When you run a business, it’s easy to get caught in the moment, always focusing on the day in front of you. But to be truly successful, you need to be looking ahead. You need to plan for your growth. To help with that process, many business owners write business growth plans, which provide a timeline for the next one to two years on how revenue can increase. In order to write an effective business growth plan, you need to understand what one is, the different types of strategies to consider, and how to project ways for your revenue to grow.

What is a business growth plan?

A business growth plan is an outline for where a company sees itself in the next one to two years. The growth plan should be formatted to follow along with each quarter. At the end of each quarter, the company can review what goals it met and what goals it missed during that period. At this point, management can revise the business growth plan to reflect current market standing.

Why are business growth plans important?

These are some of the many reasons why business growth plans are important:

• Market share and penetration. If your market share remains constant in a world where costs consistently increase, you’ll inevitably start recording losses instead of profits. Business growth plans help you avoid this scenario.
• Recouping early losses. Most companies lose far more than they earn in their early years. To recoup these losses, you’ll need to grow your company to a point where it can make enough revenue to pay off your debts.
• Future risk minimization. Growth plans matter for established businesses too. These companies can always stand to make their sales more efficient and thereby become more liquid. This liquidity can come in handy should you need money to cover unexpected problems.
• A business growth plan is beneficial to a company as a whole, but for most businesses, the main purpose is to write it with investors in mind. Investors want an outline of how your company plans to build sales in the coming months.
• Concrete revenue plans. Growth plans are customizable to each business and don’t need to follow a set template. However, all business growth plans must focus heavily on revenue. The plan should answer a simple question: How does your company plan to make money each quarter?

What factors impact business growth?

Countless factors can affect your business growth. These are some of the key elements:

• Leadership. To achieve your goals, you need to know the ins and out of your business processes and how external forces impact them. Without this knowledge, you can’t direct and train your team to drive your revenue. Ultimately, this will lead to stagnation rather than growth.
• Management. As a small business owner, you’re innately involved in management – obtaining funding, resources, and physical and digital infrastructure. Any management styles that hamper your acquisition of these resources for the sake of saving money could hamstring your growth. The money you’ll earn after growing could retroactively cover your current costs.
• Customer loyalty. Acquiring new customers can be five times as expensive as retaining current ones, and a 5% boost in customer retention can increase profits by 25% to 95%. Combined, these statistics make customer loyalty fundamental to business growth.

What are the four major growth strategies?

There are countless growth strategies for businesses, but only four major types. With these growth strategies, you can determine how to build on your brand.

• Market strategy: A market strategy refers to how you plan to penetrate your target clientele. This type of strategy isn’t intended for entering a new market or creating new products and services to boost your market share; it’s about leveraging your current offerings. For instance, can you adjust your pricing? Should you launch a new marketing campaign?
• Development: This strategy means looking into ways to break your products and services into a new market. If you can’t find the growth you want in the current market, a goal could be to expand to a new market.
• Product strategy: Also known as “product development,” this strategy focuses on what new products and services you can target to your current market. How can you grow your business without entering new markets? What are your customers asking for?
• Diversification: Diversification means expanding both your products and target markets. This strategy is usually best for smaller companies that have the means to be versatile with the products or services they offer and what new markets they attempt to penetrate.

Tip: Share your growth plan with key employees as a motivator. When employees see an opportunity for increased responsibility and corresponding compensation, they’re more likely to stay.

What to include in a business growth plan

A business growth plan focuses specifically on expansion and how you’re going to achieve it. Creating a useful plan takes time, but the effort can pay off substantially by keeping your growth efforts on track. You should include these elements in your growth plan:

1. A description of expansion opportunities
2. Financial goals broken down by quarter and year
3. A marketing plan of how you will achieve growth
4. A financial plan to determine what capital is accessible during growth
5. A breakdown of your company’s staffing needs and responsibilities

FYI: Your growth plan should also include an assessment of your operating systems and computer networks to determine if they can accommodate growth.

How to write a business growth plan

To successfully write a business growth plan, you have to do some forward thinking and research. Here are some key steps to follow when writing your business growth plan.

1. Think ahead.

The future is always unpredictable, but if you study your target market, your competition and the past growth of your company, you can plan for future expansion. The Small Business Administration (SBA) features a comprehensive guide to writing a business plan for growth.

2. Study other growth plans.

Before you start writing, review models from some successful companies.

3. Discover opportunities for growth.

With some homework, you can determine if your expansion opportunities lie in creating new products, adding more services, targeting a new market, opening new locations or going global, to name a few examples. Once you’ve identified your best options for growth, include them in your plan.

4. Evaluate your team.

Your plan should include an assessment of your employees and a look at staffing requirements to meet your growth objectives. By assessing your own skills and those of your employees, you can determine how much growth can be accomplished with your present team. You’ll also know when to start hiring additional people and what skill sets to look for in those new hires.

Tip: Review and revise your growth plan often – at least once a year.

5. Find the capital.

Include detailed information on how you will fund expansion. Business.gov offers a guide on how to prepare your request for funding, as well as how to connect with SBA lenders.

6. Get the word out.

Growing your business requires a targeted marketing effort. Be sure to outline how you will effectively market your business to encourage growth and how your marketing efforts will evolve as you grow.

7. Ask for help.

Advice from other business owners who have had successful growth can be the ultimate tool in writing your growth plan.

8. Start writing.

Business plan software has streamlined the growth plan process. Most software programs are geared toward business plans, but you can modify them to create a plan that focuses on growth.

Many small businesses lack a full financial plan, even though evidence shows that it is essential to the long-term success and growth of any business. 

For example, a study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. If you’re not sure how to get started, read on to learn the six key elements of a successful small business financial plan.

What is a business financial plan, and why is it important? 

A business financial plan is an overview of a business’s financial situation and a forward-looking projection for growth. A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan.

A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and monthly expenses and plan for taxes each year.

Importantly, a financial plan helps you focus on the long-term growth of your business. That way, you don’t get so caught up in the day-to-day activities that you lose sight of your goals. Focusing on the long-term vision helps you prioritize your financial resources. 

FYI: Financial plans should be created annually at the beginning of the fiscal year as a collaboration of finance, HR, sales and operations leaders.

The 6 components of a successful financial plan for business

1. Sales forecasting

You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles helps you better understand your business, and this knowledge is invaluable as you plan marketing initiatives and growth strategies. 

For instance, a seasonal business can aim to Boost sales in the off-season to eventually become a year-round venture. Another business might become better prepared by understanding how upticks and downturns in business relate to factors such as the weather or the economy.

Sales forecasting is also the foundation for setting company growth goals. For instance, you could aim to Boost your sales by 10 percent over each previous period.

2. Expense outlay

A full expense plan includes regular expenses, expected future expenses and associated expenses. Regular expenses are the current ongoing costs of your business, including operational costs such as rent, utilities and payroll. 

Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing, and the office holiday party. It’s a good idea to distinguish essential expenses from expenses that can be reduced or eliminated if needed.

Expected future expenses are known future costs, such as tax rate increases, minimum wage increases or maintenance needs. Generally, a part of the budget should also be allocated to unexpected future expenses, such as damage to your business caused by fire, flood or other unexpected disasters. Planning for future expenses ensures your business is financially prepared via budget reduction, increases in sales or financial assistance.

Associated expenses are the estimated costs of various initiatives, such as acquiring and training new hires, opening a new store or expanding delivery to a new territory. An accurate estimate of associated expenses helps you properly manage growth and prevents your business from exceeding your cost capabilities. 

As with expected future expenses, understanding how much capital is required to accomplish various growth goals helps you make the right decision about financing options.

3. Statement of financial position (assets and liabilities)

Assets and liabilities are the foundation of your business’s balance sheet and the primary determinants of your business’s net worth. Tracking both allows you to maximize your business’s potential value. 

Small businesses frequently undervalue their assets (such as machinery, property or inventory) and fail to properly account for outstanding bills. Your balance sheet offers a more complete view of your business’s health than a profit-and-loss statement or a cash flow report. 

A profit-and-loss statement shows how the business performed over a specific time period, while a balance sheet shows the financial position of the business on any given day.

4. Cash flow projection

You should be able to predict your cash flow on a monthly, quarterly and annual basis. Projecting cash flow for the full year allows you to get ahead of any financial struggles or challenges. 

It can also help you identify a cash flow problem before it hurts your business. You can set the most appropriate payment terms, such as how much you charge upfront or how many days after invoicing you expect payment.

A cash flow projection gives you a clear look at how much money is expected to be left at the end of each month so you can plan a possible expansion or other investments. It also helps you budget, such as by spending less one month for the anticipated cash needs of another month.

5. Break-even analysis

A break-even analysis evaluates fixed costs relative to the profit earned by each additional unit you produce and sell. This analysis is essential to understanding your business’s revenue and potential costs versus profits of expansion or growth of your output. 

Having your expenses fully fleshed out, as described above, makes your break-even analysis more accurate and useful. A break-even analysis is also the best way to determine your pricing.

In addition, a break-even analysis can tell you how many units you need to sell at various prices to cover your costs. You should aim to set a price that gives you a comfortable margin over your expenses while allowing your business to remain competitive.

6. Operations plan

To run your business as efficiently as possible, craft a detailed overview of your operational needs. Understanding what roles are required for you to operate your business at various volumes of output, how much output or work each employee can handle, and the costs of each stage of your supply chain will aid you in making informed decisions for your business’s growth and efficiency.

It’s important to tightly control expenses, such as payroll or supply chain costs, relative to growth. An operations plan can also make it easier to determine if there is room to optimize your operations or supply chain via automation, new technology or superior supply chain vendors.

For this reason, it is imperative for a business owner to conduct due diligence and become knowledgeable about merchant services before acquiring an account. Once the owner signs a contract, it cannot be changed, unless the business owner breaks the contract and acquires a new account with a new merchant services provider. 

Tips on writing a business financial plan

Business owners should create a financial plan annually to ensure they have a clear and accurate picture of their business’s finances and a realistic view for future growth or expansion. A financial plan helps the business’s leaders make informed decisions about purchases, debt, hiring, expense control and overall operations for the year ahead. 

A business financial plan is essential if a business owner is looking to sell their business, attract investors or enter a partnership with another business. Here are some tips for writing a business financial plan.

Review the previous year’s plan.

It’s a good idea to compare the previous year’s plan against real performance and finances to see how accurate the previous plan and forecast were. That way, you can address any discrepancies or overlooked elements in next year’s plan.

Collaborate with other departments.

A business owner or other individual charged with creating the business financial plan should collaborate with the finance department, human resources department, sales team, operations leader, and those in charge of machinery, vehicles or other significant business tools. 

Each division should provide the necessary data about projections, value and expenses. All of these elements come together to create a comprehensive financial picture of the business.

Use available resources.

The Small Business Administration (SBA) and SCORE, the SBA’s nonprofit partner, are two excellent resources for learning about financial plans. Both can teach you the elements of a comprehensive plan and how best to work with the different departments in your business to collect the necessary information. Many websites, including business.com, and service providers, such as Intuit, offer advice on this matter. 

If you have questions or encounter challenges while creating your business financial plan, seek advice from your accountant or other small business owners in your network. Your city or state has a small business office that you can contact for help.

Did you know? Several small business organizations offer free financial plan templates for small business owners. You can find templates for the financial plan components listed here via SCORE.

Business financial plan templates

Many business organizations offer free information that small business owners can use to create their financial plan. For example, the SBA’s Learning Platform offers a course on how to create a business plan. It also offers worksheets and templates to help you get started. You can seek additional help and more personalized service from your local office.

SCORE is the largest volunteer network of business mentors. It began as a group of retired executives (SCORE stands for “Service Corps of Retired Executives”) but has expanded to include business owners and executives from many industries. Advice is free and available online, and there are SBA district offices in every U.S. state. In addition to participating in group or at-home learning, you can be paired with a mentor for individualized help. 

SCORE offers templates and tips for creating a small business financial plan. SCORE is an excellent resource because it addresses different levels of experience and offers individualized help.

Other templates can be found in Microsoft Office’s template library, QuickBooks’ online resources, Shopify’s blog and other places. You can also ask your accountant for guidance, since many accountants provide financial planning services in addition to their usual tax services.

Diana Wertz contributed to the writing and research in this article.

• A marketing plan identifies your target audience, the most effective channels on which to engage with them, and analytical insights to guide future strategy.
• Businesses need a comprehensive marketing plan to coordinate their campaigns and properly measure their impact.
• Marketing is a cumulative effort, and a unified plan maximizes the value of every campaign toward a cohesive strategy.
• This article is for small business owners looking to build an effective marketing plan that achieves higher engagement and fuels business growth.

Every successful company needs a well-thought-out business plan to outline its course of action. A marketing strategy is one key part of that plan: It spells out critical information, including how a business will distinguish itself from competitors and what the team will aim to achieve.

While marketing plans don’t always produce immediate results, they are still a crucial aspect of a business plan and should be given a considerate amount of attention. A complete and effective marketing strategy can reveal opportunities through new audience segments, changes in pricing strategy or by differentiating the brand from the competition.

Here’s how to create an effective marketing plan for your business. 

How to develop a business marketing plan

A focused marketing plan sets two goals. The first is to maintain engagement and customer loyalty, and the second is to capture market share within a specific audience segment of your target audience.

Your marketing plan outlines the strategies you’ll use to achieve both goals and the specific actions your marketing team will employ, such as the specific outreach campaigns, over which channels they will occur, the required marketing budget and data-driven projections of their success.

Marketing is a science-driven commitment that typically requires months of data to refine campaigns, and an interconnected marketing plan keeps your business committed to its long-term goals. 

All marketing guidelines will circle back to the four P’s: product, price, place and promotion. The following tips are starting points that will ingrain the habit of continually returning to these four P’s.

1. Create an executive summary.

Marketing campaigns should not be considered individual functions. Marketing is the story of your brand as told to customers; like any narrative, its tone and characters should remain consistent. An executive summary details your marketing goals for the next year and helps tie each campaign together. 

When establishing your marketing goals, they should be specific, measurable, attainable, relevant and time-bound – or SMART. These goals should work together to achieve both internal and external harmony, telling a consistent story that informs customers of your exact message while building on its previous chapters. 

For example, you may set a SMART goal to increase your company’s social media traffic by 15% in a 90-day time frame, and plan to achieve this by creating four relevant, informative and high-quality posts per week on each platform, using your company’s brand kit. 

2. Identify your target market.

Before you write a marketing plan, you need to find and understand your niche. Ask yourself who the specific demographic is that you’re targeting. For example, if your business sells 30-minute meals, then those who work traditional 9-to-5 jobs are likely in your market. Study that group of individuals to understand their struggles and learn how your business can solve the problem.

FYI: Targeting your audience can drastically Boost the effectiveness of your marketing efforts and help you avoid wasting resources on fruitless campaigns.

3. Differentiate your brand with inbound marketing.

Inbound marketing utilizes internal tools – such as content marketing, social media activity and search engine optimization (SEO) – to attract a customer’s attention primarily through online communication. Content marketing can include informative blog posts, interviews, podcasts with relevant industry figures or supplementary guides on how to best use your product. For example, if you sell cooking supplies, consider posting several fun recipes around the holidays that your tools can help prepare.

Each of these strategies empowers the others in a loop to achieve greater customer attention. A strong content offering can Boost your search engine ranking, which brings more people to your website and social pages. You can then share those developed content pieces to that wider audience, who will again Boost your search engine rankings. All of this can be done without the expense of a famous endorser or commercial advertising campaign. 

4. Identify competitors that also target your customers.

No matter how original your product or service may be, there is always competition for your target customer’s dollar. Small business personnel seldom take the time to study their competitors in depth or pinpoint companies outside their industry that are just as capable of luring customers away. Knowing who your competitors are, their core competitive advantages, and how they might respond to your offerings – like price cuts or increased communication – helps you devise strategies to combat such losses. 

By seeking out these competitors, you can develop ways to differentiate your business by providing consumers with the things they may be lacking from your competition. Observe how your competitors operate to find ways in which you can stand out and steer your target audience toward your business. 

Did you know? According to SmallBizGenius, 19% of small businesses fail because of their competitors.

5. State your brand position for your target customers.

Ultimately, your brand – and what it symbolizes for customers – is your strongest advantage. You should be able to write a simple declarative sentence of how you will meet customer needs and beat the competition. The best positioning statements focus on solving a problem for the customer in a way that promotes the best value.

6. Budget the plan. 

When implementing a strategy, consider the marketing budget you will allot. Marketing requires money for various reasons, including paid promotions, marketing software, events and outsourced costs. Consider your budget when creating the plan so that there is money available to spend on marketing tactics to achieve your goals. 

While drafting the plan and evaluating your course of action, note the estimated cost, assets, and time required to achieve the stated goals; this will help when it comes time to set the real calculated budget. Any goals that you create should be realistically achievable within the budget you have set. 

Key takeaway: When developing your marketing plan, you should know why a customer would use your product, differentiate your brand from competitors, and audit your product offering and message to ensure consistency.

Channels to include in your marketing plan

Once you know the elements of your plan, the next step is to develop the blueprint of how you will reach your target customers. Aside from traditional print and broadcast media, here are three digital marketing channels that many business owners utilize.

Social media

Social media is an essential part of businesses’ marketing plans, because every type of customer is on some type of platform – such as Facebook, Twitter or LinkedIn. You may feel overwhelmed at the possibilities, but focus on the sites that can benefit your business the most.

Brett Farmiloe, founder of internet marketing company Markitors, advised companies starting out in social media to get to know their customers and the platforms they use.

“Figure out where your customers are spending their time, and set up shop on those platforms,” he told Business News Daily. “Develop a content strategy that can be executed internally, [and then] execute your strategy by posting branded content on your selected platforms.”

Email

Though email marketing is not as new as social media marketing, it is an effective and popular choice for small business owners. Companies can implement email marketing techniques in many ways, including newsletters, promotional campaigns and transactional emails. For instance, Mailchimp and Constant Contact help companies manage their email drip campaigns.

Farmiloe added to set your email marketing efforts apart from the others by segmenting your markets.

“Not all subscribers want to receive the same blast,” he said. “Smart email marketers take the time to segment subscribers at the outset, and then continue to segment based on subscriber activity. Through segmentation, companies reduce the amount of unsubscribes, increase open rates and, most importantly, increase the amount of actions taken from an email send.”

Mobile

The popularity of smartphones and tablets has changed how companies target consumers. Since people have these devices with them nearly all the time, companies are looking to implement strategies that reach customers on their gadgets.   

“Mobile marketing is interruptive,” Farmiloe said. “It’s because of this power that a marketer has to let the consumer determine how and when to receive marketing material. That’s why almost every app comes with the option to turn notifications on or off. The consumer has to hold the power with mobile marketing.”

Key takeaway: Use digital marketing channels – such as social media, email and mobile – to reach customers, but only after researching each channel in depth and developing a strategy to capture consumers’ interest.

Monitoring results

Well-defined budgets, goals and action items – with appropriate personnel assigned to each – can make your marketing plan a reality. Think about how much you’re willing to spend, the outcomes you expect and the necessary tasks to achieve those outcomes.

Analytical tools that track customer behavior and engagement rates can serve as a helpful guide for your marketing strategy. Unlike billboards or commercials, digital channels allow you to assess each step of the customer journey and gain insights on the individual patterns and intent of prospects. Intention can soon develop into prediction, empowering your marketing team to develop campaigns that consistently reach target audiences at the right time. 

You can find more tips for measuring your marketing ROI here.

Jordan Beier and Adryan Corcione contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

For many small business owners, maintaining positive cash flow and a stable balance sheet can be an ongoing battle that consumes virtually all of their time. Even retirement often seems like a distant speck on the horizon, let alone plans to hand over the business. However, establishing a sound business succession plan is beneficial for most business owners and can be absolutely necessary for some.

For business owners that are at or near retirement, the issue of succession cannot be ignored. In this article, we will take you through the steps you'll want to take to create a successful succession plan.

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ChatGPT is the artificial intelligence (AI) chatbot that took the tech world by storm. And we’re not done talking about it or learning what it can do. The most recent ChatGPT feats consist of passing law and business school exams. Although ChatGPT is still just an average student with a lot to learn before becoming a straight-A student, this is obviously an astounding development.

The bot scared Google to the point where the internet search giant has shifted resources to have ChatGPT-like products ready for a spring demo.

Not only that, but Google’s founders are back to help with these efforts, as ChatGPT could become a massive threat to Google Search. Of note, Google is already starting to show off AI solutions of its own, like the new Google AI that can generate music from text. But online search is Google’s bread and butter. That’s how it makes billions of dollars from ads.

ChatGPT isn’t a reliable Google Search replacement right now, just as it’s not a straight-A student. But the AI tool is showing progress.

Professors at the University of Minnesota Law School tested ChatGPT on exams from four courses. The bot had to complete 95 multiple-choice questions and 12 essay questions. ChatGPT performed on average at the level of a C+ student. It achieved a “low but passing grade in all four courses,” the professors wrote in a study called ChatGPT Goes to Law School.

Similarly, professors at Wharton tested ChatGPT with a business management course exam. The chatbot scored better on this exam, getting a B grade.

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Wharton business professor Christian Terwiesch said ChatGPT did “an amazing job” dealing with basic operations management and process-analysis questions. But it struggled with more advanced ones and made surprising math mistakes. Wharton has a paper on the experiment: Would Chat GPT3 Get a Wharton MBA?

The emergence of ChatGPT made some schools ban the chatbot. Public schools in New York City and Seattle have already banned it, per CNN. Students and teachers can’t use ChatGPT on school networks or devices.

The worry is that ChatGPT could offer students new ways to cheat on exams and papers. The law and business school test experiments show that ChatGPT has what it takes to pass exams with average grades or better.

But the chatbot could be helpful to students outside of exams, too. “ChatGPT struggled with the most classic components of law school exams, such as spotting potential legal issues and deep analysis applying legal rules to the facts of a case,” Jon Choi told CNN. “But ChatGPT could be very helpful at producing a first draft that a student could then refine.”

Choi is a professor at the University of Minnesota. He also argued that human-AI collaboration might become the norm in the future of law. Of note, ChatGPT can already write legislation.

Terwiesch told CNN that the chatbot was “remarkably good” at modifying its answers as it reacted to human hints. This indicates ChatGPT could assist humans in various ways, aside from just during exams. The professor said bans are needed to ensure students can’t access the bot during exams. But Terwiesch acknowledged that there’s a place for ChatGPT in the classroom of the future.

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When you’re ready to craft your business plan, it can help immensely to have business planning software like Business Sorter. The cloud-based app makes it easy for you to start a plan and kicks off your business planning with a SWOT analysis (strengths, weaknesses, opportunities, threats). Then, you can follow a guide to build your plan with each section divided by areas. After which, you can choose cards to help steer you toward the right objectives and goals for your business.

You won’t find roadmapping tools in Business Sorter, but the card system keeps you on track (and even gives you goals you may not have considered). As you prioritize goals, you’ll find steps you need to take that guide you to completing your business plan. Every plan allows multiple users, so you can collaborate on what takes precedence.

Plans start at $10 per month, billed annually, and allows you to have three users on board. For 10 users, the Medium plan costs $30 per month, billed annually, and if you need 30 users, the Large Team plan will run you $80 per month, billed annually. It’s one of the most affordable business planning apps for teams.

Who should use it:

Although Business Sorter doesn’t offer a messaging tool, it’s still one of the best options for teams. You don’t have to pay per person, but you can add multiple people to the account to work on creating business plans.

Lisa McQuerrey has been a business writer since 1987. In 1994, she launched a full-service marketing and communications firm. McQuerrey's work has garnered awards from the U.S. Small Business Administration, the International Association of Business Communicators and the Associated Press. She is also the author of several nonfiction trade publications, and, in 2012, had her first young-adult novel published by Glass Page Books.

CNN  — 

ChatGPT is smart enough to pass prestigious graduate-level exams – though not with particularly high marks.

The powerful new AI chatbot tool recently passed law exams in four courses at the University of Minnesota and another exam at University of Pennsylvania’s Wharton School of Business, according to professors at the schools.

To test how well ChatGPT could generate answers on exams for the four courses, professors at the University of Minnesota Law School recently graded the tests blindly. After completing 95 multiple choice questions and 12 essay questions, the bot performed on average at the level of a C+ student, achieving a low but passing grade in all four courses.

ChatGPT fared better during a business management course exam at Wharton, where it earned a B to B- grade. In a paper detailing the performance, Christian Terwiesch, a Wharton business professor, said ChatGPT did “an amazing job” at answering basic operations management and process-analysis questions but struggled with more advanced prompts and made “surprising mistakes” with basic math.

“These mistakes can be massive in magnitude,” he wrote.

The test results come as a growing number of schools and teachers express concerns about the immediate impact of ChatGPT on students and their ability to cheat on assignments. Some educators are now moving with remarkable speed to rethink their assignments in response to ChatGPT, even as it remains unclear how widespread use is of the tool among students and how harmful it could really be to learning.

Since it was made available in late November, ChatGPT has been used to generate original essays, stories and song lyrics in response to user prompts. It has drafted research paper abstracts that fooled some scientists. Some CEOs have even used it to write emails or do accounting work.

ChatGPT is trained on vast amounts of online data in order to generate responses to user prompts. While it has gained traction among users, it has also raised some concerns, including about inaccuracies and its potential to perpetuate biases and spread misinformation.

Jon Choi, one of the University of Minnesota law professors, told CNN the goal of the tests was to explore ChatGPT’s potential to assist lawyers in their practice and to help students in exams, whether or not it’s permitted by their professors, because the questions often mimic the writing lawyers do in real life.

“ChatGPT struggled with the most classic components of law school exams, such as spotting potential legal issues and deep analysis applying legal rules to the facts of a case,” Choi said. “But ChatGPT could be very helpful at producing a first draft that a student could then refine.”

He argues human-AI collaboration is the most promising use case for ChatGPT and similar technology.

“My strong hunch is that AI assistants will become standard tools for lawyers in the near future, and law schools should prepare their students for that eventuality,” he said. “Of course, if law professors want to continue to test simple recall of legal rules and doctrines, they’ll need to put restrictions in place like banning the internet during exams to enforce that.”

Likewise, Wharton’s Terwiesch found the chatbot was “remarkably good” at modifying its answers in response to human hints, such as reworking answers after pointing out an error, suggesting the potential for people to work together with AI.

In the short-term, however, discomfort remains with whether and how students should use ChatGPT. Public schools in New York City and Seattle, for example, have already banned students and teachers from using ChatGPT on the district’s networks and devices.

Considering ChatGPT performed above average on his exam, Terwiesch told CNN he agrees restrictions should be put in place for students while they’re taking tests.

“Bans are needed,” he said. “After all, when you supply a medical doctor a degree, you want them to know medicine, not how to use a bot. The same holds for other skill certification, including law and business.”

But Terwiesch believes this technology still ultimately has a place in the classroom. “If all we end up with is the same educational system as before, we have wasted an amazing opportunity that comes with ChatGPT,” he said.