Business Plans Serve Two Main Purposes

On Monday I talked about the difference between a feasibility study and a business plan. Today I want to share with you the two main purposes for writing a business plan. But, as usual, before we get to that I want to set the stage a little bit for you.

Do I even need a business plan?

I work with companies that are in a variety of stages of growth. The stage of business your company is sets the tone for the types of strategic planning documents you need to produce.

For example, startups that are at the ideation-only stage shouldn’t take the time to write a business plan. There are a range of reasons why. Including that most investors don’t want to take the time to read a business plan. At least not in the early stages of due diligence.

However, if your business is more established a business plan can make more sense.

The key to writing a good business plan is understanding the purpose of that document. Typically there are two main purposes for writing one.

Business Plans serve two main purposes

Most of the entrepreneurs I work with come to me asking for help in developing an investor-ready business plan. But, as I said earlier, that isn’t always a good idea. Instead they should focus on producing a quality pitch deck that tells the story of their idea and the planned business model.

Business plans work great for more established companies. Particularly for two main reasons — in order to raise capital through debt finance (i.e .loans) or to capture how the business will operate. In fact, companies that plan to leverage loans from the Small Business Administration (SBA) to fund growth are required to submit a business plan. But, I also recommend companies use business plans as a manual that describes how the company will operate, what each person’s role is, how the company will market itself, and more.

Since using a plan to obtain funding or to spell out how your company will operate are so different it is important that you keep those purposes in mind when righting your document. Otherwise things will get lost in translation.

Next up I will be talking about how online lending works for small business loans.

P.S. If you looking for tips on how to meet investors, what they look for in a startup, and more check out our Funding Power Pack.

I’m a former C-level banking exec. and 3x startup founder leading a corporate innovation/product team and have helped companies raise over $500M in funding.