Both should include a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) and be reviewed regularly so that they’re up to date.
A business plan sets your course
The business plan is a broader, more preliminary document that sets your course when your company may still be nothing more than a twinkle in your eye.
If you were to sit down with a potential partner, investor or banker, this document contains the answers to the key questions they are bound to ask. It not only accurately summarizes what your business is all about, but why it’s a viable proposition.
What a business plan contains
A complete business plan typically includes three key parts.
This includes a specific description of the goods or services you propose to offer, your target market and your unique selling proposition to customers. What’s compelling and different about what you’re offering compared to the competition? How will you market it?
What do you need to execute your vision? This is your organizational structure, HR requirements to staff your team and your needs in terms of space, equipment and distribution.
Here’s where you outline your detailed financial projections, including growth expectations over the next couple of years. Lenders and investors want to know they’re going to get paid back or make a return.
How a strategic plan differs
If much of what we just covered sounds like it belongs in a strategic plan as well, you’re right. However, a strategic plan is different in that it sets out the detailed roadmap you will follow in the next few years to achieve your objectives.
Therefore, it must contain an action plan with specific activities, due dates and who is responsible for each activity.
A strategic plan ensures any growth initiative is undertaken in a coordinated, systematic and informed way, for the best possible odds of success.
Both a business plan and a strategic plan are living documents that must be reviewed at least annually.
However, a strategic plan should also be reviewed every time there’s a major event impacting the business, such as a new competitor entering your market, a new product launch, a sudden cash flow challenge or an important currency fluctuation.
The business plan and the strategic plan are both essential planning tools for your business. Where one may provide more value than the other depends on your stage of growth and what you’re trying to achieve.