In the world of business lingos, there is a multitude of terms that are interchangeable. Discount rate and interest rate are one of the same. Also, net profit and bottom line mean the same darn thing. However, what is not interchangeable are the terms ‘business plan’ and ‘strategic plan.’ The differences between the two terms are actually quite large. It is almost like calling a car a road.
In this article, I wish to first help everyone understand and appreciate the differences between the two terms, strategic plan and a business plan. After this is done, we can then explore the differences and commonalities between the two plans. Finally, answering that age-old question of “do I need a strategic plan or a business plan?” may finally be answered.
What is a Strategic Plan?
Let’s first start by defining a strategic plan. A strategic plan is a set of actions, written or conceptualized, of specific actions that an organization will take in order to reach an objective(s). For example, an objective may be to develop a new clothing product line. From this, some important steps for the owner to take would be to create designs, find suppliers, and start work production. This whole process, from identifying an objective to distributing products to suppliers, would be considered a strategic plan. If you think about it, businesses made up of a multitude of different strategic plans. It’s little wonder why people don’t strategic plan… the process is never-ending.
What is a Business Plan?
As for a business plan, a business plan compiles specific aspects of the business, both internal and external, in a document. Components of a business plan may include the executive summary, company summary, competitive advantages, competitors, industry review, and financial projections.
Differences between Strategic Plan and a Business Plan.
Using these two definitions, we can quickly identify differences between strategic plans and business plans. The biggest difference is that the business plan is more of a snapshot of how the company looks at a specific point in time. Whereas the strategic plan helps business owners and managers accomplish specific objectives using predetermined actions. Another difference is that strategic plans are meant to be implemented on a daily basis. At least, actions taken towards and objectives. For a business plan, this could also be used in a business, however, periodically. For example, business plans are great to use as benchmarks. What I mean by this is that business owners can use business plans to gauge how much they have grown in a specific timeframe, usually six months to a year.
Commonalities between a strategic plan and business plan.
As for commonalities, probably the most unfortunate commonality is that most businesses have neither a business plan nor a strategic plan written. This is undoubtedly heartbreaking for myself. Without tangible benchmarks and understanding the totality of the company, opportunities are often this for revenue generation as well as cost savings. A second commonality would be that both plans should follow specific structures to ensure optimal usage. With a business plan, the structure should follow examples supplied by the SBA. In these examples, headings are usually the major sections, as noted above, whereas the subsections further define the heading topic. To illustrate, one heading may be financial statements. Within this section, subheadings may include the income statement, balance sheet, and profit and loss statement. In following specific structures for these plans, not only will they become easier to use and right after some practice, but also, readers will be able to better understand a structured document.
Published Books by Paul Borosky, Owner, MBA., Doctoral Candidate
Do I need a Strategic Plan or Business Plan?
Hopefully, y’all can see that business owners need both written strategic plans as well as business plans. Further, the documents should be intertwined and seamlessly integrated. To accomplish this, as a professional business plan writer, I always recommend that business owners first write the business plan. In their business plan, make sure to include a strategic planning section focused on one or more aspects of your business. This strategic planning section should be no more than one or two pages. What your business plan is complete, then take the strategic plan section out of the plan and use it as a starting point for your strategic plan. By doing this, your strategic plan will be building off your business plan. This will inevitably lead to synergy within your organization and improve the chances of success for the overall business.
Author: Paul Borosky, Doctoral Candidate, MBA., Author