Business plans are not just for new businesses and funding requests. And they don’t have to be lengthy, excruciatingly-detailed documents.
Many businesspeople think that there are only two times when they need to create a business plan: at the formative stages of a new company and prior to requesting financing.
But your business plan shouldn’t be something you polish at only those times. It should be an ever-evolving document that you revisit and modify when your company, for example:
- Launches a new product line or service offering,
- Considers expanding,
- Needs to be valued,
- Brings in new management or takes on a partner, or
- Establishes new goals or otherwise changes direction.
“In its simplest form, a business plan is a guide,” writes Tim Berry, widely-regarded as the country’s foremost expert on business plans; his Business Plan Pro software and the cloud-based LivePlan are used by hundreds of thousands of businesses globally. “It’s a roadmap for your business that outlines goals and details how you plan to achieve those goals.”
A Trio of Formats
Just as navigational roadmaps can be as small as your smartphone screen or large enough to take up significant wall space, there’s no one-size-fits-all formula for a business plan.
There is a generally-accepted set of documents and financial spreadsheets that potential investors and financial institutions expect to see. This is what most companies consider a business plan to be.
But you should actually have three different types of business plans. Berry describes these variations:
The one-page business plan. This may actually be the hardest type to write, because you must describe your company and its mission very succinctly (like any professional writer will tell you, it’s easier to write long documents than short ones). What will your company produce, and how will you succeed at turning your vision into a successful entity? Who will do the work, and how will you measure success?
You might write this document early on, as you’re in the initial planning stages, to get your core ideas on paper. You could also create a professional version to use as an introduction to your company.
The internal business plan. There are some sections of a full-blown business plan that you don’t need – company history, management team descriptions, etc. — if you just want a document that you can use internally. This type of business plan, which doesn’t require the polish that your external plans will require, would focus on areas like strategy, milestones, metrics, budgets and forecasts. It can help management in two primary areas: making decisions and evaluating the company’s fulfillment of its objectives.
The external business plan. This is the big one, the formal business plan that you’ll show to potential investors and loan officers. It builds on the content of the internal plan, and typically follows a formula that includes sections like:
- Executive Summary,
- Products and/or services,
- Management team,
- Marketing and sales plans
- Milestones and metrics, and
- Financial plan (this section will be very number-heavy, including neatly-formatted data like your Profit & Loss Statement, Cash Flow Statement and multi-year projections).
Your external business plan needs to look great when you print it out, and it shouldn’t run dozens of pages. Your audience will be keenly interested in all of the details, but you want to help them absorb the critical information quickly. Keep your paragraphs brief, and use simple language. Don’t make spelling errors or use poor grammar. Break up the text with subheads, bulleted lists, etc. to enhance readability. Be very specific and to the point, optimistic but realistic.
A Work in Progress
Don’t let dust collect on any of these three types of business plans. You should be constantly reviewing them, updating the numbers and evaluating your progress. You might set up a regularly-scheduled meeting with key employees for this purpose.
As Berry puts it, “A real business plan is always wrong — hence the regular review and revisions — and never done — because the process of review and revise is vital,” he writes. “Your business plan is the most important management tool you have.”