A business plan is a business strategy tool, often used for a start-up business. However, any small business can use a business plan to evaluate or grow its operation. Like a household budget or a family emergency plan, the business plan is used to define a set of criteria and lay out a plan for achieving goals.
Six types of business plans are commonly named: start-up, feasibility, growth, operations, internal, and strategic. However, I’ve organized business plans differently, based on whether you want to create new business, products, or services; need to meet the challenges of running an existing business; or are ready to analyze and grow your business.
Listed below are seven types of business plans and when to use them during the course of managing your small business.
Business plans that help you start a new business, product, or service
- Feasibility of a new business, product, or service: Explores the possibility of success for a new product or service, including target demographics (who will purchase the service or product), required capital, projected profitability, and recommendations for going forward.
- Start-Up of a new business, product, or service: Details the requirements to start a new business or add a completely new product line or service to an existing, profitable business. For example, you sell t-shirts and plan to add athletic shoes. Or, you repair printers and want to repair other peripherals and computers. The start-up plan especially includes a description of the new business, product, or service, a competitive analysis and marketing strategy, sales forecast, management qualifications and key employee skills (e.g. supply contacts or repair skills), financial analysis (including capital needs, projected income, cash flow, and project profit), and how any loans will be repaid.
Business plans that help you run your company
- Operations: Details the tangible aspects of running a business. The operations plan may include details such as the responsibilities of managers and the employees in their departments, milestones, dates, goals, and deadlines. It can be used to take a snapshot of the company performance, evaluate the health of the company, and set performance goals.
- Growth, by extending a product or service: Details the requirements for adding elements to an existing product line or service in a profitable company. For example, you sell logo t-shirts and plan to add the ability to offer customize graphics on t-shirts. Or, you repair HP printers and plan to add other brand name printers to your repair services. A growth plan will include elements of the feasibility, start-up, and operations plans, plus a description of the current market for the product or service, including market size and demographics, and SWOT analysis (strengths, weaknesses, opportunities, threats).
- Special project: Falls outside of normal business operations and is not a new product or service. For example, you want to launch a new holiday marketing campaign or establish a new incentive program for sales employees. A special project plan might include hiring needs, operating budget, financial projections, or any other applicable elements from other types of plans.
Business plans that help you gain more control over where your business is headed
- Strategy: Defines the company philosophy, outlines opportunities, sets priorities, and serves as an inspirational tool to focus the work of each employee on the company’s goals. While the operations plan details goals and deadlines, the strategic plan presents the big picture view. The strategic plan often includes the company vision, mission statement, key objectives, and critical success factors. If your existing company is not profitable or struggling, this is a good plan with which to begin, followed by an operations plan.
- Growth, through market expansion: Details the requirements for expanding the sales area for an existing product or service in a profitable company. This could include a new geographical area, a new vertical market, or adding an online store to a brick-and-mortar operation. A growth plan will include elements of the feasibility, start-up, and operations plans, plus a description of the new sales area, including market size and demographics, and SWOT analysis (strengths, weaknesses, opportunities, threats).
Internal and external business plans
For each type of plan above, the audience may be internal or external. How much detail you include in the business plan depends on this intended audience. When the plan is intended to be used as an internal strategy and planning tool by the principles and managers of a company, then basic information about company history and other commonly known details are often unnecessary.
However, when a business plan is prepared for an external audience, such as a loan officer at a bank or a venture capitalist, then information such as the company background, detailed financial data, and other information specific to the particular business plan needs to be comprehensive, meticulous, and professionally presented.