Business Plan vs Strategic Plan – How are they different?
Business plan vs strategic plan – unfortunately, these two are often confused with each other while they are certainly not the same thing. It’s important to understand the differences between the two because they both are very useful tools for a company on its path to success.
Let’s begin with the definition of each concept and lay out their components before listing the differences.
What is a business plan?
A business plan lays out the details of how you run your company on a day-to-day basis. It has a broad scope and can be used for setting your course when your company is in the planning phase.
It accurately summarizes what your business is all about. It’s also a viable proposition and presentation of your business.
Components of our proposed business plan are:
- Business overview: a brief description of your company and where it stands in the marketplace. Includes details like business description, mission, vision, industry and market overview, trends, regulations and the competition.
- Sales and marketing plan: Strategies that will be used to target your customers. Includes details like target customers, suppliers, marketing and advertising channels, pricing, customer service policy and warranties.
- Operating plan: A description of the physical aspect of your business operations. Includes details like business location, equipment, technology requirements and investment needs, and environmental compliance.
- Human Resources Plan: Details on your key staff, HR policies and procedures.
- Action Plan: The planned actions for the business over the next 2 to 3 years. Includes business objectives, required resources, a step-by-step plan, risk assessment and contingency plan.
- Financial Appendix (optional): You may also consider adding a financial appendix to your business plan to outline the facts and figures that back up what you say in your plan. This is mostly required if you will use your plan for financing applications, but optional if you intend to use the business plan only as an operational guide.
What is a strategic plan?
A strategic plan is an internal roadmap to grow your business. It outlines a company’s future goals and an action plan to reach the desired future state.
The purpose of a strategic plan is to build team alignment and decision-making capacity to be ready for the future and take advantage of opportunities to grow or become better at what you do.
A strategic plan usually comprises of three main sections, namely current state, future state, and strategic plan. Let get into its components in a bit more detail.
- Current State: A section to answer the question: “Where are we?”. It mainly includes:
- A company overview — past milestones and achievements, current products or services, markets, key competencies, target customers, sales performance and trends in recent years, current key performance indicators
- Strategic analysis of the internal and external environments using various analyzing tools
- A SWOT analysis (an acronym for strengths, weaknesses, opportunities, and threats)
- Future State: A section to describe the desired future state of the company. The future state section includes:
- Strategic objectives
- A vision statement summarizing the company’s aspirations for the future
- A mission statement and core values and any anticipated changes
- Broad, high-level goals, expressed in long-term statements
- Future business model — described with a business model canvas
- Desired future value proposition
- Aspirational statements that expand on the vision statement
- Strategic Plan: This section describes how your company will bridge the gap between its current state and the desired future state. This section should outline 3 to 5 initiatives that will lead the business to its goals in a sustainable fashion. It includes:
- Business directions — a broad overview of what you need to do to achieve your goals
- Strategic priorities — a list of your key business processes
- Details on actions needed for each strategy
- Financial projections by market, product and other potential categories
- Action plan — a one-page spreadsheet listing each action, who is responsible for carrying it out and otherwise involved, a timeline for its completion and a key performance indicator to monitor progress.
Business Plan vs Strategic Plan – Key Differences
A business plan is a broader document that covers the “who”, “what”, and “where” of a business. It introduces your company with all its aspects and provides a high-level action plan.
Differently, a strategic plan is more like a roadmap dealing with the “how” and “when”. It shows how to achieve your business goals with clear directives and proposes a very specific action plan with task distribution, strict timelines and KPIs.
2. Uses & Audience
Business plans are prepared for external audiences to introduce your business and show how it operates in a systematic way. You will probably need a business plan when you apply for business financing. 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 is also a good idea to have a well-drafted business plan if you are starting a new business and want to keep focused.
Strategic plans, on the other hand, are internal tools prepared for you and your team. It provides clear roadmap of what to do next to achieve your goals and metrics to measure success. You will need one to effectively address your specific business goals and achieve them in an efficient way.
Business plans are long-term documents that should be revisited from time to time when there is a significant change to how you operate. You can have a 5-year business plan which you review yearly to ensure if it’s still completely viable.
Strategic plans are more dynamic documents that have shorter terms as they draw a roadmap for specific business objectives. They should be revisited more frequently and revised and adjusted whenever necessary. You can have a 12-month strategic plan that you review monthly and quarterly to ensure that you’ll reach your goals.
4. Structure and Components
Although there are some common sections in business and strategic plans, their structure and key components are quite different as laid out above in the definitions. They employ different analysis and evaluation tools to serve best within scopes.
Bottomline, a business plan and a strategic plan are both very useful means and necessary documents for your business success. The similarity of them may cause a great deal of confusion; however, it is important to know their differences and what each is used for, and, of course, make sure that you use them as tools for success!
Contact us if you need professional help to develop a business plan or a strategic plan to guide you towards business success, or book a free consulting session to discuss your specific business needs.