing are complex and intricate. The critical thinking process doesn’t necessarily lead to a cut-and-dry solution—instead, the process helps you understand the different variables at play so you can make an informed decision. 

6. Develop and communication solutions

Communication is a key skill for critical thinkers. It isn’t enough to think for yourself—you also need to share your conclusion with other project stakeholders. If there are multiple solutions, present them all. There may be a case where you implement one solution, then test to see if it works before implementing another solution. 

This process of communicating and sharing ideas is key in promoting critical thinking within a team or organization. By encouraging open dialogue and collaborative problem-solving, you create an environment that fosters the development of critical thinking skills in others.

7. Reflect and learn from the process

The seven-step critical thinking process yields a result—and you then need to put that solution into place. After you’ve implemented your decision, evaluate whether or not it was effective. Did it solve the initial problem? What lessons—whether positive or negative—can you learn from this experience to improve your critical thinking for next time? 

By engaging in this metacognitive reflective thinking process, you're essentially teaching critical thinking to yourself, refining your methodology with each iteration. This reflective practice is fundamental in developing a more robust and adaptable approach to problem-solving.

Depending on how your team shares information, consider documenting lessons learned in a central source of truth. That way, team members that are making similar or related decisions in the future can understand why you made the decision you made and what the outcome was.

Example of critical thinking in the workplace

Imagine you work in user experience design (UX). Your team is focused on pricing and packaging and ensuring customers have a clear understanding of the different services your company offers. Here’s how to apply the critical thinking process in the workplace in seven steps: 

Step 1: Start by identifying the problem

Your current pricing page isn’t performing as well as you want. You’ve heard from customers that your services aren’t clear, and that the page doesn’t answer the questions they have. This page is really important for your company, since it’s where your customers sign up for your service. You and your team have a few theories about why your current page isn’t performing well, but you decide to apply the critical thinking process to ensure you come to the best decision for the page. 

Gather information about how the problem started

Part of identifying the problem includes understanding how the problem started. The pricing and packaging page is important—so when your team initially designed the page, they certainly put a lot of thought into it. Before you begin researching how to improve the page, ask yourself: 

Why did you design the pricing page the way you did? 

Which stakeholders need to be involved in the decision making process? 

Where are users getting stuck on the page?

Are any features currently working?

Step 2: Then gather information and research

In addition to understanding the history of the pricing and packaging page, it’s important to understand what works well. Part of this research means taking a look at what your competitor’s pricing pages look like. 

Ask yourself: 

How have our competitors set up their pricing pages?

Are there any pricing page best practices? 

How does color, positioning, and animation impact navigation? 

Are there any standard page layouts customers expect to see? 

Step 3: Organize and analyze information

You’ve gathered all of the information you need—now you need to organize and analyze it. What trends, if any, are you noticing? Is there any particularly relevant or important information that you have to consider? 

Step 4: Consider alternative viewpoints to reduce bias

In the case of critical thinking, it’s important to address and set bias aside as much as possible. Ask yourself: 

Is there anything I’m missing? 

Have I connected with the right stakeholders? 

Are there any other viewpoints I should consider? 

Step 5: Determine the most logical solution for your team

You now have all of the information you need to design the best pricing page. Depending on the complexity of the design, you may want to design a few options to present to a small group of customers or A/B test on the live website.

Step 6: Communicate your solution to stakeholders

Critical thinking can help you in every element of your life, but in the workplace, you must also involve key project stakeholders . Stakeholders help you determine next steps, like whether you’ll A/B test the page first. Depending on the complexity of the issue, consider hosting a meeting or sharing a status report to get everyone on the same page. 

Step 7: Reflect on the results

No process is complete without evaluating the results. Once the new page has been live for some time, evaluate whether it did better than the previous page. What worked? What didn’t? This also helps you make better critical decisions later on.

Tools and techniques to improve critical thinking skills

As the importance of critical thinking continues to grow in academic and professional settings, numerous tools and resources have been developed to help individuals enhance their critical thinking skills. Here are some notable contributions from experts and institutions in the field:

Mind mapping for better analysis

Mind mapping is a visual technique that helps organize and structure information. It's particularly useful for synthesizing complex ideas and identifying connections between different concepts. The benefits of mind mapping include:

Enhancing creativity by encouraging non-linear thinking

Improving memory and retention of information

Facilitating brainstorming and idea generation

Providing a clear overview of complex topics

To create a mind map:

Start with a central idea or concept.

Branch out with related sub topics or ideas.

Use colors, symbols, and images to enhance visual appeal and memorability.

Draw connections between related ideas across different branches.

Mind mapping can be particularly effective in project planning , content creation, and studying complex subjects.

The Socratic Method for deeper understanding

The Socratic Method, named after the ancient Greek philosopher Socrates, involves asking probing questions to stimulate critical thinking and illuminate ideas. This technique is widely used in higher education to teach critical thinking. Key aspects of the Socratic Method include:

Asking open-ended questions that encourage deeper reflection

Challenging assumptions and preconceived notions

Exploring the implications and consequences of ideas

Fostering intellectual curiosity and continuous inquiry

The Socratic Method can be applied in various settings:

In education, to encourage students to think deeply about subject matter

In business, it is important to challenge team members to consider multiple points of view.

In personal development, to examine one's own beliefs and decisions

Example: A high school teacher might use the Socratic Method to guide students through a complex ethical dilemma, asking questions like "What principles are at stake here?" and "How might this decision affect different stakeholders?"

SWOT analysis for comprehensive evaluation

SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a strategic planning tool that can be applied to critical thinking. It helps in evaluating situations from multiple angles, promoting a more thorough understanding of complex issues. The components of SWOT analysis are:

Strengths: internal positive attributes or assets

Weaknesses: internal negative attributes or limitations

Opportunities: External factors that could be beneficial

Threats: External factors that could be harmful

To conduct a SWOT analysis:

Clearly define the subject of analysis (e.g., a project, organization, or decision).

Brainstorm and list items for each category.

Analyze the interactions between different factors.

Use the analysis to inform strategy or decision-making.

Example: A startup might use SWOT analysis to evaluate its position before seeking investment, identifying its innovative technology as a strength, limited capital as a weakness, growing market demand as an opportunity, and established competitors as a threat.

Critical thinking resources

The Foundation for Critical Thinking : Based in California, this organization offers a wide range of resources, including books, articles, and workshops on critical thinking.

The National Council for Excellence in Critical Thinking : This council provides guidelines and standards for critical thinking instruction and assessment.

University of Louisville : Their Critical Thinking Initiative offers various resources and tools for developing critical thinking skills.

The New York Times Learning Network provides lesson plans and activities to help develop critical thinking skills through current events and news analysis.

Critical thinking frameworks and tools

Paul-Elder Critical Thinking Framework : Developed by Dr. Richard Paul and Dr. Linda Elder, this framework provides a comprehensive approach to developing critical thinking skills.

Bloom's Taxonomy : While not exclusively for critical thinking, this classification system is widely used in education to promote higher-order thinking skills.

The California Critical Thinking Disposition Inventory (CCTDI) : This assessment tool measures the disposition to engage in problems and make decisions using critical thinking.

The Ennis-Weir Critical Thinking Essay Test : Developed by Robert Ennis, this test assesses a person's ability to appraise an argument and to formulate a written argument.

By incorporating these tools and techniques into regular practice, individuals can significantly enhance their critical thinking capabilities, leading to more effective problem-solving, decision-making, and overall cognitive performance.

Critically successful 

Critical thinking takes time to build, but with effort and patience you can apply an unbiased, analytical mind to any situation. Critical thinking makes up one of many soft skills that makes you an effective team member, manager, and worker. If you’re looking to hone your skills further, read our article on the 25 project management skills you need to succeed .

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6 ways to develop adaptability in the workplace and embrace change

Ideas and insights from Harvard Business Publishing Corporate Learning

Strategic Thinking: Because Good Ideas Can Come From Anywhere

As part of our update to the Harvard ManageMentor Strategic Thinking topic, we asked Mason Weintraub, Director of Digital Engagement at Oxfam America, about the importance of strategic thinking. Here’s what Mason had to say:

I often think I’m expected to have all the answers about what to do with digital strategy. But the reality is that I lead a very talented team, and one of the ideas that we have tried to engender on the team is that good ideas can come from anywhere.

“Good ideas can come from anywhere.” Most of us recognize the wisdom embedded in that statement, yet we still see strategy as the realm of our organization’s senior leaders. That may be because of our tendency to equate strategic thinking with strategic planning. Although these practices are related and equally necessary for organizational success, they are actually quite distinct.

Strategic planning vs. strategic thinking

In strategic planning, leaders gather data and decide on the path the organization will take to achieve its goals. With strategic thinking, employees at all levels and in all functions continually scan for new ways to contribute to the organization’s success. They apply those insights as they carry out organizational priorities and provide input to the overall strategy. In this way, strategic thinking is part of everyone’s job – whatever their role or level of responsibility.

Why is this ability to think strategically especially important now? Today’s organizations are more dispersed and less hierarchical than ever before. With the pace of change continuing to rise, it’s no longer feasible for people to wait for “orders from above.” All employees must keep an eye on the future, not just react to what’s happening in the present. They need to look beyond their functional areas to become aware of the bigger context in which they operate. And they have to be agile learners who identify opportunities by challenging their own and their team’s assumptions about how things work in their organization and industry.

Becoming a strategic thinker

With strategic thinking taking on even greater importance in organizations, we’ve made key updates to the Harvard ManageMentor Strategic Thinking topic. The content we’ve added is geared to helping people boost their productivity and effectiveness by making strategic thinking a habit, and includes practical ways that enable them to do so.

One practice is simply making the time to think strategically – something that’s not always easy in today’s fast-paced business settings. Another involves inviting dissent on your team. To make strategic decisions, you need people on all sides of an issue to speak their minds. By letting team members know that speaking up is an important part of their jobs, you free them to provide important input.

Other strategic thinking practices are useful for training yourself to see opportunities and threats well before they happen. For example, most of us are comfortable using convergent thinking – analysis, logic, and reasoning – to come up with the “best” option from a set of choices. We tend to be less adept at divergent thinking, which involves generating lots of ideas with the goal of finding innovative solutions. This isn’t an either-or process: When you first diverge as a team to generate ideas and then converge on a path forward, you improve your ability to design and implement strategic actions.

Don’t let the future surprise you

The future will undoubtedly look a lot different from today. No one can predict tomorrow, but by identifying different scenarios, you and members of your team stretch your thinking about what opportunities and threats might emerge, how they might impact your organization, and what you can do about them. You learn to enact truly meaningful change rather than make incremental improvements. And it all begins with strategic thinking.

How do you foster strategic thinking throughout your organization?

Janice Molloy is a content researcher with Harvard Business Publishing Corporate Learning. Email her at  [email protected] . 

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More From Forbes

Three keys to creating a strong business plan in 2023.

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Founder and CEO of Global Squirrels , a complete SaaS platform for international remote hiring and payroll management.

A business plan is an explicit document that talks about company goals, budget, operations, strategies and execution. Small enterprises often fail due to the lack of a clear, well-defined business strategy. The same can be true for enterprises that found initial success but lose their momentum after one or two years because they don't have an effective plan in place to navigate challenges. Thus, it is essential for every organization to plan ahead and have a detailed business plan for the future. Here's how:

Think Criticality, But Stay Positive

As a leader, it is your responsibility to keep your employees motivated and fill your team with positive energy. This can be hard to do when the media is continuously talking about an economic slowdown and a possible recession, but, in my experience, the best way to respond is with great vigor and a sense of urgency, leaving no space for negative discussions.

Organizations should focus on immediate priorities and can do so effectively by following these steps:

• Combine all your resources and utilize their collective strength (and momentum) to deliver critical projects.

• Achieve some quick wins to help spread positive vibes.

• Think more of solutions rather than focusing on obstacles.

• Invite new thoughts and encourage multi-team collaborations.

Align Your Budget With Your Strategy

When it comes to a recession, many people think of budget eliminations, but I encourage you to shift your mindset and instead think of it as a budget reallocation. It is impossible to predict the future, but it is possible to prepare ourselves for future outcomes by taking certain measures in terms of budget and cost allocations. Work to get a proactive budget plan in place.

Start by reviewing your previous budget plans, rearranging priorities and reassessing your business goals. Make sure that your budget aligns with your new business strategy and immediate goals. Stop spending money on undefined goals and maintain a clear objective for every penny you spend.

Over the last few years, more companies have moved toward zero-based budgeting , which requires managers to justify every penny they spend, helping to ensure that a company spends only on necessary things. It requires everyone to make decisions with much more precision. Zero-based budgeting can help you control your funds/expenses and plan your operations more efficiently.

Consider Getting Outside Help

Without a properly staffed company, business leaders often struggle to deliver critical projects on time. If you overload your existing employees with more work, you risk pushing your valuable assets to the edge, which could result in burnout and even higher turnover. But constraints can be good for innovation. When you cannot find people with relevant skills or within your pay grade in your region, look for ways to bring in more affordable outside help.

My company assists many corporations in hiring people from other countries using what's called a Professional Employment Organization platform. PEO or employer of record platforms help you hire global remote talent and manage their benefits, payroll and compliance from a single dashboard. The benefits of hiring international employees include having a more diverse work culture, access to a larger talent pool and a competitive edge should you ever wish to entertain international expansion.

If you're considering partnering with a PEO/EOR, ask these questions upfront:

• What aspects of international hiring do you cover? Many PEO/EOR platforms don't provide sourcing/staffing services and ask employers to find people on their own. But true hiring starts with sourcing; onboarding, payroll and compliance come next.

• How much do you charge? International hiring is all about minimizing skill gaps by finding relevant talent at affordable prices. There is no point in going that route if it's going to actually cost you more to manage payroll, benefits and compliance.

• Can you assist with hardware and office space? Being in the United States, it's often not easy to send laptops and other hardware support to your employees residing in other countries. The same goes for finding office space in foreign lands if you don't want your employees working from home. If this is a priority for you, look for a provider that can help with both hardware and office space assistance.

• What level of customer service do you offer? As hiring and managing payroll is not a one-time job, you need continuous support from your provider.

In conclusion, it is possible to lead your employees toward a stable and highly profitable 2023—if you have the right plan in place. Work to help your employees understand the needs of the hour and ask them to keep their energy levels high. Reallocate your budget and rein in unnecessary spending. Consider alternative hiring methods and ways you can embrace a global workforce. Your business plan should act as a guiding torch. You have everything at your disposal, all you need is a strong business plan!

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