CHAPTER THREE – What is the difference between a business plan and a strategic plan? Which of them is more important to a start-up company? Well, I advice you read on to find the answers you seek.
Although the two terms, Business plan and Strategic Plan, are used interchangeably most of the time, they are not the same and cannot therefore interchange each other. And the difference between both terms is one of those things you must understand as an entrepreneur, because you need to be sure that you are speaking the same professional language as others.
So in this article, you will understand the difference between a business plan and a strategic plan. This understanding will give you an idea of what constitutes each plan as well as its purpose.
What is a Strategic Plan?
The strategic plan is a document that outlines a business’s vision, mission statement, goals and objectives over a specified time frame. It also describes how specific stakeholders in the business will contribute to the achievement of the set goals and objectives within the set time frame.
A strategic plan looks at the limited resources you have; such as time, money, manpower, equipment, technology, facilities, etc and evaluates them and outlines ways by which stakeholders in your business will utilize these limited resources to achieve the goals and objectives.
Lastly, a strategic plan is an internal document that should be used routinely as a guide for your employees to achieve success. Generally, a strategic plan is in the following format:
Basic Format of a Strategic Plan
- Vision statement
- Mission statement
- Action plans
- Risk analysis and contingency plans
- Competitive analysis
The above is the basic format, but this can vary depending on how each element is to be interpreted. For example, the mission statement can vary depending on the values of the business in regards to its stakeholders (that is, employees, shareholders, board, customers, vendors, and so on). The following are tips on how to develop a perfect strategic plan for your business
5 Tips for Developing a Perfect Strategic Plan for your Business
- Know the difference between action plans and goals to avoid mistaking them for one another. Both terms are different.
- Keep your financials consistent
- Avoid listing as goals and objectives extraneous issues such as future or problem solving and decision making
- Don’t conduct a risk analysis without appropriate contingency planning
- Involve third party facilitators to make the plan balanced and reasonable
Finally, keep in mind that a strategic plan is a flexible document. It can be changed whenever necessary.
What is a Business Plan?
The business plan is a statement about your business that demonstrates to outsiders what your business is all about; unlike the strategic plan, which is a roadmap for insiders. It follows a distinct format that outlines your kind of business and what would likely become of your business in future. The basic format of a business plan is as follows:
Basic Format of a Business plan
- Cover page
- Table of contents
- Executive summary
- Company overview
- Market analysis
- Production and technology
- Sales and marketing
The format can be modified depending on certain factors. For instance, the purpose of the plan could be to raise money for a project, to find a strategic partner, or to give confidence to lenders.
The audience is another factor that can change the format of a business plan. They could be stakeholders, investors or lenders, potential key employees, or strategic partners. Also, the format of the plan can change with respect to the maturity of the business. It could be a start up, a growing business, a mature business, or a declining or distressed business.
The business plan is the first thing that your audience will want to see if they are asked to invest in your company or vest their interest in it in some other way. The reader will judge your business based on the clarity, simplicity, consistency, uniqueness, and completeness of your business planning.
In short, your business plan tells the reader what you are doing, how you are doing it, where you are going, how you will get there, and if they are investors, how and when they will get paid back for their investment in the business. On a final note, from the explanations given above, the following deductions can be pulled out:
3 Outstanding Difference between a Strategic Plan and a Business Plan
- A strategic plan is used for implementing and managing the strategic direction of an existing business, but a business plan is used to start a new business.
- A business plan is used to catch the interest of investors or other potential stakeholders, but a strategic plan is used to prioritize available resources.
- A business plan assesses the viability of a business idea, but a strategic plan focuses on building a competitive advantage.