A business plan is an essential part of every successful business. You don’t want your company to function like a chicken running around with its head cut off. You may accidentally stumble into success, but businesses without a solid plan typically burn out fast or fail to turn a profit in the long run. Success isn’t an accident – it’s calculated.
Whether you’re at the very beginning of your journey as an entrepreneur (hello, brave startup owners) or expanding a long-running endeavor, you’ll probably use one of two business plans: a lean plan or a traditional plan. Which of the various kinds of business plan you use really depends on your goals and audience.
What’s Inside Traditional Business Plan Models?
Though there are a few kinds of business plan, most of them include the same standard sections. Sometimes the business plan is a little lighter (like in a lean plan), and sometimes it's dozens of pages long (like in a standard plan). According to the Small Business Administration, you’ll want to include all of the following in your standard business plan and most of the following in a lean business plan.
- Executive Summary: This is where you talk about the basics of your company and its path to success. Namedrop your leadership team, your employees and where you’re located. If you’re presenting this business plan to investors, include your financial information and growth plans here.
- Company Description: In this section, you’ll get a little more detailed about your company. Instead of talking about your team, you’ll touch on your demographics, the consumers you have or plan to seek out and the niche your company is servicing. If you’re filling a hole in the market, here’s where you get to brag. From the perfect location to the expert team members, put it all here.
- Market Analysis: Is your industry even lucrative? A business is only as good as the people who are willing to buy into it. For the market analysis section of your business plan, you’re going to need to cite some research about your industry’s outlook and your target market. You’re going to need to compare yourself to your competitors. Find out what they’re doing well and how you can do it better. It’s definitely wise to look for trends and themes with your market research and utilize your business plan to detail how you’re going to make the most of those trends.
- Organization and Management: Describe the legal structure of your business. Are you an LLC or an S Corp? Who’s in charge?
- Service or Product Line: This is where you’ll describe the service your business provides, how it benefits your customers and your product’s life cycle. Do customers need to come back every two months? Do they visit you once a year? Also use this space to outline any plans you have to copyright or patent your intellectual property.
- Marketing and Sales: The right marketing plan turns a good business into a great business. Though your strategy will change as your business grows, most types of a business plan touch upon how a business attracts and retains customers. Also use this space to explain how a sale happens. Your revenue stream is the heart of your business, and both investors and employees need to know how the money gets from consumers’ pockets to your cash register.
- Funding Request: The dreaded funding request is the part that makes every business owner squirm when he is presenting to investors. Use this section to outline your funding requirements over the next five years and how you’ll use the resources, whether it’s buying equipment, paying salaries or marketing. Do you plan to have debt, equity or both?
- Financial Projects: Use this section to explain the financial projections of your business, be it in quarterly, monthly or yearly increments. Obviously, you want to be financially successful, but how fast do you think your business can grow? If you’re already an established business, including income statements and balance sheets helps paint a detailed picture to potential investors. Remember, graphs and charts always help.
- Appendix: In this last section, you’ll include supporting documents like licenses, patents, permits, references, resumes and even product photos.
Though most business plans include a variety of the above, there are a few hyper-focused types of business plans that suit a range of businesses, from startups to expansions to the worst-case scenario.
Lean Startup Plans
If you’re here, it’s probably because you’re at the very beginning. Before you launch your business, you need some killer business plan models to attract investors and make sure your company has a pathway to financial success. No, that doesn’t mean you have to be profitable right off the bat. Actually, it’s more likely that you won’t be. Turning a profit typically takes years, and even a few publicly traded tech companies – like Spotify, which has more than 70 million paid subscribers – still aren’t considered profitable.
For some critics, Spotify’s financial troubles are the fault of a shaky business plan. Its licensing deals with labels are costly, its payouts to rights holders are tied closely to its revenue and there’s no guarantee that the service will always have the licenses it currently holds. A good startup business plan would have nailed out these financial concerns.
Startup business plans are typically lean in order to help launch companies quickly and allow for easy changes as the company grows. They only include essential information like your customer base, finances and infrastructure. They also include your value proposition, such as why the market needs your company instead of your competitors. Remember, this plan is mainly used to attract investors, so it’s one of the few kinds of business plan that relies more on graphics and charts than long-written facts.
Internal Business Plans
Your company has a greater chance of success if everyone on your team is fully onboard. This is why you may opt for internal business plan models that target an audience inside your business instead of outside investors. This is one of the types of a business plan that helps evaluate specific projects and keeps your team up to speed on the state of the company. Is what you’re doing working, or do you need to consider a change? Are you sliding backward or moving forward? An internal business plan includes almost everything in a standard business plan, but it’s spun for the eyes of those already on your side.
There are a few things a working internal business plan might glaze over, and you may wish to remove certain pieces of sensitive information. For example, some entrepreneurs consider it highly inappropriate to let employees know how much money a CEO or business owner takes home. You can choose to omit this without really affecting the integrity of your plan. After all, the goal of this type of business plan isn't showing the balance sheet to investors. It’s about making your business run as smoothly as possible.
Strategic Business Plans
Strategic business plans are usually part of internal business plans. They help outline how you’re going to get to where you want to go. They’re the strategy your team must carry out to achieve your goals, including your strengths, weaknesses and how you’re going to utilize your opportunities. These types of plans typically skip the more detailed financial data and milestones (those are of more interest to investors than they are to your team because your team pretty much already knows when they do a good job). Strategic business plans help create internal efficiency so you can get the best results.
Annual or Operational Business Plans
Operational business plans are more akin to a lean startup plan than your standard, lengthy types of a business plan. Why are they so small? They’re cut down to a year's worth of information. This plan isn't made to tell investors how you intend on turning a profit in the span of five years. It’s simply where you expect to be in 365 days (and let’s all hope that’s in a very profitable place). An annual plan can also be an internal plan (i.e., the strategy your employees intend to enact over the next year). It can also be used to attract investors at the very beginning. Annual business plans are perfect for companies that expect to make big changes in the not-so-distant future.
Growth or Expansion Business Plans
If you’re looking for a hyper-focused business plan, this is it. Growth or expansion plans focus on a specific area within your business, like opening a new location or launching a certain product. These plans are always lean plans but are not necessarily just for startups. There are two types of growth plans to consider: internal or external growth plans. It just depends on your audience.
Internal growth plans are a lean version of a strategic business plan. You’ll use them if your company’s growth or expansion is being funded internally, such as if you’re launching a new product line from the last product line’s revenue. You already know what you’re funding, so you don’t need to deeply explain the product. However, you do need to estimate the sales and expenses.
For an investor-facing growth plan, you’re going to need some different information, and it may be quite lengthy. This type of plan assumes that the bank, investor or individual you’re pitching doesn’t know much about your business at all. You’ll need to look at it like you’re a startup and include additional details about your growth or expansion. It’s basically two business plans in one.
Growth plans for investors and banks usually include everything in a standard business plan. You need the financial data and projections, the market research and the funding request. Make sure you thoroughly describe your products and sales and the reason why your customers need your specific business rather than a competitor’s. For example, if you’re launching a brand of orange sodas, what makes you different from Fanta? Why does the public need your soda when so many exist? You may even choose to include team backgrounds and any brag-worthy facts and company milestones.
The "What If" Plan
Feasibility plans cover the “what ifs.” They’re the variation outside of your working business plan (i.e., all the other plans listed). A feasibility plan is the backup. It’s what happens in the worst-case scenario you can possibly imagine for your business. It basically outlines what you’d do if your company survived a zombie apocalypse without somehow declaring bankruptcy or becoming a zombie itself. More realistically, it just outlines what happens if competition is too fierce, if you lose a significant market share or if you have to let go of a key player in your management. Why would you ever want to make such a grim plan? Well, sometimes it actually can help lead to growth.
If your company is planning on an acquisition or sale, you don’t exactly have the certainty of knowing that your products and team will be exactly the same. A "what if" plan can help you decide how those things will affect your business. You may want to sell your business, but you probably don’t want it to tank with a change in leadership. A "what if" plan helps you consider major changes that affect the core of your business, so you can make good decisions. It’s the plan you should consider before you consider any expansion or growth plan.
Which Type of Business Plan Is Best for Me?
There's no right or wrong answer to the type of business plan you choose, only that your business absolutely needs one for long-term success. Whether it's a lean startup plan, a lengthy expansion pitch to investors or a dive into the worst-case scenario, only you can tell which business plan is right for your company's goals.
Mariel Loveland is a small business owner, content strategist and writer from New Jersey. Throughout her career, she's worked with numerous startups creating content to help small business owners bridge the gap between technology and sales. Her work has been featured in publications like Business Insider and Vice.