Key Components of a Business Plan
Every existing and aspiring business owner will tell you that they have abusiness plan. However,...
Oftentimes business owners don’t think they need a strategic plan because they have a business plan. This is especially true when it comes to small business owners. Often small businesses wrongly believe that strategic plans are just something big businesses use. They will think because they have their financial and operations plans that they’re good. But that could not be further than the truth. However even with a solid business plan in place, that still doesn’t tell anyone anything about the direction the business intends to go and more importantly, how it plans to get there. A business plan is a statement of what is. A strategic plan is a statement of what will be and how an organization intends to get there.
This article highlights the key differences between a strategic plan and a business plan and why to really grow, a smart business, no matter their size, has BOTH.
Simply put, a strategic plan is an action plan for your business. Think of it as a cross between a hopped up to do list and that map from Dora the Explorer, complete with a backpack that sings and has a lot of resources. It contains the goals, tasks required to achieve said goals, milestones, and all the things required to help your business evolve. A strategic plan typically looks ahead in a 3-5 year timeframe, with specific goals lined up annually and quarterly.
A business’s mission statement defines its ever important why. Your mission should include what an organization is and why it exists. It should also, at a minimum, clearly state who your primary market is, how you serve this market (think goods and services), and nod to the geographical location in which you are serving.
Your vision state should communicate your ideal long-term business goals and reflect your mission as well. Having a well thought out vision statement will empower your organization to have a clear focus and be confident about the direction in which it is heading.
Your mission and vision should shape your business goals and determine what is the best path by which to reach them. They will set the target at which all your goals will be aimed and be the determining factors in what needs to be done, by whom, and just how these goals will be achieved.
With your mission, vision, and goals in place, your organization will also need to set its core values, its guiding principles. These principles will help your organization function better as a team as they will shape your organizational culture. At MPWRSource, our core values are industriousness, strategy, authenticity, relationships, and having growth mindsets. We also like coffee and carbs.
SWOT stands for strengths, weaknesses, opportunities, and threat analysis. An effective SWOT analysis will help your company understand where exactly it is now. It will help you understand where you excel and where you are best poised to grow.
Your action plan, sometimes called operational tactics or a tactical plan, is a further breakdown of your large-scale strategy into specific steps for implementation. Whereas your mission and values as why, your action plan describes WHAT and HOW. Oftentimes it will break down your goals into SMART goals that can be planned out yearly, quarterly, monthly, weekly, and even daily. It will help you create milestones so that you can track your success and let you know when you need to pivot.
The resources portion of the strategic planning process looks the where and how resources will be acquired and allotted in order to meet your goals and also sets who will be responsible for what part.
In order to make sure that your strategic plan reaches it goals, it will also analyze the metrics set to measure how your strategic objectives are achieved. In order to properly measure your progress, the goals set should be SMART (specific, measurable, achievable, realistic, and time-bound). When these metrics are measured, it will also help your organization pivot when it needs to.
A business plan is a written document that describes in detail how a business defines its objectives and how it is going to go about achieving its objectives. They are important documents because they are how startups attract investments and business loans from financial institutions prior to having established a proven track record.
An executive summary should be a concise overview of the entire business plan.
The business overview is a general description of the business. It should include the legal structure of the business, how it came to be, the type of business it will be (for example, what goods or services it will offer), as well as the location and channels through which the business will be conducted.
The operations plan should outline how the business intends to functions, including physical setup, processes, and the parties responsible for each task.
Your market analysis should be a deep dive into the selected market and industry. It includes a lot of research and other graphs, charts, and spreadsheets.
This section should almost be like a menu wherein you include your products manufactured or sold, or the services offered. Each product and/or service should have a brief description.
This section should answer the question, “How will the products or services be sold?” It should also include information on your target market as well as your pricing and sales strategies.
Market research should be conducted to analyze the strengths and weaknesses of direct and indirect competitors.
This section includes bios of the entire management team.
Your financial plan should include the following:
Your projections section of your business plan should include projected incomes statements, projected balance sheets, and revenue projections for up to 5 years with the projections for the first year being the most detailed.
Important supporting documents to include in your business plan are:
The biggest difference between a strategic plan and a business plan is its intended purpose. While entrepreneurs use a business plan to start a company, existing companies use a strategic plan to grow their business. There are varying benefits that accompany each plan as well..png?width=705&name=BENEFITS%20OF%20STRATEGIC%20%26%20BUSINESS%20PLANS%20(1).png)
One of the primary benefits of a strategic plan is that it helps align all members of the organization to a common goal through which it can increase profitability. It also allows for greater flexibility in fund allocation for things like hiring new people or purchasing new technology. It can also help an organization increase its market share.
A well-crafted business plan is a must for securing funding for a new business. Furthermore, it helps startups compile all of their brilliant ideas into one document so that the company can succeed and be sustainable.
Established organizations use a strategic plan to provide them with a clear direction for future growth. It empowers them by highlighting opportunities for development and change and helps them to determine where best to allocate valuable resources like their budget and time, in order to maximize their return on investment. It also helps establish operating systems and provide the organization with a competitive advantage over similar companies without well-defined goals and strategy.
Startups use their business plan to build a successful business. It is used to identify if the business idea is marketable and just how the idea can be funded and brought forth into action. It is often the foundation upon which not only the business is built, but the strategic plan is built upon as well.
Both the business plan and strategic plan operate best when reviewed on a regular basis. Neither is a one-and-done document, but rather, a plan that evolves over time. When a business plan is changed, it will also require a change to the strategic plan.
Every existing and aspiring business owner will tell you that they have abusiness plan. However,...
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