What Type of Business Plan Do You Need?
Two common misconceptions about business plans are that a business needs just one, and that there is one type of business plan that suits all businesses. In reality, companies often need new or amended business plans as they evolve, and the right kind of business plan for any company depends on the its purpose.
What type of business plan do you need? This guide, which matches different types of business plans to different purposes, will help you choose.
To Test Your Business Idea
Writing a business plan is a whole lot less trouble and expense than just plunging in and starting whatever new business comes to mind, especially when you're not sure whether your business idea is going to be a money maker.
This doesn't necessarily need to be a lengthy process. You can, of course, test your business idea by working through a full-scale business plan. But there are also ways to draft a quick-start plan by answering a few key questions about your concept, market, and potential obstacles.
People often cycle through several business ideas before they hit on the one that they feel will give them the best chance of success. Once your business idea passes the quick-start test, you can be more confident that the time and energy you invest in writing a full-scale business plan won't be wasted.
To Serve as a Blueprint for Your Business
When you're starting a business, it's important to cross all the T's—and to know where all the T's are. That’s where the full-scale business plan comes in. In the process of writing a detailed plan, you'll work through everything from marketing and competitive analysis to your operations and financial plans.
The full-scale business plan is the most suitable for people who need to work through all the details to get a business up and running. Its purpose is to serve as a startup guide and a plan for the first years of your business's life. Once you've worked through writing this type of business plan, you'll know all about those T's and what to do with them.
To Get a Business Loan or Grant
The same full-scale business plan you use as a blueprint for your business is ideal for seeking business loans or grants, too. This is the type of business plan that traditional lenders, whether they be private lenders or bank managers, want to see.
When you're writing a business plan to attempt to secure a business loan or grant, be sure you pay particular attention to two areas of the business plan: the financial plan section, where you provide detailed financial statements and a financial statement analysis, and the executive summary, which summarizes the key elements of your entire business plan. All the other parts of the business plan are essential, too, but these are the two sections on which lenders will focus.
To Attract Investors or Partners
Investors and potential partners will also be particularly interested in your financial statements and projections. But their overriding question when they're examining your business plan will be, "What's in it for me?" Every aspect of your business plan has to be directed toward answering that question.
You can do this with the traditional business plan, of course, as long as you keep every section of the plan focused on your audience. Beyond the financials, potential investors and partners will want to see you've done thorough work in planning your management, marketing, and products.
To Guide and Grow Your Business
Whether your business plan is a traditional document, a website, or a collection of handwritten documents just for you, don't forget that the job of the business plan isn't done when you start your business. Once your new business is on its feet, the business plan is the perfect tool for planning and managing your business. Keep a copy of your business plan on hand to make it easier to amend or add to as you create new plans and evaluate old ones. At some point, you might revise the marketing plan. At another time, you might revise the operations plan.
It's often too easy to put off reviewing your business plan as you get immersed in putting out the fires of the day. But your business plan should be the compass to keep your business on course and ready to face whatever new challenges or opportunities arise. Refer back to it regularly as your business grows.
The Right Business Plan Saves Time and Money
It's a truism that every business needs a business plan. But that business plan's form and content should depend on the business plan's purpose. Ask yourself why you're writing a business plan before you write one, and tailor your business plan to your mission. Otherwise, you may end up spending your time and money on writing a business plan that doesn't do what you want it to do.