The most common perception of a business plan is a formal, structured, professional document that describes all parts of a business, ordered in a sequential and predictable format. We have all seen them. To be honest that is what most business plans look like and – especially if you are creating it for a bank or some other body for approval that is what they expect.
In reality, the term “business plan” can encompass many types of plans that differ in format, layout, content, and purpose. Business gurus love to claim their own types as being the definitive plan, call it something slightly different and then spruik their own methods to create them and their value to your business. There are countless books, articles, and how-tos on the subject, each with their own angles and glory for the authors. It is not useful or honest to say there is only one type. In my opinion, it is better to do some type of planning rather than getting hung up on differences in methods. I liken it to keeping fit. You are better off doing some exercise rather than none and can start getting picky once you get proficient.
After seeing what is needed in practice for small business, my definition of a business plan is:
A document that specifies and explains the goals of a business for a defined time period.
Sounds basic, so I will unpack it to explain my thinking.
This definition is not too prescriptive, since the methods that work will differ between industries, businesses, markets, personalities, and the life stage of your business. It needs to work for your business.
To document means it is recorded in some way that is sharable and not just talk or thoughts. Since there are so many types of business plans, I do not think it is accurate or helpful to give more details about content, length, style, and so on. It could be one page, it could be all on a spreadsheet, hard or soft copy or it could be a designed and printed book.
The plan gives definite, clear, measurable, and specific goals for the business; it specifies. That can include any number of metrics for the business, including, financials, sales targets, budgets, marketing numbers, staff, retention, or sales ratios. It may also include other goals, such as moving to new premises, buying equipment, gaining accreditation, or winning an award.
That it “explains” means all the necessary details are included to justify, back up, and convince the reader goals are achievable and based on solid reasoning and accurate information. Under this banner falls market research, competitor research, analyses, explanations, rationales, details, actions, timelines, milestones, theories, and risks.
A “defined time period” is the plan’s time frame, usually one to three years. The longer the time frame, the more granular details become.
“Business planning” is a term I prefer to use rather than “business plan.” Business planning is not a one-off activity, nor something you should do when you start your business, or when you feel motivated, and then forget about it. It is an ongoing process of development and review, of looking backwards and then looking forwards. With my clients I like to talk about planning practices. This is the day-to-day, week-to-week type of business planning that you actually use when you run your business. It is not just the creation of a document. Rather, the document is a summary of your planning. This is the discipline of developing habits and thinking strategically, the “working on the business” we always hear about but never seems to happen.
In your planning you will research your market, create budgets and projections, plan your marketing, create an action plan, set milestones, review your business, and set goals. In most situations, these are all recorded in a single document, your business plan. If you are doing this process to have a better business, it’s less important what type of plan you use than it is to be doing it.