What Business Plan Type Is Best for Me?

Article by:
Tim Berry, Guest Blogger
SBA.gov

Shakespeare wrote, “A rose by any other name would smell as sweet.” I say a plan by any other name is still a plan; but many different things get labeled "business plans." 

You'll see that label on:

  • Strategic plans
  • Annual plans
  • Operational plans
  • Feasibility plans
  • Business plans for startups seeking investment money   

And of course I use the term “lean business plan,” which is what I say all business owners need. No wonder it's confusing! Here are a few tips to help you sort it out.

Understanding what you need from your business plan will help you select the right type one for your company.

Understanding what you need from your business plan will help you select the right type one for your company.

1. Start At the Beginning

All business plans begin with this basic principle: form follows function. What do you want from your business plan? The answers to that question determine what kind of plan you need.

2. Think Lean

At its heart, every business needs a lean business plan. It’s faster, easier, and much more useful than the mythological big business plan. It’s what every business owner deserves as a tool for optimizing the business. The Lean business plan:

  • Leads off with bullet points for strategy. This is for your own business eyes only, not for public consumption. It's not explanations, rationales, or supporting documents. It's a simple list of reminders about focus: your target market, your product, and your business's identity. Sometimes it also includes a breakdown of what you'll call "success" — but it's quick and dirty, in list form only
  • Develops the right tactics. You can have a great strategy, but you'll never make it happen without tactics. These are also bullet points featuring what you've decided are the key points of your marketing, product, financial, and recruitment plans. These are for your team's eyes only, again … not for outsiders. And they'll cover pricing, channels, social media, launch dates, products, services, features, and so forth
  • Includes concrete specifics. This is where you list your assumptions, milestones, tasks, deadlines, responsibilities, and performance expectations. The key here? Measurable, trackable, and accountable
  • And finally, pulls everything together in budgets. These are concise, too: your sales forecast, spending budget, and cash flow

With this lean business planning (link is external) as a jumping-off point, you continue a regular process of review and revision to keep it fresh. Even if your business doesn't need an elaborate plan, it'll benefit from this framework.  Review and revise as needed, at least once a month.

3. Those Other Types of Plans You May Need

Again, because terminology tends to "bleed" from one type to another, don't rely on labels. Think of the function of the plan and you'll be able to narrow down the type that will best serve your business needs. Here are a few more common scenarios.

Plans for Banks, Investors, Buyers, and Partners

When you're presenting a business plan to a bank, angels, or other investors, your latest revised "lean" plan is the first draft. Once again, remember, that plan is just for management; you'll need to dress it up to include the additional content that outsiders will want and need. Among these items are:

  • Summaries and Explanations: make sure your executive summary is strong; that's all some of your outside target audience will read. Keep it short, and make sure it fits the need.  If you're immersed in a selling-the-idea or selling-the-potential mindset in the written plan, your summary should include key highlights that will pique those readers' interest.  Your lean plan also won't include detailed explanations of your strategy, your company, your market, or your product. It has just summary tactics for marketing plan, product plan, financial plan, and management plan. Think of your readers – outsiders looking in – and help them understand the business. Achieve the specific goal of this dressed-up business plan
  • Formal Financial Projections: while the lean plan might be fine with just sales forecast, expense budget, and cash management, a formal traditional business plan has to include formal financial projections that respect finance and accounting standards and include Profit and Loss, Cash Flow, and a Balance Sheet.  Banks will want to see projections of key ratios as well, and investors will like a Use of Funds table and sometimes a Break-even Analysis.

Startup Plans

Startup plans should be lean business plans with the simple addition of estimating startup costs and financing tactics. They become plans for investors or banks only when the startup looks for financing from investors or banks.

Operations or Annual Plans

Operations plans are lean business plans by another name – and annual plans should be lean business plans narrowed down to just the next year. 

Growth or Expansion Plans

A growth or expansion plan tends to be narrower, with a focus on a specific area or subset of a given business — for example, plans to develop new products. These plans can be strictly internal, or they can be linked to loan or investment applications.  And they should adhere to the principles of the lean business plan.

Growth or expansion that's being funded internally needs only internal plans, but don't skimp on the details. Know what you're funding before you fund it: take the time to estimate both potential sales and expenses for the new product.

On the other hand, if you're pitching prospective investors, whether banks or individuals, approach a growth plan as if you're pitching the business from scratch. You'll need just as much detail in terms of company and product descriptions, management team backgrounds, and solid financial data.

Strategic Plans

Strategic plans tend to be a subset of internal plans. They focus on strategy and tactics, but skip the detailed financial data and milestones of an operations plan, with a focus on company-wide priorities. In that context, one key to setting strategy for your company is carefully examining your strengths and weaknesses as a business. Knowing what your company does well enables you to play to your strengths and select the right opportunities to optimize them.  That way, you're funneling resources efficiently, to the areas where they provide the best payoff.

Conclusion: Do Only What You Need

With all the different meanings of “business plan,” I recommend you use good planning to help you run your business as well as possible. Keep it lean. Don’t make it a document for outsiders unless you have a business reason to show a business plan to outsiders. Keep it fresh. Use it to get what you want from your business.

Join SBA Administrator Maria Contreras-Sweet in the 'Startup in a Day' Initiative

The Startup in a Day initiative aims to make it easier for entrepreneurs to start a business by reducing the amount of time it takes to register and apply for permits and licenses on the local level.

The SBA is conducting two prize competitions for U.S. cities and Native American communities. Both competitions will award prizes to support the development, implementation, and improvement of online tools that will let entrepreneurs learn about the business startup process in their area, including how to register and apply for all required local licenses and permits, in one day or less.

For more information, visit SBA.gov/Startup, or email the Startup a Day team at startup@sba.gov.