A business plan is usually a substantial and detailed document. It typically includes a thorough examination of a new product/service concept, the viability of a market for that product/service, an overview of competitors and their products/services, how the concept is differentiated from the competitive offerings. It also spells out how the concept will be fashioned into a product/service, how much the product/service will cost, how it will be promoted, how much revenue is it expected to generate, plans for development and operations management, and the necessary resources to make it all happen (including capital, employees, space, and equipment). The business plan spells out what you want to do, who else is doing it, what impact you can create, or need you can fill, and how much money will be spent and made in this endeavor.
On the other hand, a strategic plan is usually a shorter document which provides the foundation and framework for a business plan. It spells out a company's mission, primary goals, and measurable objectives, and explains the basic strategies for achieving the mission and the goals. It’s about focus on direction; it says, this is what we ultimately want to do, this is where we are now, and this is how we plan to get to where we want to be.
Much has been written about the differences between management and leadership. The consensus is that management is really about projects and processes, while leadership is more about people. Using this premise, a business plan is a management tool, for companies that may be aligned regarding ultimate vision and direction, but not so clear on organizational structure, standard procedures and systems, and overall detailed planning. The business plan helps an organization manage its activities, and measure its progress toward short- and mid-term goals. It aims to enhance the effectiveness of an organization, without significantly altering its established direction.
A business plan typically concentrates on a specific product, service, or program. It focuses on realistic financial projections, and will contain market research, competitive intelligence, projected sales and budget figures. Business plans usually sketch out the next three to five years, and are typically updated every year or two.
A strategic plan, on the other hand, is a leadership tool, useful to companies whose organization and systems are established, but perhaps lack a focused vision, or their employees may not be united towards a defined goal. The strategic plan describes the business’ mission, along with supporting goals and objectives, and the strategies to be utilized in pursuing them.
The process of creating a strategic plan can be as valuable as the finished work itself. It is imperative to involve key management people in this exercise. Oftentimes, differing viewpoints may emerge from within the team, but through discussion and communication of ideas, consensus is usually found. Frequently, product or service enhancements and innovations are born out of such strategy exercises.
The most successful business plans have a strong balance between the enthusiastic possibilities for the future, and the pragmatic realism of hard business data. It should serve as a roadmap showing the best way to get you to where you envision your business.
Strategic planning should be done at the beginning of a business venture, and in preparation for each subsequent new fiscal year. It should also be done prior to launching any new venture, division, or product/service line. The strategic plan tells how you plan to achieve the financial projections stated in the business plan.
So Which Do You Need?
Successful, organized businesses have both, and both are updated every year or so for accuracy, market feasibility, budget guidelines. The plans do not necessarily need to be rewritten each time, but the points therein should all be re-evaluated to ensure continued relevancy. You want to know if your desired destination is still in the same spot, and if the roadmap you are using is as up- to-date as possible.
If your business hasn’t reviewed its business plan and strategic plan in over three years, it is definitely time to attend to them. If you never bothered with written business and strategic plans for your business, we urge you to make time for the process, sooner than later. There is always benefit in having your vision, mission, goals, objectives, and strategy all on paper for your entire organization to see.
When a CEO brags that his company is “all on the same page,” he means the pages of the business plan and strategic plan.