When people think about planning for their organization, they most often think “Business Plan -> Startup”, “Strategic Plan -> Established Company”. And in many ways that is true; but not exclusively and not necessarily for the reasons they think. It’s not so much a “new company” vs. “mature company” thing as it is a “Who’s my target audience?” thing. The decision depends on what you are trying to communicate and to whom. They are definitely not the same or interchangeable. Know your purpose and you will know which plan to build at a given time. So which one do you need? The truth is, you need both – or a hybrid.
Let’s begin by clarifying that strategic plans and business plans are not the same and are not interchangeable. They have specific uses (which I’ll touch on below). There is however some overlap. Both of them need to clearly explain the strategic foundations of your organization. Your purpose. Your target market (and demonstrating your understanding of it). Your plan to approach that market.
So, what’s the difference between the two? At its heart, strategic plans are meant to be
primarily internal documents; most useful to employees. Business plans (while useful for employees to be familiar with) are targeted outward. A business plan would
typically be used to share information about your business with outsiders like potential investors, partners, etc. Here’s a quick and dirty comparison:
- Focused on describing the strategic direction of the organization – and how it will be implemented
- Targeted toward employees
- Longer-term focus (3+ years)
- Most often used for established organizations
- Clearly defines the business – target market, products/services, operations, financials, etc.
- Targeted externally
- Shorter-term focus (1-3 years – depending on the business)
- Most often used for early-stage organizations
With all these similarities and differences in mind, remember that you can use these tools in different situations. There aren’t really any hard and fast rules you have to follow. Create what fits your needs.
An example. I once worked with a nonprofit that wanted to better define and alter some fundamental aspects of their direction. We decided that a hybrid business and strategic plan would be the best way to go. It served their purpose well because we were able to more clearly define their mission and vision and strategic direction – and then assess and financial implications of this direction. They used a derivative of this business plan to share with internal and external stakeholders.
Another thing to remember is that at least some of the value of a strategic or a business plan is in the process itself. I know it sounds a bit cliche, but I’ve really seen it to be true. Thinking through the mission, vision, values, and strategic direction openly with your team has great benefits. Detailing your market, its challenges, and how you will meet those needs has a lot of value. Forcing yourselves to be detailed, realistic/practical, and analytical about the operational and financial implications of your direction has big rewards. So, don’t underestimate the value of simply driving through the process. In this case, both the means and the ends have value.
One of the things I love about business plans is that it requires an organization to deeply focus on how it will extract results. To develop a reasonable set of pro forma financials you have to clearly state your assumptions about revenues and expenses (and their sources) and revise and refine them. This all has to be derived from an open discussion and debate about how your business will operate. Being honest, we are usually more comfortable skipping these “details” and just assuming that our organizations will be profitable and sustainable if we just lay out a cool sales and marketing strategy. (NOT at all a safe assumption!) Serious consideration about the details of what will impact your financial results will make a real difference in how you view your business and in your depth of knowledge about it.
The strategic plan will clearly describe the strategic foundation of your organization and its direction. The process will ensure that your team is all on the same page about what the organization is all about, where it is now, and where it’s headed in the future. The business plan will take that strategic direction and clearly define how the strategic direction will be concretely implemented and what the expected results will be.
So, knowing that strategic plan and business plans are different and have different uses, it’s important for you to consider which one best fits your organization’s situation and goals at a given time and for a given purpose. The truth is that both plans provide tremendous value and that they can and should build upon each other. An organization needs both. The strategic plan provides your team a well-defined strategic direction and a roadmap about how you will get there. The business plan takes your strategic direction and defines how the business will work operationally (along with expected financial results). The combination of both of these plans will provide a very well-rounded plan of attack.
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