Four Types of Highly Effective Business Plans
Think business plans are only useful for raising capital?
The development of a business plan-which is as much about the "process of planning" as it is about an actual, written document-provides an excellent framework for a variety of business applications.
Here are a few different types and examples of business plans and how they can be used to grow or improve your business:
Operating Business Plan
Developing an operating business plan for a young company can be quite valuable. As a company grows beyond its initial founding team, the need for institutionalizing organizational behavior quickly becomes apparent. Hence, this type of business plan is used to document the company's systems, structures and principles, and codify them into a set of written guidelines.
The emphasis is on capturing, in one single location, the company's "best practices"-i.e., tactics and actions that work particularly well-along sales, logistics, customer service, and other key operational lines. The operating business plan is also useful for identifying areas that need improvement, and for setting up the series of steps needed to effect the desired change. It is highly goal- and metric-driven. For example, it may contain detail on current in-bound sales conversion rates, as well as goals, tactics, and deadlines for improving such rates.
In addition, the operating business plan is often used to help formalize the company's vision and values-in short, the firm's corporate culture and DNA. Specifically identifying the practices and values that make your company great helps reinforce this message to existing employees, and it helps new hires ingrain the culture more quickly.
Expansion Business Plan
The expansion business plan is for companies who are introducing entirely new products or entering new markets in which they do not currently have a presence. The launch of a new product-or the expansion into a new market-often requires a different set of thinking, strategies, and tactics than those that the company currently follows for its core business.
Thus, the expansion business plan is essentially a dedicated strategy plan for a focused sub-set of the business. The bulk of the work is typically focused on competitive analysis, market and customer research, and go-to-market strategies, and the plan includes roles and responsibilities for staff assigned to the new product or market launch. When used effectively, it serves to guide the company in its new direction, and to align the team toward new goals. A nice side benefit is the enthusiasm such a plan generates; taking action toward new growth initiatives is often a great morale booster.
Feasibility Business Plan
A feasibility business plan offers a low-risk way to determine the potential of a new product before spending the time and resources needed to actually develop it. It also provides a way to map out and explore a new direction the company may be considering taking-particularly useful if the firm is facing a stagnating market, and is considering "reinventing itself."
Similar to the expansion business plan, the focus is on analyzing the market potential and determining the company's ability to successfully enter and exploit that potential. A feasibility plan makes heavy use of financial models and "what if" scenarios, and it usually culminates in a go/no-go decision. In the case of a "go" decision, the plan can then be turned into an Expansion Business Plan by building out further detail on launch and marketing strategies.
Partnership or Joint Ventue Business Plan
Whenever two companies come together, whether to form a new, independent entity (joint venture) or to launch, for example, a combined marketing campaign, there are risks-such as different goals and capabilities, varying levels of commitment, clashing cultures, and disparate communication styles. Developing a joint venture or partnership business plan helps to identify such challenges. By collaborating closely and writing the plan together, it lets both parties' voices be heard, and it often uncovers concerns that are not stated during the initial excitement of a deal. Naturally, it also serves as a useful tool to determine appropriate strategies for mitigating such risks.
Importantly, this type of plan will have specific details on the roles, responsibilities, and action-steps for each partner involved in the deal, and it will contain metrics and milestones to measure and track progress. A notable side benefit is that it helps document what was agreed to in the early stages of negotiations, which can be useful as a reference point when things (inevitably) differ from the planned route.
In sum, view the business plan process as a framework that can have multiple applications-from expanding your business, to improving operations and codifying company culture, to mapping out joint roles and responsibilities of a strategic partnership. A business plan is much more than just a document used for pitching investors-- consider it a flexible, adaptable tool to grow your company in an efficient manner.
How will you use your business plan?