Two common misconceptions about business plans are that a business only ever needs one and that there is one type of business plan that suits all businesses. The truth is that businesses often need new or amended business plans as they evolve and that the type of business plan they need depends upon their 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.
Different Purposes for Writing Business Plans
Why are you writing a business plan?
- To find out if your business idea is any good.
This may well be the main reason most people write business plans. Writing a business plan is a whole lot less trouble and expense than just plunging in and starting whatever new business you are thinking of starting - especially when you're not sure that your business idea is going to be a money maker.
You can, of course, test your business idea by working through a full-scale business plan such as the Writing a Business Plan series that I introduce in the Business Plan Outline, but there is a faster way. With my Quick-Start Business Plan, all you need to do to find out if your business idea is feasible is answer five questions and do a bit of preliminary research.
Starting with the Quick-Start Business Plan can be a real time-saver because people so 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 Business Plan 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 developing your business.
When you're starting a business, it's important to cross all the 'Ts' - and to know where all the 'Ts' are. That’s where the full-scale business plan that you see in the Business Plan Outline comes in.
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 start-up 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 'Ts' and what to do with them.
- To get a business loan or grant from a traditional institution or lender.
The full-scale business plan that I present in the Business Plan Outline is the one you want to use when you're trying to get 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 special 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 important, too, but these are the two sections that the people looking at your business plan will look at first, and, as always, first impressions matter.
- To attract investors or partners.
Investors and potential partners, too, will 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 towards 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. Read more about Attracting Angel Investors and How to Prepare an Investor Ready Business Plan to learn more about matching your business plan to your potential investors' needs.
But where do you find the potential investors to make the pitch to? Where to Look for Angel Investors provides advice. Another idea for attracting potential investors is to Put Your Business Plan Online.
- To serve as the basis for business planning and to manage your business's growth.
Whether your business plan is a traditional document such as the Business Plan Outline, 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. I recommend keeping a copy of your business plan in a three-ring binder to make it easier to amend or add to it as you create new plans and see how previous plans have worked out.
Business planning is critical for all businesses, but often easier to put off than to do because we tend to get so immersed in whatever-as-to-be-done-right-now. Get around this by setting aside time to plan and making it a top priority. My Quick-Start Business Planning Guide will lead you through the process of reviewing your business's progress and amending your business plan.
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 purpose. 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.