Do I need a business plan? Strategic plan? Startup plan? Operational plan? Annual plan? Feasibilty plan? It’s a common problem, a common question, and one of those vocabulary detours where everybody assigns their own meaning. Do a web search and you’ll find a bewildering crowd of experts and expert opinions, using overlapping phrases, and overlapping definitions. Here’s what I think really matters: form follows function. Regardless of which label you use, do a plan that serves your specific business needs.
So let’s put that into a real business context. What does that mean to you? For example, if you’re developing a plan for internal use only, you may not need to include all of the background details that you and your partners or employees already know. On the other hand, it could be essential to include specific deadlines or milestones, and the budgets allotted for meeting them, so the whole team is up to speed. Similarly, a description of your management team will be very important in a business plan that you present to investors, while your company’s financial history and forecasting is the most important information for a meeting at the bank.
And for the issue of what to call it, dealing with those multiple labels people apply to the same thing or overlapping things, one special case we all have to deal with is when somebody else is asking your about a plan, or asking you to produce a plan. In that special case, what I recommend is that you not be shy about asking: “what specifically do you mean by that? Do you have some examples I can see?” Because then you’ll be able to determine what that person means by the term business plan, strategic plan, or whatever.
Beyond that, maybe the following, my favorite definitions, might help: Let’s take a look at the types of business plans, and their differences in my view. And that means these three general areas:
- The Most Commonly Used Business Plan
- The Streamlined Version for Startups
- Internal Plans and Their Multiple Uses
The most standard business plan covers topics including the company overview, the product or service you are selling, the target market and strategy of your company, your implementation milestones and goals, management team, and financial forecasting and analysis.
The financial analysis includes the company’s projected sales, profit and loss statement, balance sheet, cash flow statement, and potentially a few other tables depending on its intended use. For example, a prospective investor might ask to see the details of your personnel plan or your market analysis.
The cash flow statement is usually considered to be the most important part of your financial planning and is a no-brainer for inclusion in the plan. Profitable or not, a business’s plan must show that it has enough cash to remain operational.
A standard business plan will start with an executive summary describing the key points of your plan, and end with appendices showing monthly projections for the first year. Though it is presented at the beginning of the plan, a good tip is to write your executive summary last. This way, you’ve been through the business plan writing process already and you can confidently select the highlights of your plan to showcase on the first page.
This is the standard outline that banks and investors will expect to see.
A startup plan, also called a feasibility plan, is a very simple business plan that typically includes the following sections: an executive summary, a company overview, a mission statement, and a market analysis. Even if you don’t have the exact numbers yet, it’s always a smart idea to include a preliminary analysis of costs, pricing, and probable expenses.
You can use this kind of a business plan to discuss your options with potential partners and associates. This kind of no-frills plan is good for deciding whether or not to proceed with an idea, to help gauge whether this is a business worth pursuing. If you do decide to go into business, over time you can always go back to your business plan and make necessary edits and additions. As your business grows, you can flesh sections out and add details.
Internal plans will reflect the needs of the members of your company. Since the purpose of an internal plan is specific to the people directly involved with the company, it will most likely be shorter and more concise than a fully detailed standard plan that you’d take to the bank. Internal plans are not intended for banks, outside investors, or other third parties.
Types of Internal Plans:
An operations plan, also called an annual plan, is a type of internal plan. An operations plan includes specific implementation milestones, project deadlines, and responsibilities of team members and managers. This is the plan used for staying on track to meet your goals as a business. Planning for your goals as a business allows your company to assign priorities, focus on results and track your progress. Your operations plan covers the inner workings of your business. It outlines the specifics of who should be doing what, and when they should be doing it.
Of course, cash flow figures prominently here as well. For example, your milestones will need to have sufficient funding for their implementation, and you’ll need to track your progress so you know how much you’re spending.
A growth or expansion plan focuses on a specific area of a business, or a subset of the business. For example, a plan for the creation of a new product is a growth plan. These plans could be internal plans or not, depending on whether they are being linked to loan applications or new investment. An expansion plan requiring new outside investment would include full company descriptions and background on the management team, just the same as a standard plan for investors would. Loan applications would require this much detail as well.
However, an internal plan used to set up the steps for growth or expansion that is funded internally could skip these descriptions. It might not be necessary to include detailed financial projections for the company overall, but it should at least include detailed forecasts of sales and expenses for the new venture or product.
A strategic plan is another kind of internal plan. A strategic plan incorporates the financial information and milestones of an operations plan, but focuses more on setting company-wide priorities. As you build the strategy for your company and decide how to implement it, you will want to examine your strengths and weaknesses as a business. What does your company do well? As your company grows, you want to play to your strengths. Strategy is often a matter of selecting the right opportunities. Resources should be funneled strategically to the areas where they will provide the biggest overall benefits.
Once you have an idea of your strategy, you must have a plan for implementing it. This is where the milestones portion of the plan becomes key. To effectively execute your strategies, it’s critical to assign responsibilities and have a schedule for following through. The implementation tactics you use will actively move you in the right direction towards achieving your goals.
Resources for Moving Forward
Reading about the different types of business plans is a good jumping-off point in the process of creating a business plan. If you’re looking for more information about business plans and how to write them, you’ll find our business planning videos and sample business plan library to be helpful resources.