Recently someone asked for a simple definition. As it turns out, business plans mean different things to different people. I tend to think of them as presenting the vision or goals for a business, along with a road map for achieving those goals. It can be sketched on a napkin, written on a few pages, or compiled into a huge stack of paper.
Here’s Wikipedia’s definition:
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
The business goals may be defined for for-profit or for non-profit organizations. For-profit business plans typically focus on financial goals, such as profit or creation of wealth. Non-profit and government agency business plans tend to focus on organizational mission which is the basis for their governmental status or their non-profit, tax-exempt status, respectively—although non-profits may also focus on optimizing revenue. In non-profit organizations, creative tensions may develop in the effort to balance mission with “margin” (or revenue).
Here’s what I would add. First, business plans need to demonstrate a solid understanding of customers and markets, which are all too often under-emphasized. Second, a plan is not complete until it indicates who will be responsible for running the business (its leadership), and why they are suited to achieve success. Third, it should have credible financial projections that can be tested independently. Finally, a business plan needs to indicate its most likely risks, and present well thought-out strategies for overcoming them.
OK, it’s hard to do all that on the back of a napkin. But however you define a business plan, be sure your plan indicates clearly where you are going and how you’ll get there.
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For more resources, see our Library topic Business Planning.