There Are Two Main Types of Business Plans

There Are Two Main Types of Business Plans

business plan

Most people only think about a business plan when they are seeking funding. But business plans serve another function as well.

Most of the entrepreneurs that I work with are looking for investor-ready documents, usually in the form of a pitch deck. However, there are occasions when investors want to see a full-fledged business plan. In those instances, or when you need a business plan for applying for an SBA loan, you will want a business plan that is focused on imparting to the investor, or lender, what is different about your business and how you plan to succeed. That type of business plan is meant explicitly to attract funding.

There is another type of business plan that a lot of companies don’t focus on until they are more established. However, I believe this type adds a lot of value and can help you be more successful in scaling your business. That is an operational business plan.

Whether for attracting funding or for running your business there are both similarities and differences in how those documents look and feel.

What are the similarities?

If you saw two business plans side by side, one for funding and one for operations, they would look really similar. Both styles of plan have similar structures to them. They usually take the form of a Word document. Most of the time they are between 10-25 pages in length. A quick tip on that point - if you need your plan going longer than 25 pages it's time to move the less important pieces to an Appendix.

Each has many of the same sections as the other. For example, they each need to have a section for the Company, the Team, Marketing, Competitors, and Projections. As well as a few other common sections.

What are the differences?

The first place you’d notice a difference is in the audience the plan is talking towards. For a funding business plan, the audience is, of course, investors. Or lenders if you are applying for an SBA loan, where one is required. An operational plan is meant to speak to the founder(s) and management. The goal is to explain how the business will be run. So, an operational business plan is also important for employees to read.

There are also a few sections that appear in a funding plan that doesn’t appear in an operational plan. For example, funding plans often have a Use of Proceeds section that explains where the money is going to be used. While an operational plan may address financing it doesn’t typically go into great detail on where new capital will be deployed. How a business plans to market itself is important but only an operational plan requires real in-depth coverage of how the business plans to reach its customers.

Can one plan accomplish both purposes?

In some instances, it is possible to write a plan that serves both funding and operational purposes. But, it is hard to address both aspects well. For starters, by trying to cover both use cases you are going to have a much larger document than I recommend having or one that is so long that an investor won’t want to read the whole thing.

One way you can accomplish this, if you are set on it, is to write an operational plan and then splash additional details of the capital you are looking to raise, what you are willing to give up in exchange, and the use of proceeds.

Or, you can write an operational plan, create a duplicate, and tweak it for investors.