Business Plan vs. Strategic Plan (With Key Differences)
By Indeed Editorial Team
Published July 14, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Business professionals often develop business or strategic plans to forecast the success of a new or existing business. These plans can show every resource element a company requires and indicate a milestone for each planning stage. Understanding what these plans involve and when to use them can help you decide which one might benefit the organization you work at. In this article, we explain the difference between a business plan vs. strategic plan, outline their key components, and discuss the characteristics of a good business and strategic plan.
What is the difference between a business plan vs. a strategic plan?
The key difference between a business plan vs. a strategic plan is the function they have in business development. Professionals typically use a business plan to help start and run a business or develop a new entity within an existing business that's expanding to a new region or broadening into a new market. They may create it for internal reference or to apply for external funding. A business plan usually lays the foundations of a company's business decisions and strategies at the ownership level.
A strategic plan typically establishes the foundations of responsibilities and operations within an existing business. It explains the strategy for each team member to follow and defines the functional outline and significant outcomes of every process and project within a company. It also establishes a company's operations and results within its departments and for its employees. The only element a strategic plan shares with a business plan is a company's vision. A vision can guide the company's strategy, which then drives its operations.
Key components of a business plan
The following are the key components you can typically find on a business plan:
The financial plan
Funding is the framework for a new business's ability to grow into a financially healthy organization. A financial plan can have a broad influence on a company's success because it affects almost every aspect and operation. The financial plan of a business requires a significant amount of attention to detail, preparation, and foresight to help determine specific details, such as projected liabilities, assets, expenses, and income. When starting a new company, it's important to identify these factors accurately to assess how to obtain funding, how much money the company requires, and where to spend it.
The organizational plan
An organizational plan is a key component of a business plan because it shows a company's values and vision. It helps entrepreneurs realistically determine whether a business can grow successfully and how long it can take before seeing a positive net income. It can also help decide what market sector to best operate in. The organizational stage of a business plan is where you perform research into how marketable the company can be and how likely it can receive sponsorship or funding.
The sales and marketing plan
A successful sales and marketing plan is realistic, actionable, and helps develop a starting customer base. It typically includes all aspects of a company's marketing and sales, such as forecasting sales and establishing the company's brand. It's important for a company to use this plan to make a summary of its brand marketing strategies and market share projections that it wishes to achieve by a specific launch date or over a certain period.
Key components of a strategic plan
The following are the key components that make up a strategic plan:
A vision for a company works as a guide for choosing specific courses of action now and in the future. A vision statement, which is a few sentences long, informs stakeholders precisely what the company is working to achieve. The last sentence of a vision statement typically describes why the company exists. Powerful vision statements may help employees focus their tasks in the right direction.
A mission explains what goals a company has and how it can achieve them. Companies often use a mission statement to supplement a vision statement and explain its purpose. The mission statement typically defines the company's values, culture, ethics, and agenda. Providing everyone in a company with a clear mission interpretation can lead to unified initiatives and strategies.
Clearly stating a company's objectives can help measure the impact of any strategic plan and assess its overall health. A good objective is usually measurable and clear and has multiple strategic plans across the company to support it. The objectives section of a strategic plan can include both short- and long-term objectives, provided they relate to the company's overall vision.
A company's strategy is a long-term plan that provides necessary details to help achieve its objectives. An effective strategy typically combines a company's vision and execution and is usually more specific than its vision, mission, and objectives. Companies typically only share strategies throughout their teams and build them around their needs and market perspective. A strategy can help businesses foster innovative thinking, develop long-term plans to achieve objectives, create actionable steps, and anticipate and ease potential challenges from a span of 3 to 5 years. There can also be separate plans for individual company objectives.
Planning an approach provides the methods a company can use to execute its strategy. The approach is the foundation to help answer important questions that can determine the company's tactics. It can also guide the company on how it can execute its strategies. The number of details the approach has can determine how much flexibility the rest of the team has when implementing its tactics. Fewer details at this stage can allow for more flexibility.
Tactics are the key to implementing a company's strategy. They're the actions a company can take to make all planned elements take place successfully. A company's tactics typically focus on projects, initiatives, or programs that may assist it in executing its strategic plan. While not all tactics may relate to the company's strategic plan, efficient tactics usually connect to its objectives, strategy, vision, and mission.
The strengths, weaknesses, opportunities, and threats (SWOT) analysis
The SWOT analysis provides a company with a situational investigation into its position in the market. It typically allows a company's management to identify the organization's key aspects, adversaries, and happenings. For example, a company's strength can lie in its ability to attract new local customers. If a local competitor with a non-local customer base faces a financial challenge, it can present the company with an opportunity to improve its ability to attract non-local customers.
Characteristics of a good business plan
Here are some characteristics that a successful business plan typically has:
It's easy to understand. A good business plan can cater to a broad audience with various temperaments, mindsets, and knowledge. Therefore, it's important to develop a plan that's brief and easy for anyone to understand.
It's descriptive and clear. You can use a business plan to describe the reason for starting a company and the goals its employees are working toward daily. It's important to make your purpose and objectives clear to help your audience understand the basics of the company you work at.
It uses relevant data. Proper documentation and data can help your target audience know more about a company, its market, and its yearly turnover. Adding data to prove the company's actual or potential performance can enhance your audience's faith in the business and its objectives.
It discusses products and services. An effective business plan typically includes in-depth details regarding a company's products and services. You can also explain why these products and services are unique and better than what's currently available on the market.
Characteristics of a good strategic plan
Here are some characteristics that a successful strategic plan typically has:
Realistic goals: It's important to be practical when establishing company goals. Having realistic goals can help a company save time and money by focusing on the most efficient areas.
Detailed actions and goals: These may allow a company to gauge its progress using various key performance indicators. It's usually important to create goals that add value to the organization.
Room for updates: When implementing a strategic plan, you may encounter changes in company requirements because of industry trends, economic conditions, and customer feedback. Therefore, it's important to clarify any areas that can change throughout your plan.
Clear deadlines: It's important to ensure a company sets specific deadlines to achieve each plan aspect that leads to the ultimate goal. This can create urgency and accountability for team members to finish their tasks on time.
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