what are the 2 types of business plans

7 Different Types of Business Plans Explained

11 min. read

Updated April 10, 2024

Business plans go by many names: Strategic plans, traditional plans , operational plans, feasibility plans, internal plans, growth plans, and more.

Different situations call for different types of plans. 

But what makes each type of plan unique? And why should you consider one type over another?

In this article, we’ll uncover a quick process to find the right type of business plan, along with an overview of each option. 

Let’s help you find the right planning format.

• What type of business plan do you need?

The short answer is… it depends. 

Your current business stage, intended audience, and how you’ll use the plan will all impact what format works best. 

Remember, just the act of planning will improve your chances of success . It’s important to land on an option that will support your needs. Don’t get too hung up on making the right choice and delay writing your plan.

So, how do you choose?

1. Know why you need a business plan

What are you creating a business plan for ? Are you pitching to potential investors? Applying for a loan? Trying to understand if your business idea is feasible?

You may need a business plan for one or multiple reasons. What you intend to do with it will inform what type of plan you need.

For example: A more robust and detailed plan may be necessary if you seek investment . But a shorter format could be more useful and less time-consuming if you’re just testing an idea.

2. Become familiar with your options

You don’t need to become a planning expert and understand every detail about every type of plan. You just need to know the basics:

• What makes this type of plan unique?
• What are its benefits?
• What are its drawbacks?
• Which types of businesses typically use it?

By taking the time to review, you’ll understand what you’re getting into and be more likely to complete your plan. Plus, you’ll come away with a document built with your use case(s) in mind—meaning you won’t have to restart to make it a valuable tool.

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3. Start small and grow

When choosing a business plan format, a good tactic is to opt for a shorter option and build from there. You’ll save time and effort and still come away with a working business plan.

Plus, you’ll better understand what further planning you may need to do. And you won’t be starting from scratch.

Read More: How to identify the right type of plan for your business

Again, the type of business plan you need fully depends on your situation and use case. But running through this quick exercise will help you narrow down your options. 

Now let’s look at the common business plan types you can choose from.

• Traditional business plan

The traditional (or standard) business plan is an in-depth document covering every aspect of your business. It’s the most common plan type you’ll come across. 

A traditional business plan is broken up into 10 sections:

• Executive summary
• Description of products and services
• Market analysis
• Competitive analysis
• Marketing and sales plan
• Business operations
• Key milestones and metrics
• Organization and management team
• Financial plan
• Appendix 

Why use this type of plan?

A traditional business plan is best for anyone approaching specific business planning events—such as presenting a business plan to a bank or investor for funding.

A traditional plan can also be useful if you need to add more details around specific business areas. 

For example: You start as a solopreneur and don’t immediately need to define your team structure. But eventually you hit a threshold where you need more staff in order to keep growing. A great way to explore which roles you need and how they will function is by fleshing out the organization and management section .

That’s the unseen value of a more detailed plan like this. While you can follow the structure outlined above and create an in-depth plan ready for funding, you can also choose which sections to prioritize. 

Read More: How to write a traditional business plan  

• One-page plan

The one-page business plan is a simplified (but just as useful) version of a traditional business plan. It follows the same structure, but is far easier to create. It can even be used as a pitch document.

Here’s how you’ll organize information when using a one-page plan:

• Value proposition
• Market need
• Your solution
• Competition
• Target market
• Sales and marketing
• Budget and sales goals
• Team summary
• Key partners
• Funding needs

A one-page plan is faster and easier to assemble than a traditional plan. You can write a one-page plan in as little as 30 minutes . 

You’ll still cover the crucial details found in a traditional plan, but in a more manageable format.

So, if you’re exploring a business idea for the first time or updating your strategy—a one-page plan is ideal. You can review and update your entire plan in just a few minutes.

Applying for a loan with this type of plan probably wouldn’t make sense. Lenders typically want to see a more detailed plan to accurately assess potential risk. 

However, it is a great option to send to investors. 

“Investors these days are much less likely to look at a detailed plan,” says Palo Alto Software COO Noah Parsons. “An executive summary or one-page plan, pitch presentation, and financials are all a VC is likely to look at.”

Creating a more detailed plan is as much about being prepared as anything else. If you don’t dig into everything a traditional plan covers, you’ll struggle to land your pitch . 

If you don’t intend to seek funding, a one-page plan is often all you need. The key is regularly revisiting it to stay on top of your business. 

Let’s explore two unique processes to help you do that: 

Read More: How to write a one-page business plan

Lean planning process

Lean planning is a process that uses your one-page plan as a testing tool. The goal is to create a plan and immediately put it into action to see if your ideas actually work. You’ll typically be focusing on one (or all) of the following areas: 

• Strategy – What you will do
• Tactics – How you will do it
• Business Model – How you make money
• Schedule – Who is responsible and when will it happen

Why use this process?

Lean planning is best for businesses that need to move fast, test assumptions, revise, and get moving again. It’s short and simple, and meant to get everyone on the same page as quickly as possible. 

That’s why it’s so popular for startups. They don’t necessarily need a detailed plan, since they’re mostly focused on determining whether or not they have a viable business idea .

The only drawback is that this planning process is built primarily around early-stage businesses. It can be a useful tool for established businesses looking to test a strategy, but it may not be as helpful for ongoing management.

Read More: The fundamentals of lean planning

Growth planning

Growth planning is a financials-focused planning process designed to help you make quick and strategic decisions.

Again, it starts with a one-page plan outlining your strategy, tactics, business model, and schedule. The next step is to create a working financial forecast that includes projected sales, expenses, and cash flows.

From there, you run your business. 

As you go, track your actual financial performance and carve out time to compare it to your forecasts . If you spot any differences, these discrepancies may indicate problems or opportunities that call for adjusting your current strategy.

Growth planning combines the simplicity of the one-page plan and the speed of lean planning, with the power of financial forecasting. 

This makes the process useful for every business stage and even allows you to skip to the forecasting step if you already have a plan.

With growth planning, you’ll:

• Regularly revisit your financials
• Better understand how your business operates 
• Make quick and confident decisions

This process focuses on growing your business. If diving into your financials isn’t a priority right now, that’s okay. Start with a one-page plan instead, and revisit growth planning when you’re ready.

Read More: How to write a growth-oriented business plan

• Internal plan

Sometimes you just need a business plan that works as an internal management tool. 

Something to help you: 

• Set business goals
• Provide a high-level overview of operations
• Prepare to create budgets and financial projections

You don’t need an overly long and detailed business plan for this. Just a document that is easy to create, useful for developing or revisiting your strategy, and able to get everyone up to speed.

The internal plan is a great option if you’re not planning to present your plan to anyone outside your business. Especially if you’re an up-and-running business that may have created a plan previously. You might just need something simple for day-to-day use.

Read More: 8 steps to write a useful internal business plan

• 5-year business plan

Some investors or stakeholders may request a long-term plan stretching up to five years. They typically want to understand your vision for the future and see your long-term goals or milestones.  

To be honest, creating a detailed long-term business plan is typically a waste of time. There are a few exceptions:

• A long-term plan is specifically asked for
• You want to outline your long-term vision
• Real estate development
• Medical product manufacturing
• Transportation, automotive, aviation, or aerospace development

The reality is, you can’t predict what will happen in the next month, let alone the next one, three, or five years.

So, when creating a long-term plan, don’t dig too deep into the details. Focus on establishing long-term goals , annual growth targets, and aspirational milestones you’d like to hit.

Then supplement these with a more focused one-page plan that actually describes your current business, which you can use in your business right now.

Read More: How to write a five-year business plan

• Nonprofit business plan

A nonprofit business plan is not too different from a traditional plan. You should still cover all of the sections I listed above to help you build a sustainable business. 

The main differences in a nonprofit plan are tied to funding and awareness. You need to account for:

• Fundraising sources and activities.
• Alliances and partnerships.
• Promotion and outreach strategies.

You also need to set goals, track performance, and demonstrate that you have the right team to run a fiscally healthy organization. You’re just not pursuing profits, you’re trying to fulfill a mission. But you cannot serve your community if your organization isn’t financially stable.

If you can use your business plan to show that you’re a well-organized nonprofit organization, you are more likely to attract donors and convince investors to provide funding.

Read More: How to write a nonprofit business plan

Resources to help write your business plan

Don’t get too hung up on the type of business plan you choose. Remember, you can always start small and expand if you need to.

To help you do that, I recommend downloading our free one-page business plan template . It’s especially useful if you’re exploring an idea and need a quick way to document how your business will operate.

If you know you’ll pursue funding, download our free traditional business plan template . It’s already in an SBA-lender-approved format and provides detailed instructions for each section. And if you want to explore other options, check out our roundup of the 8 best business plan templates you can download for free.

Lastly, check out our library of over 550 sample business plans if you need inspiration. These can provide specific insight into what you should focus on in a given industry.

Remember, just by deciding to write a business plan, you are increasing your likelihood of success. Pick a format and start writing!

Types of business plans FAQ

Which type of planning should be done for a business?

The type of planning fully depends on your business stage and how you intend to use the plan. Generally, whatever format you choose should help you outline your strategy, business model, tactics, and timeline.

How many types of business plans are there?

There are seven common types of business plans, including: traditional, one-page, lean, growth, internal, 5-year, and nonprofit plans.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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What is a Business Plan? Definition, Tips, and Templates

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]

Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

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Click this link to access this resource at any time.

Free Business Plan [Template]

Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

• Business Plan Subtitle
• Executive Summary
• Company Description
• The Business Opportunity
• Competitive Analysis
• Target Market
• Marketing Plan
• Financial Summary
• Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

• Startup Business Plan
• Feasibility Business Plan
• Internal Business Plan
• Strategic Business Plan
• Business Acquisition Plan
• Business Repositioning Plan
• Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

• A detailed product description
• Market analysis
• Technology needs
• Production needs
• Financial sources
• Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

• Department-specific budgets
• Target demographic analysis
• Market size and share of voice analysis
• Action plans
• Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

• Relevant data and analysis
• Assessments of company resources
• Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

• How an acquisition will change its operating model
• What will stay the same under new ownership
• Why things will change or stay the same
• Acquisition planning documentation
• Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

• What the new owner will do to turn the business around
• Historic business metrics
• Sales projections after the acquisition
• Justification for those projections

6. Business Repositioning Plan

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

• Acknowledge the current state of the company.
• State a vision for the future of the company.
• Explain why the business needs to reposition itself.
• Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

• SWOT analysis
• Growth opportunity studies
• Financial goals and plans
• Marketing plans
• Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.

• What are some of the reasons why business plans don't succeed?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

Looking for someone to write a business plan?

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These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

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Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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BUSINESS STRATEGIES

7 types of business plans every entrepreneur should know

• Amanda Bellucco Chatham
• Aug 3, 2023

What’s the difference between a small business that achieves breakthrough growth and one that fizzles quickly after launch? Oftentimes, it’s having a solid business plan.

Business plans provide you with a roadmap that will take you from wantrepreneur to entrepreneur. It will guide nearly every decision you make, from the people you hire and the products or services you offer, to the look and feel of the business website you create.

But did you know that there are many different types of business plans? Some types are best for new businesses looking to attract funding. Others help to define the way your company will operate day-to-day. You can even create a plan that prepares your business for the unexpected.

Read on to learn the seven most common types of business plans and determine which one fits your immediate needs.

What is a business plan?

A business plan is a written document that defines your company’s goals and explains how you will achieve them. Putting this information down on paper brings valuable benefits. It gives you insight into your competitors, helps you develop a unique value proposition and lets you set metrics that will guide you to profitability. It’s also a necessity to obtain funding through banks or investors.

Keep in mind that a business plan isn’t a one-and-done exercise. It’s a living document that you should update regularly as your company evolves. But which type of plan is right for your business?

7 common types of business plans

Startup business plan

Feasibility business plan

One-page business plan

What-if business plan

Growth business plan

Operations business plan

Strategic business plan

01. Startup business plan

The startup business plan is a comprehensive document that will set the foundation for your company’s success. It covers all aspects of a business, including a situation analysis, detailed financial information and a strategic marketing plan.

Startup plans serve two purposes: internally, they provide a step-by-step guide that you and your team can use to start a business and generate results on day one. Externally, they prove the validity of your business concept to banks and investors, whose capital you’ll likely need to make your entrepreneurial dreams a reality.

Elements of a startup business plan should include the following steps:

Executive summary : Write a brief synopsis of your company’s concept, potential audience, product or services, and the amount of funding required.

Company overview: Go into detail about your company’s location and its business goals. Be sure to include your company’s mission statement , which explains the “why” behind your business idea.

Products or services: Explain exactly what your business will offer to its customers. Include detailed descriptions and pricing.

Situation analysis: Use market research to explain the competitive landscape, key demographics and the current status of your industry.

Marketing plan: Discuss the strategies you’ll use to build awareness for your business and attract new customers or clients.

Management bios: Introduce the people who will lead your company. Include bios that detail their industry-specific background.

Financial projections: Be transparent about startup costs, cash flow projections and profit expectations.

Don’t be afraid to go into too much detail—a startup business plan can often run multiple pages long. Investors will expect and appreciate your thoroughness. However, if you have a hot new product idea and need to move fast, you can consider a lean business plan. It’s a popular type of business plan in the tech industry that focuses on creating a minimum viable product first, then scaling the business from there.

02. Feasibility business plan

Let’s say you started a boat rental company five years ago. You’ve steadily grown your business. Now, you want to explore expanding your inventory by renting out jet skis, kayaks and other water sports equipment. Will it be profitable? A feasibility business plan will let you know.

Often called a decision-making plan, a feasibility business plan will help you understand the viability of offering a new product or launching into a new market. These business plans are typically internal and focus on answering two questions: Does the market exist, and will you make a profit from it? You might use a feasibility plan externally, too, if you need funding to support your new product or service.

Because you don’t need to include high-level, strategic information about your company, your feasibility business plan will be much shorter and more focused than a startup business plan. Feasibility plans typically include:

A description of the new product or service you wish to launch

A market analysis using third-party data

The target market , or your ideal customer profile

Any additional technology or personnel needs required

Required capital or funding sources

Predicted return on investment

Standards to objectively measure feasibility

A conclusion that includes recommendations on whether or not to move forward

03. One-page business plan

Imagine you’re a software developer looking to launch a tech startup around an app that you created from scratch. You’ve already written a detailed business plan, but you’re not sure if your strategy is 100% right. How can you get feedback from potential partners, customers or friends without making them slog through all 32 pages of the complete plan?

That’s where a one-page business plan comes in handy. It compresses your full business plan into a brief summary. Think of it as a cross between a business plan and an elevator pitch—an ideal format if you’re still fine-tuning your business plan. It’s also a great way to test whether investors will embrace your company, its mission or its goals.

Ideally, a one-page business plan should give someone a snapshot of your company in just a few minutes. But while brevity is important, your plan should still hit all the high points from your startup business plan. To accomplish this, structure a one-page plan similar to an outline. Consider including:

A short situation analysis that shows the need for your product or service

Your unique value proposition

Your mission statement and vision statement

Your target market

Your management team

The funding you’ll need

Financial projections

Expected results

Because a one-page plan is primarily used to gather feedback, make sure the format you choose is easy to update. That way, you can keep it fresh for new audiences.

04. What-if business plan

Pretend that you’re an accountant who started their own financial consulting business. You’re rapidly signing clients and growing your business when, 18 months into your new venture, you’re given the opportunity to buy another established firm in a nearby town. Is it a risk worth taking?

The what-if business plan will help you find an answer. It’s perfect for entrepreneurs who are looking to take big risks, such as acquiring or merging with another company, testing a new pricing model or adding an influx of new staff.

A what-if plan is additionally a great way to test out a worst-case scenario. For example, if you’re in the restaurant business, you can create a plan that explores the potential business repercussions of a public health emergency (like the COVID-19 pandemic), and then develop strategies to mitigate its effects.

You can share your what-if plan internally to prepare your leadership team and staff. You can also share it externally with bankers and partners so that they know your business is built to withstand any hard times. Include in your plan:

A detailed description of the business risk or other scenario

The impact it will have on your business

Specific actions you’ll take in a worst-case scenario

Risk management strategies you’ll employ

05. Growth business plan

Let’s say you’re operating a hair salon (see how to create a hair salon business plan ). You see an opportunity to expand your business and make it a full-fledged beauty bar by adding skin care, massage and other sought-after services. By creating a growth business plan, you’ll have a blueprint that will take you from your current state to your future state.

Sometimes called an expansion plan, a growth business plan is something like a crystal ball. It will help you see one to two years into the future. Creating a growth plan lets you see how far—and how fast—you can scale your business. It lets you know what you’ll need to get there, whether it’s funding, materials, people or property.

The audience for your growth plan will depend on your expected sources of capital. If you’re funding your expansion from within, then the audience is internal. If you need to attract the attention of outside investors, then the audience is external.

Much like a startup plan, your growth business plan should be rather comprehensive, especially if the people reviewing it aren’t familiar with your company. Include items specific to your potential new venture, including:

A brief assessment of your business’s current state

Information about your management team

A thorough analysis of the growth opportunity you’re seeking

The target audience for your new venture

The current competitive landscape

Resources you’ll need to achieve growth

Detailed financial forecasts

A funding request

Specific action steps your company will take

A timeline for completing those action steps

Another helpful thing to include in a growth business plan is a SWOT analysis . SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis will help you evaluate your performance, and that of your competitors. Including this type of in-depth review will show your investors that you’re making an objective, data-driven decision to expand your business, helping to build confidence and trust.

06. Operations business plan

You’ve always had a knack for accessories and have chosen to start your own online jewelry store. Even better, you already have your eCommerce business plan written. Now, it’s time to create a plan for how your company will implement its business model on a day-to-day basis.

An operations business plan will help you do just that. This internal-focused document will explain how your leadership team and your employees will propel your company forward. It should include specific responsibilities for each department, such as human resources, finance and marketing.

When you sit down to write an operations plan, you should use your company’s overall goals as your guide. Then, consider how each area of your business will contribute to those goals. Be sure to include:

A high-level overview of your business and its goals

A clear layout of key employees, departments and reporting lines

Processes you’ll use (i.e., how you’ll source products and fulfill orders)

Facilities and equipment you’ll need to conduct business effectively

Departmental budgets required

Risk management strategies that will ensure business continuity

Compliance and legal considerations

Clear metrics for each department to achieve

Timelines to help you reach those metrics

A measurement process to keep your teams on track

07. Strategic business plan

Say you open a coffee shop, but you know that one store is just the start. Eventually, you want to open multiple locations throughout your region. A strategic business plan will serve as your guide, helping define your company’s direction and decision-making over the next three to five years.

You should use a strategic business plan to align all of your internal stakeholders and employees around your company’s mission, vision and future goals. Your strategic plan should be high-level enough to create a clear vision of future success, yet also detailed enough to ensure you reach your eventual destination.

Be sure to include:

An executive summary

A company overview

Your mission and vision statements

Market research

A SWOT analysis

Specific, measurable goals you wish to achieve

Strategies to meet those goals

Financial projections based on those goals

Timelines for goal attainment

Related Posts

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Business Plan: A Beginner’s Guide with Types and Templates

Setting up your own company, business, or startup could be an overwhelming process. It involves a variety of operations that need to be carried out in areas such as legal, financial, sales, among others. All these operations are a part of the Business Plan. The question here is what is a business plan and how do you go about writing it?

This article takes you on a detailed journey of writing a business plan apart from the following points:

• Understanding a business plan
• Elements of a business plan
• Types of business plans
• We also see why making a business plan is important
• How to write a step-by-step business plan?
• We also look into why some business plans fail.
• Business plans FAQ

What Is a Business Plan?

The startup of a company requires knowing and addressing many problems — legal issues, finance, sales and commercialization, protection of intellectual property, protection of liability, and more.

A business plan is defined as a written document that comprises business details, the company’s goals, and methods to achieve these goals. A business plan contains a comprehensive framework for the company in terms of marketing, finance, and operations.

Business plans serve a significant purpose. They are documents that can assist in inviting potential investment before a substantiated record of success has been ascertained. It helps create a good platform for businesses to continue to pursue targets.

Drafting a business plan is specifically useful for a startup or new enterprise. Optimally, the plan will be periodically restructured to see if objectives have been achieved or changed throughout the years. The companies may also decide after some time to redraw and upgrade the business plan to give a new direction after establishment.

Understanding Business Plans

Fundamentally, a business plan is a key document that must be put in place before start-up activities. Therefore, before new companies can provide their capital, banks and risk-capital companies often make a viable business plan a necessary precondition.

It is highly advisable to define a business plan before commencing any operations of the business. There have been examples of companies not lasting long without a competent business plan. It helps the businesses take decisions on matters of investments, learn about potential risks and adapt to new trends.

A strong business plan defines a company's identity, what it does, how it does it, and where it's headed. It is easier to grasp a company plan if you keep this history in mind. The core team or the people in a company's internal dynamics shapes its policies and objectives, or participates in the capital budgeting process must be able to comprehend a business plan.

Here’s a step-by-step guide to understanding the complicated and detailed document.

Executive Summary

Being the first section in a business plan, it comprises the summary of the entire strategy of the company. This 2 to 3-page summary presents the vision statement and brings into perspective the rest of the strategy.

Table of Contents

This comes after the executive summary. This should be looked into carefully to know if there are any particular aspects you would want to know the details about.

The next few sections can tell you a lot about who the adversaries are and what sort of products and services does the company offer. Any kind of issues that the company faces or even its capabilities are mentioned in this section.

Look for Management Capabilities

Within these sections, there would be information about the people playing key roles in the company. You can know about their qualifications and expertise from the document. These spaces will also consist of the description of the location of the company. It would be good to know about it to assess if it is strategically situated.

Operations Section

This section comprehensively describes the manufacturing, marketing, selling of products carried out by the business. Its customer support and other services can be assessed from this section.

Finances and Forecast Section

This could be helpful in understanding the revenue, expenditure, and other critical financial aspects of the organization. A complete chart of costs, risk analyses, and earnings estimates can be accessed through this section. This space also provides details about how these important digits were arrived at.

Final Section

This helps you understand the company’s targets and projections and the measures they wish to take for accomplishing the same. This will also share a glimpse of the ways in which the resources or funds from the investors will be used.

Elements of a Business Plan

Typically, a 20-25 page document, business plan varies hugely based on the type and size of the business. The details or the depth of the plan could be diverse and entail different kinds of elements. However, there are some crucial elements that come under the main plan and are also a part of the appendices.

Although, business plans are different, here are some common critical elements that are included in all the plans. Let’s look at them one by one:

This is the point that elaborately explains the mission of the company. Besides, it also includes information about the company’s management leaders, employees, functions.

Products and Services

This point includes all the products or services that the company is offering. Apart from the names of these products, services, it also comprises the details pertaining to the product such as the pricing, longevity, and benefits that the customers can avail of from its services.

Other information that could be a part of this point, includes production and manufacturing processes. It may also showcase any patents or proprietary technology that the company has acquired. A research and development report is also a part of this element.

Market Analysis

A company must have a thorough understanding of its sector as well as its intended audience. A market analysis will show you the expected demand for the products that the company sells. It will also help you know what difficulties you could face from the competitors. This will also assist you with an insight into the expertise of the contemporaries along with their strengths and drawbacks.

Marketing Strategy

This section explains how the organization plans to recruit and retain customers, as well as how it plans to reach out to them. This necessitates the creation of a distinct distribution channel. It will also detail branding, brand awareness and email marketing campaign plans , as well as the forms of media via which such efforts will be carried out.

Financial Planning

The organization should incorporate its financial planning and future estimates in order to persuade the other parties to review its business plan. The established companies may include income statements , balance sheets, and so on; On the other hand, new enterprises will include objectives and projections for the initial years of operation, as well as venture capitalists.

Every good business should have a budget in place. This comprises expenses such as employment, innovation, production, advertising, and any other business-related expenditure.

Types of Business Plans

The company management and investors can use business plans to help them start and grow their company. A company prepares a business plan to describe the objectives that will forecast and organize for expansion and to understand each area of the firm. A business plan is written by competent entrepreneurs to direct management and attract investment funds.

Business plans are drawn based on the requirements of the company. With this in mind, there are the following types of business plans:

Business Plans for Startups

A start-up business plan should outline the actions necessary to launch a new firm. It also includes a financial study with spreadsheets that describe financial concepts such as income, profit, and cash flow estimates. This may also be used by potential investors to gain an insight into the financial status of the startup. The startup business plans give clarity on market analysis, the product or service that the startup will provide besides the set goals.

Internal Business Plans

Internal plans detail project marketing, staffing, and technology costs. This document will summarise the company's present situation, including administrative performance and profitability, before determining whether and how the company would repay any project-related cash. These are written for a limited audience within the company, such as the marketing team evaluating a proposed initiative. They usually comprise a market study that shows the intended audience, competitive landscape, and the market's beneficial impact on corporate profits.

Business Plans for Strategic Business Development

A strategic business plan lays out a structural plan by providing a high-level picture of the company's objectives and how it moves to achieve them. While the framework of a strategic business plan varies per firm, typically contain five elements:

• The vision statement
• The mission statement
• Defining the key performance factors
• tactics for accomplishing objectives
• Timeframe for implementation

A strategic business plan engages personnel at all levels of the organization in the big picture, motivating them to collaborate to achieve the company's objectives

Business Plans for Scalability

A feasibility or scalability business plan considers two key issues regarding a planned business endeavor:

• If there will be buyers for the products or services that the company intends to sell.
• Whether or not the enterprise will be profitable.

This plan highlights the details of the demand of the product or service and the associated target audience for the said product. A feasibility study typically concludes by providing recommendations for the future.

Business Plans for Operations

These include features regarding the operations of the company and hence, the name. The plan specifies the deployment benchmarks and timelines for the future year. It also entails employee responsibilities.

Business Plans for Growth

These are also known as the plans for expansion and are created for both, internal as well as external use. This plan features the details around the following points:

• Detailed and specific highlights about the company
• Details of officials as the company

It is important to chalk out this plan and give the relevant corporate details to convince the potential investors.

The Importance of Making a Business Plan

Entrepreneurs frequently utilize business plans. It is doable to travel without a business strategy, but doing so will simply raise the chances of wandering aimlessly along the trip. This helps them to steer clear of any potential problems and putting themselves in a situation where they may have to keep asking for directions.

Therefore, business plans are necessary to help business owners in observing the broader picture, planning for the future, making critical decisions, and increasing their overall chances of success.

Defining organizational goals

A small business, a startup, an established business; all need a business plan. When it comes to small businesses, the business plans can be helpful in structuring the goals of the organization. It can allow you to monitor and govern everything you've strived to produce if you use it correctly and use it on a frequent basis. Finally, it can serve as a reliable tool for management to stay on track with administrative milestones.

To assist you in making important decision

The fundamental objective of a good business plan is to assist business owners in making better decisions. Companies don't always have the opportunity to take time and analyzing all of the implications of a decision. A company plan can help with this. Management frequently deals with a never-ending exercise in making decisions and dealing with crises. Developing a business plan involves estimating the outcome with some of the most important company actions.

Minimize Risks

Handling the operations of a business can involve risky steps, but it tends to become much more sustainable with a well-thought business strategy. Developing accounting period predictions, logistics planning, and a thorough knowledge of the future outlook can assist with mitigating the risk of a job that is intrinsically insecure.

A business plan makes it easier to find better solutions, leads to better decisions, and see a clearer picture of the organizational future.

Obtain Funding

While there are multiple activities for which a business plan is required, a major reason why you may need it is to secure funding from venture capitalists. The most effective means of demonstrating your competence is through a business plan, which is usually a prerequisite for anyone seeking outside funding. And anyway, anyone considering investing in your company will want to know it's in fantastic form and will be profitable in the long run.

To serve as a resource for service providers

Contractors, freelancers, and other experts are commonly a part of an organization. They are important people as they help with some of the crucial duties such as bookkeeping, legal aid, consulting, and so on. Having a business plan in place will help them get a fair idea of the key portions of areas where they are required.

To prevent unnecessary blunders

A business plan can help understand the reasons and avoid potential mistakes and blunders. Some of the most commonly observed mistakes could be:

• Capital troubles: Cash flow troubles or just running out of money are both examples of a lack of capital.
• No Appreciation: Nobody buys what you're selling since there isn't a market for it.
• Insufficient team: This emphasizes the significance of employing the correct personnel to assist you in running your company.
• Excessive competition: It's difficult to make a consistent profit when there's huge competition.

5 Quick and Easy Ways to Create an Excellent Business Plan

Let's speak about certain guidelines that will make the entire company planning process more efficient before you start writing your business plan. We have put together the following points to direct you towards writing a goal-oriented business plan.

Keep it concise

A long business plan which has over 50 pages will not only consume a lot of time in drafting but may not essentially be efficient in the long run. The foundation of writing a business plan is to quickly write it and move on with the tasks defined in it.

Moreover, it is a tool to help the company grow; it will require to be fine-tuned continuously, and therefore, it is best to keep it short and precise.

Audience-centric

Make your business plan by keeping in mind the audience who would be referring to it for accomplishing their goals. An example is if the business plan is aimed at readers that consist of investors as the primary audience, it would be wise to draft it in a language that would be comprehended by them.

Test viability of your business

The more tests you conduct for the elements mentioned in your plan, the better the business plan. Elements of a business plan, as we know now, could include anything from mission and vision statement to products and services. It is recommended you get approval or feedback on the elements included in your business plan.

Determine your aims and objectives

You should have a clear idea of what you want to obtain out of your company from the start. Determine if you are looking for a complete overhaul of your business?  Or if you are aiming to expand your employee base?  Knowing what you want to achieve can help you design a company plan that is tailored to these objectives.

Don’t Get Discouraged

You might be a new entrepreneur who has just started to look for setting up a business plan. No matter, how daunting this may seem in the beginning, it is good you do not get intimidated by the process.

Although initially writing a business plan may seem difficult, all you need is to be confident and expert in your field. If you're an expert in your field and know everything there is to know about it, then this is all that takes to establish a business strategy.

With this information, we move on to the main section of this article which explains a step-by-step process to write a business plan.

Download Business Plan Template

How to write a business plan, step by step.

While writing a business plan, there could be two scenarios that could be considered:

• Traditional Business Plan
• Lean Startup Plan

Let’s look at each of these in detail:

Traditional Business Plan Format

If you're particularly looking for specifics, want a complete plan, or plan to seek funding from conventional sources, you could choose a typical business plan structure. Instead of following the conventional model, focus on the portions that are most relevant to your business and needs. You could use a combination of the sections in the conventional plan to describe how your company can benefit the reader.

Executive Summary: Points that can go here are:

• Mission statement
• Talk about your products and services
• Information regarding the key personnel, employees
• Location of the company
• Also, some high-level plans for growth, in case you wish to seek funds.

Company Details: This includes all the minute details of your company. Talk about what kind of solutions your company provides. Points to be included here are:

• Problems that you can solve
• Enlist your consumers or businesses you wish to serve
• Mention the distinguishing feature or the USP of your company
• Mention the expertise held by the key people involved
• Include a complete overview of the strengths of your company

Market Analysis: You must closely understand your business perspective and the target market. Through thorough competitive analysis, you could assess the market trends and seek answers to the following questions:

• What are the current trends in the market?
• What are the success mantras of other companies?
• Will you be able to achieve what they are doing?
• Do you need more expertise to do it better?

Company and Management: This section is about informing your audience about how and who is in charge of the business. This would be an apt space to describe the points mentioned:

• Company’s legal structure.
• Declare of your company is a general or limited partnership.
• Determine if you want your business to be a C or S corporation
• Also, state if you are the only proprietor or a Limited Liability company.

Products and Services: This section explain the products and services that you wish to sell. Include these under this section:

• Let your audience know of your planning to get a patent, intellectual property, or copyright fr your products.
• Explain the R&D process undertaken with regards to a particular product or service.
• Also, describe the product lifecycle and the benefits of your product.

Marketing and Sales: With the varying requirements per company, the marketing strategies can be unique to all. Based on your domain and industry, you must explain the following points in this section:

• Describe the appeal and retention of customers
• How a sale really is going to take place
• Make revenue projections and forecasts

Funding Application/Request: This area will explain your funding requirements in case you apply for funding. You should also make these points clear:

• How often and how much funding you shall require
• Explain how you plan to use it over the years (providing the number of years would be appropriate)
• Mention the terms and conditions agreeable by you
• If you would want to take a debt or an equity
• Explain your expenses like your bills, employee salaries, purchase of new equipment, etc.
• Always mention your debt repayment strategies.

Financial/Revenue Projections: This goes hand-in-hand with your funding request. It brings forth your company’s stability, sustainability, and growth prospects. Here’s what should go in this section:

• All the revenue reports, balance, and income statements for the past 5 years in case yours is an established company.
• Enlist any guarantees you can levy against a loan
• Explain your financial growth plan for the next 5 years.
• Income forecasts, expenditures, and budgets
• Present a graphical analysis through charts to depict your monthly/quarterly growth plan.

Appendix: This section could be used to attach other essential documents such as:

• Legal documents
• Product pictures, if demanded.
• Credit history
• Licenses, etc.

Let’s look at the startup business plan and its design.

Startup Business Plan

Although all the business plans comprise of the nice segments, the startup business plan can touch upon each one of those without going much into the details. Moreover, as compared to the traditional plan, this one provides you a lot more agility in terms of making amendments. This would be beneficial as a startup frequently undergoes a lot of changes in its initial years.

Let’s look at the components you’ll be adding to your startup business plan:

Customer Segment: This section explains who your target customers or audience will be. While there could be numerous segments enlisted in this section, it would be wise to identify the ones that your business will most appeal to. Identifying them and naming them here is crucial.

Value Proposition: This is intended for the different audiences your business wishes to serve, The value your business holds or offers to them can be different. In this section, you describe how and what value proposition you will be making for each of those businesses/customers. It is important to figure this out and write it down here as that indicates the value-add your company holds.

Channels: This displays the communication channels you will be using to covey your propositions to your customers.

Customer Relationships: This will highlight your ways of maintaining communication with your customers. You can list down the ways through which you shall be communicating: whether they will be informed through automated emails or will you be connecting with them personally, all goes in here.

Revenue Streams: This point elaborates on where your revenue or income is coming from. An already established business may have multiple sources of income but if yours is a startup, then it may have only one. Nevertheless, you must identify and mention it here.

Key Resources: The resources in your company need to be mentioned here; this includes but is not limited to your employees, key personnel, infrastructure, among others.

Activities: Details of all the crucial activities that strengthen your business or lead it to a meritorious milestone need to go in here.

Important Partnerships: Most of the new businesses invite partnerships and have shared resources. There are certainly some other entities or businesses involved and they must find a mention in this section. These include all your vendors, suppliers, manufacturers, or other people you are working with.

Cost Structure: Once you have identified and defined your business’s requirements and infrastructure, it is time to get the details of the costs of your business. You can also give away the plans or strategies you have to optimize those associated costs.

Why do Business Plans Fail?

While there are numerous business plans drafted each year, only a few of these companies make it to the success ladder. While such business plans can include good suggestions, they fall short. The company’s projects also tend to meet the same fate; despite the brilliant ideas, the project collapses. The reasons for this failure could be many. Wouldn’t it be great if we could foresee them and avoid them before they cause failure?

Here are some reasons that could lead to a failed business plan:

Unreal objectives and ambitions

It may not always be a great idea to reach out for the highest goals in the realm of the business plan. Although high goals are important, the path to reach these goals must be realistic and achievable. You might aspire to make a grand sale of say, thousands of your products in a month but that may not always be attainable. It s, therefore, important to work out a business plan to make it realistic to avoid failures in the future.

Lack of Motivation

Businesses are driven on tonnes of motivation, which in turn is effective on the productivity of the company. The entrepreneurs with a solid determination and motivated team have been great examples of turning their ventures into grand success stories in a relatively short time. Not only does the leader need to be motivated, but the motivation also needs to flow on to his team and all employees to make a difference to the overall output. A company where the leaders lack motivation could be walking slowly towards failure.

Lack of Proper Budgeting

Budgeting is a vital aspect of a business, and a lack of real-world budgeting is a factor to avoid. It is not advisable to always go for a loan to launch the company every time. Unless you can get your theory to move in the right direction, your financial support may evaporate. Therefore, the cost of building a company must be determined and maintained through the first year. All the cost factors should be worked out much in advance to keep away disappointments in the later stages of development.

Inadequate Market Research

Market research is all about acquiring enough information and understanding the current trends in the market. Your plan should be aligned with the kind of market research you have done. Being a vital part of a new company’s business plan, market research needs to provide you a competent data to battle out the odds that you may face. Sufficient information in this regard will help you establish a plan that’s effective. Not doing so may lead you to scrap it and restart the work with greater amounts of time and effort.

Business Plans FAQ

Now that you have a fair idea of how to go about writing a business plan, let’s look around at some of the frequently asked questions:

Do I have to include all the sections?

A clear answer is No. You need not include all the sections, but work out only those that are relevant to your company and business. With the nine sections, you are trying to give away maximum relevant information in the plan; however, not all of the sections would need to be addressed.

How long should the plan be?

Your plan only needs to have all the information composed well into one document. There is no specific length or the number of pages that it should have. When you are sure that it mentions all the required information, you are good to go.

Would be a good idea to start a business in an economically challenged scenario?

Although economic ups and downs could be dissuading, especially while starting a new business. Our take is that any business that can compete well with the existing prices and offers great value to customers can make it big.

How can Deskera Help You with Your Business Plan?

Deskera offers you to learn the concepts of business and get acquainted with the top software applications for startups and can also help with accounting for startups . You may refer to Deskera’s blogs to get a better grip over business topics such as How to understand a balance sheet , Main financial statements , Why are income statements important .

Besides, you may also learn a lot from the Best Marketing Blogs 2020 and the user-friendly CRM , Business Expense , Accounting Cycles .

Take your business to the next level with Deskera All-in-One . It is a platform that offers Invoicing, Accounting, Inventory, CRM, HR & Payroll all under one roof. With Deskera Books , you can avail of online invoicing, accounting & inventory software to boost your business. It covers all the significant aspects of business such as billing, payments, warehouse management, Credit &Debit Notes, financial reports, an elaborate business dashboard apart from many other features.

Key Takeaways

Let’s look at the key points from the document:

• A business plan is a written document that describes the functional areas, goals, and the way in which a company aims to address its objectives.
• In order to attract external investors startups utilize business plans.
• Companies can develop a longer traditional business plan or a shorter startup or small business plan.
• Executive summaries, distribution channels, promotional strategies, and analytical information, wealth management, and budget should include good business plans.
• Business plans could be drafted for Startups, internal business, strategic business development, scalability, and operations.
• There are 2 major types of business plans: Traditional business plans and startup business plans.
• Unreal objectives, lack of motivation, and market research could be the reasons for the failure of a business plan

Related Links

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5 Types Of Business Plans (+ Customizable Templates)

Find the best form of business plan for your venture and learn to align your business plan model with a winning strategy. Grab a template to get started.

6 minute read

helped business professionals at:

Short answer

What are the main types of business plans?

5 main types of business plans:

Startup business plan

One-pager business plan

Operational business plan

Feasibility business plan

Growth business plan

Aligning your strategy with the wrong type of business plan leads to failure

Crafting a sharp business plan is non-negotiable if you want your project to lift off the ground.

Yet, many miss the mark by not adapting their strategy to the appropriate type of business plan. It's like trying to open a door with the wrong key, frustrating and futile. This oversight can lead to miscommunication, disinterest from crucial stakeholders, and missed growth opportunities.

Here's where I step in, offering you a master key to unlock the true potential of effective business planning.

You'll learn about the strategic value of tailoring your plan to fit specific needs, whether you're kickstarting a venture, seeking investment, or plotting growth. Let's go.

What makes a successful business plan?

Creating a business plan that stands out involves more than just outlining your business's operations. It's about highlighting how your business differentiates itself and thrives within its industry.

Drawing inspiration from expert advice on business planning, here's an overview of the key elements that make a business plan successful. 6 key elements of a winning business plan:

Precision and structure: It's sharp, structured, and zeroes in on the business's main goals and strategies without unnecessary fluff.

Grounded objectives and forecasts: It sets attainable objectives and includes grounded financial forecasts, informed by thorough market analysis and industry insights.

Flexibility: It remains adaptable, ready to evolve alongside the business and shifting market dynamics.

Audience-specific design: It's crafted with the target audience in mind, whether that's attracting investors, securing loans, or engaging customers, ensuring it resonates and meets their expectations.

Clear communication: It communicates the business idea, market potential, and growth trajectory clearly and persuasively.

Defined action plan: It provides a clear set of steps to be undertaken to reach the business's goals, making it practical and actionable.

Internal vs. external business plan

The difference between internal and external business plans is based on their intended audience.

INTERNAL BUSINESS PLAN

EXTERNAL BUSINESS PLAN

Internal business plan

Internal documents tailored for departments such as marketing or HR emphasize succinct insights about the company and a more focused financial outlook. These documents usually adopt a less formal tone.

Purpose: Align your team and streamline operations.

Key approach: Focus on strategy, flexibility, and clear metrics.

Tip: Regularly review and update the plan, and encourage team feedback.

External business plan

External documents reach out to those outside your immediate circle, such as investors or partners. They provide a thorough overview of your company, including detailed financials, and maintain a formal tone, typically aimed at securing funding or establishing partnerships.

Purpose: Impress and persuade investors or partners.

Key approach: Ensure clarity, and professionalism, and tailor content to your audience.

Tip: Understand your audience's priorities, and seek expert feedback before finalizing.

5 types of business plans to align your strategy with

Picking the right business plan is a big deal for founders, managers, and leaders. But let's be honest, diving into the sea of options can feel overwhelming.

Whether you're chasing funding, dreaming of expanding or looking to streamline your operations, I've got you covered.

I'm talking about seizing opportunities to not just meet your goals but to exceed them. Let's dive in and align your ambitions with the perfect plan.

1) Startup business plan

Audience: External stakeholders, including investors and financial institutions.

Depth: Comprehensive and detailed.

Purpose: To outline the steps for launching a new venture and securing funding.

The startup plan is your blueprint for launching a new venture.

It's packed with everything from a punchy executive summary that grabs you with the business concept to deep dives into market trends and who you're up against.

It lays out financial forecasts with precision, giving potential backers a crystal-clear picture of where you're headed in terms of profits and what you need to get there.

This plan isn't just about pulling in funds; it's your strategic playbook for carving out a successful path forward. For newbies on the entrepreneurial scene, it's nothing short of essential.

Here’s an example of a start-up business plan:

2) One-pager business plan

Audience: External parties, such as potential investors, partners, and vendors.

Depth: High-level and succinct.

Purpose: To quickly communicate the business's value proposition and growth potential.

The one-page plan condenses the core of a business strategy into a succinct and impactful document, crafted to immediately capture the attention of potential investors, partners, and vendors.

It showcases the unique value proposition, targets the market with effective strategies, and highlights financial insights and growth potential.

This streamlined plan turns out to be a game-changer for entrepreneurs looking to share their vision and strategy in a clear, easy-to-understand way.

It quickly gets the point across and sparks interest from potential stakeholders, encouraging them to dive deeper.

Here’s an example of a one-pager business plan:

3) Operational business plan

Audience: Internal management teams and department heads.

Depth: Detailed, focusing on day-to-day operations and short-term goals.

Purpose: To streamline internal processes and enhance operational efficiency.

The operational business plan is like the company's playbook, focusing on fine-tuning every single part of your operations.

It lays out the operational goals that sync up with your big-picture strategies, breaking down the exact tasks and processes you need to nail those targets.

You've got everything mapped out, from streamlining workflows to boosting efficiency, and even who's doing what to ensure you're all pulling in the same direction.

It also covers allocating resources, from budgets to materials, ensuring every department has what it needs.

Diving into the nitty-gritty of your day-to-day, this plan is key for spotting where you can do better, ramping up productivity, and hitting your short-term goals more smoothly.

Here’s an example of an operational business plan:

4) Growth business plan

Audience: Both internal stakeholders for strategic alignment and external parties for investment or partnership opportunities.

Depth: This can vary from lean to standard, depending on the audience.

Purpose: To provide a strategic framework for business expansion.

The growth plan feels like launching into a new adventure, much like a startup plan, but for your next big leap.

It's about charting a course for new markets, beefing up your product lines, or scaling operations to new heights.

This plan packs deep dives into the business, financial forecasts that map out your journey, and a rundown of the resources you'll need to expand.

It's a guiding light for businesses aiming for sustainable growth, laying out a clear path and milestones to hit along the way.

Whether it's guiding your team internally or dazzling potential investors, the growth plan pulls everyone together, focusing efforts on shared growth targets.

It's about making sure every stakeholder is in sync, marching towards the same ambitious goals.

Here’s an example of a growth business plan:

5) Feasibility business plan

Audience: Primarily internal, though it can be external if linked to funding requests.

Depth: Focused and streamlined.

Purpose: To assess the viability of a new product or service.

A feasibility plan, or feasibility study, acts as a litmus test for proposed business expansions or new product launches.

It delves into the practicality of the idea, examining market demand, technical requirements, and financial implications.

By focusing on specific growth opportunities and analyzing them against objective standards, this plan helps decision-makers within the organization determine whether to proceed with the venture.

It's a critical step in the planning process, ensuring resources are allocated to projects with the highest potential for success.

For ventures requiring external funding, a more detailed version of this plan may be necessary to convince investors of the project's feasibility.

If you want to learn more, check out our guides on business plan:

7 Key Components of a Precise Business Plan (2024)

How to Write a Business Plan (Examples & Templates)

How to Make a Killer Business Plan Presentation (+Templates)

Create a Business Plan One-Pager (+ Proven Templates)

Don’t let poor design sabotage your business plan

Designing a business plan presentation in today's digital age goes beyond mere text on a page, it's about crafting an engaging experience that captures and retains attention.

With the shift towards digital, the presentation of your plan is as crucial as its content.

5 crucial business plan design principles:

1) Transition from static to interactive

The era of static, text-heavy presentations is behind us. Modern business plans thrive on interactivity, incorporating elements like clickable links, dynamic charts, and embedded videos.

This approach not only enriches the reader's experience but also fosters a deeper engagement with the material, making your business plan far more compelling.

Here's what a static PPT looks like compared to an interactive deck:

Static PowerPoint

Interactive Storydoc

2) Implement scroll-based design

Ditch the cumbersome PDF format for a scroll-based design that mirrors the seamless experience of browsing a modern website.

This design choice is intuitive and aligns with our habitual online content consumption, making your business plan both accessible and enjoyable to navigate.

Here's an example of scroll-based design:

3) Prioritize mobile-friendliness

In a world where mobile devices dominate, ensuring your business plan looks great on any screen is non-negotiable.

Adopting responsive design guarantees that your plan is legible and appealing across all devices, from smartphones to desktops, ensuring your message resonates clearly with every reader.

4) Move to online documents

Forget about clunky Word docs or static PDFs. The future is online documents that allow for real-time updates, easy sharing, and collaboration.

They're not only convenient for you but also for your busy investors, offering access from anywhere, at any time.

For more information, check out our comparison of the best business plan document types .

5) Master visual storytelling

Leverage the power of visuals infographics, charts, and graphs to narrate your business's story.

Visuals can simplify complex information, making your key points more digestible and engaging than text alone could ever achieve.

Here's a great example of visual storytelling:

All forms of business plan templates to get you started

Just as a captivating presentation can transform the way your message is received, a well-crafted business plan is your gateway to turning your business vision into reality.

Why settle for a dry, uninspiring document when you can create a business plan that's a dynamic blueprint for success?

Consider your business plan as a journey for your readers — investors, partners, or internal team members — keeping them engaged from the executive summary to the final appendix.

These business plan templates serve as the perfect foundation for this journey.

I am a Marketing Specialist at Storydoc, I research, analyze and write on our core topics of business presentations, sales, and fundraising. I love talking to clients about their successes and failures so I can get a rounded understanding of their world.

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The Different Types of Business Plans

Free Business Plan Template

Ayush Jalan

• December 14, 2023

A business plan is a blueprint for your business. No matter if you’re running a startup or a well-established company, every entrepreneur needs to create a business plan . It helps you have a clear idea of your goals, and objectives, the execution of your strategies, and tracking progress.

Business plans come in all shapes and sizes.

You can create a plan based on your unique requirements and goals. Often, businesses require different types of plans for different situations and to tackle different problems. Having just one standard business plan is not enough.

A meticulously crafted business plan will efficiently serve its intended purpose . In fact, business plans are categorized based on the type of audience, the scope of the plan, and the purpose and format of the plan.

Understanding the basics of each type will help you pick out the right one for your business requirements. In this article, you will learn the different types of business plans and when and where they are used.

Based on Audience

Business plans are broadly categorized into two types based on the type of audience. They are:

• 1. Internal business plans: As the name suggests, an internal business plan is solely for the people inside the company. These can be specific to certain departments such as marketing, HR, production, etc. Internal business plans focus primarily on the company’s goals, and the personnel and processes aimed to achieve them.
• 2. External business plans: On the contrary, external business plans are intended for people outside the company, such as investors, banks, partners, etc. These plans usually contain detailed information about the company’s background, finances, and overall operation of the business.

Based on the Scope

Similarly, business plans are classified into two types based on their size and the depth of information they encompass. They are:

1. Standard business plans

A standard business plan is a bulky document that contains every detail of the company. Most external plans slide into this category as they often need to be detailed for presentation to people outside the company.

A standard business plan contains these sections:

• Executive summary
• Company Overview
• Problem analysis
• Market analysis
• Customer analysis
• Competitive analysis
• SWOT analysis
• Marketing Plan
• Operations plan
• Management team
• Finances plan
• Supporting documentation

A standard plan is usually presented to banks and any potential investors as it provides a complete view of the company, and future financial projections , and helps attain funding. But oftentimes, drafting a traditional business plan can be a tedious task as it takes a lot of time and effort.

2. Lean business plans

A lean plan is a condensed version of the standard business plan. It includes the highlights of a standard business plan and summaries of all the sections. It is a compact document that emphasizes achieving milestones and tracking finances.

Drafting a lean business plan is easier, faster, and is considered to be more efficient compared to a standard plan. It is flexible and can be revised effortlessly as many times as needed, which provides room for adjusting milestones, and improvising.

A lean business plan is apt for situations where you are uncertain about the process of creating a business plan, and it can be the essential first draft for your business. Everything in a lean business plan should be concise and represented in bullet points or short texts.

These are the elements that a lean business plan focuses on:

Based on purpose and format.

Business plans are further classified based on their purpose and format into seven types, they are:

1. One-page business plans

A one-page business plan can be described as an outline of a lean business plan . It is also called a business pitch or a quick summary. It is sometimes used to present a quick overview of your business to your vendors, partners, and employees and as a summary to banks and investors.

This encapsulates all the essential parts of a business plan on a single page. This summarizes the target market, business offering, main milestones, and essential sales forecast.

2. Startup business plans

A startup business plan can be defined as a lean plan with elements of a standard plan included to seek investors. The primary purpose of a startup plan is to put forth the steps required to get a business up and running. Later on, it should also serve as a plan that will help score investment.

The steps of establishing a new company include acquiring licenses and permits, setting up an office or store, getting equipment, and hiring and managing employees. All of these should be included in the startup business plan.

A startup plan should include information about the company, its products, and services, a detailed analysis of the industry, market, competition, SWOT, the bios of management, their responsibilities and roles, complete financial details and analysis, and projections of the usage of funding.

3. Strategic business plans

A strategic business plan is a lean business plan that contains details of the strategies and their implementation to achieve the goals and objectives of a company. These are internal plans that will focus entirely on the strategies with almost no inclusion of finances.

Conduct SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to begin an effective strategic business plan. This will help you better understand the factors that play a role in the decision-making process of a business.

A SWOT analysis will help you decide the strategies that will best suit your company and accomplish the goals, utilizing the available resources. Every strategic plan should contain these five elements:

• Mission statement
• Vision statement
• Factors that determine success
• Strategies to achieve goals
• Implementation process

4. Feasibility business plans

You require a feasible plan in case the business is stepping into a new market or introducing a new product or service. It is more a decision-making plan than a business plan as it focuses on two primary concerns:

• Determining the existence of a market
• Determining the profits of the initiative

A feasibility plan is a quick analysis of the practicality of a business idea.

This type of business plan usually excludes all the other sections and solely focuses on the scope of the initiative, its profitability, analysis of the market and competition, and acquiring the funding for it.

It is mostly crafted for internal management and ends with recommendations on whether the decision of entering a new market or introducing a new product or service is viable or not.

5. Operational business plans

An operational plan is a type of lean plan that focuses on the implementation process, achieving milestones, project deadlines, and the responsibilities of management, departments, and employees. It also focuses on the funding required to accomplish the milestones.

This business plan is called an annual plan, as businesses often use it to plan and specify milestones and their implementation for the coming year.

Some of the key elements every operational plan should contain are:

• Objectives for the operations
• Activities required to achieve objectives
• Resources required
• Staffing requirements
• Deadlines for implementation
• Tracking progress

6. Growth business plans

Draft a growth business plan when a company looks to expand its business into new markets. It is essentially a startup plan for a new segment of your business. This is also known as an expansion plan as it focuses on the long-term goals of a business.

This business plan can be both external and internal.

An external growth plan includes complete financial details and a funding request. On the other hand, an internal one contains details of the forecast of sales and expenses of the upcoming venture.

7. What-if business plan

Use a what-if plan when a business is taking a risky decision and needs a plan if the outcome turns unfavorable. This plan is usually less formal unless a funding request is included.

It entails a contingency plan that considers the worst-case scenarios.

This plan provides a glimpse into the possible outcomes of taking that risky decision and its effects on the company. It makes sense when taking a major business decision, merging with another company, raising the prices of products, etc. These are all the different types of business plans from which you can hand-pick the best fit for your company.

A Plan for Every Priority

Planning is essential for every business, without one a business is not likely to sustain itself in the long run. Although daunting sometimes, choosing the right plan for your business requirement can help you achieve your goals faster and with smart use of resources.

Every situation needs a unique approach to tackle effectively. Fortunately, there’s a plan for every purpose to help your business stand the test of time. Feel free to pick one that suits your business the best. Make sure to update it regularly.

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About the Author

Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.

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Starting a Business | Listicle

4 Types Of Business Plans (Plus Software & Writing Services)

Published April 20, 2020

Published Apr 20, 2020

WRITTEN BY: Blake Stockton

This article is part of a larger series on Starting a Business .

A business plan is a written document that explains how a business will succeed. All businesses should have some type of plan. If you’re making a more in-depth business plan, consider using a software to keep your thoughts and financial projections well organized.

In this article, we talk about four types of business plans:

• One-page Business Plan
• Traditional Business Plan
• Business Model Canvas
• Business Pitch

Over time, you may make several of these business plans. For example, if your business starts as a weekend side-hustle, you may start with a one-page plan and a pitch—which verbally communicates your business.

Once your business grows, you may need financing from a bank. To be eligible for financing, you will need a traditional plan. If your business continues to grow and you have an executive team, you may choose to do a Business Model Canvas, which works well for input from a large group.

1. One-page Business Plan

The one-page business plan is for a very small business such as a side-business. It’s a great way to get your ideas on paper and to work out the fundamentals of the business. With this plan, you’ll write a couple of sentences for important business concepts. It should include items such as the business model (how will it make money?) and competitive advantage (what will it do better than competitors?).

You should plan on spending around an hour to write out a one-page business plan. The simplified financial projections will be the most challenging and time-consuming. You most likely will need to do research online to get accurate income and expense estimates.

Click here to download our one-page business plan template to start your business planning today

Sections For The One Page Business Plan

Write one to two sentences to answer the following questions:

• Problem: What problem will your business solve?
• Solution: What will your business provide to solve that problem?
• Business model: How will your business make money?
• Target customers: What type of people will buy your product or service?
• Promotion: How will your target customers learn about your business?
• Competitive advantage: What will your business do better than the competitors?
• Financial projections: How much money do you need to start? How much will you earn every month? And how much will you spend every month?
• Funding required: How much money do you need to start the business?

What To Do After Creating Your One-page Plan

Once you create your plan, don’t just shove it in a desk drawer. Share it with supportive friends, family, and mentors for feedback. Consider updating the mini-plan based on their thoughts.

You may also want to do a few of the one-page biz plans to work out several business ideas you have. If you can’t decide which business to start, here’s a strategy to decide on one business. While writing the plans, pay attention to which business plan gets you most excited. Let your excitement point you in the direction of which biz to choose.

2. Traditional Business Plan

The traditional business plan is more in-depth and thorough than the one-page business plan. A traditional plan may contain over 40 pages of info about your business. Typically, you’ll use this plan to get funding from a bank such as a larger loan. You may also use a traditional business plan to attract investors to your business.

You should plan on spending at least 30 hours creating a well-researched business plan. In addition to writing the plan, you will also spend time doing market research and creating financial projections.

As a small business consultant, I’ve reviewed dozens of traditional business plans. Most business owners can easily do the research and write the plan. Where most have difficulty are the financial projections, which require creating several financial documents. If you don’t have a financial analysis background or interest, it’s a wise strategy to purchase a business plan software that walks you step-by-step through the financial projection process.

Traditional Business Plan Sections

• Opening Organizational & Legal Pages: The opening pages of your business plan need to be a cover page, nondisclosure agreement, and a table of contents.
• Executive Summary: You will complete this section last. It is a summary of the entire plan in less than two pages.
• Company Summary: Discuss the basics of the company such as its history, location, facilities, company ownership, and competitive advantage.
• Products & Services: Talk about how your business makes money (business model), the products or services it provides, and future products or services.
• Market & Industry Analysis: This section analyzes your potential customers and industry. Include any data here about your current (or ideal) customers, business industry, and competitors.
• Marketing Strategy & Implementation Summary: How will you reach your customers? Discuss your marketing, sales, and pricing strategy.
• Management & Organization Summary: Who will own and operate the business? If your business isn’t open yet, give a compelling reason why your background will make it a success. Include information on any managers in the business as well.
• Financial Data & Analysis: Here you want to show in charts and graphs how your business will be a success. You will include financial projections such as a profit & loss statement, projected cash flow, and business ratios.
• Appendix: Any documents or information that doesn’t fit in the above categories goes in the appendix. You may want to include documents such as a floor plan, trademark, or marketing materials.

Financial Projections

For a new business owner to complete a business plan, the financial projections will be the most challenging part. It’s difficult because you are mostly guessing how much money the business will make and spend every month for the next three years. Additionally, financial terminology and how it all flows together can make your head hurt.

Bankers and investors require financial projections in a business plan because they want to learn how you believe they will make their money back. It’s also a great idea to track your projections and update it with actual data as the business progresses.

A no-cost way to create financial projections is to use SCORE’s free template . If you are overwhelmed by the free Excel document, I’d recommend using a business plan software . The LivePlan software walks you step-by-step through the financial projection process and turns your financial data into easy to read charts and graphs.

3. Modern Business Plan: Business Model Canvas

The Business Model Canvas (BMC) is an alternative to the traditional business plan. Released in 2008 , it updates sections such as Customer Relationships and Key Partnerships.

Many business owners prefer to use the BMC because it can be done as a visual exercise with the leadership team. Together, the team can go through each section and provide high-level input. Once you create the basics of the BMC, it’s easy to share with others. The contents can be summed up on one page, whereas the traditional plan above will likely be at least 40 pages.

Business Model Canvas Sections

• Customer Segments: Who are the most important type of customers or businesses that will be buying your products or services?
• Value Propositions: What value will you be delivering to customers? What customer problems are you trying to solve?
• Channels: What channels will you use to reach customers and maintain relationships?
• Customer Relationships: How will you maintain relationships with your customers?
• Key Resources : Who are the key people (inside the business), and what are the patents, places, and machines that the business couldn’t operate without?
• Key Activities: What crucial activities need to be done in the business so that you can serve your customers?
• Key Partnerships: What people or organizations (outside of the business) help your business operate such as suppliers or referral sources?
• Cost Structure: What are the largest expenses in your business? List at least seven.
• Revenue Streams: In what ways will your business earn money? If possible, list specific numbers such as the average earned per product or service performed.

Getting A Loan Or Investor with A BMC

Both banks and investors are becoming more open to accepting a Business Model Canvas instead of a traditional business plan. If you’re choosing to do a BMC to receive funding, always check with the bank or investor to determine if they will find it as an acceptable business plan.

Even though we didn’t discuss as a section for the BMC, when seeking funding, you must include thorough financial projections (similar to the traditional plan). Bankers and investors mostly care about how much money you believe the business will earn over the next three years, and how they will make their investment back.

Learn More About The BMC

You can learn about the specifics of the Business Model Canvas for free through blog posts and articles online. However, if you’re serious about applying it to your business, I recommend purchasing the official book by the creators of the BMC, called Business Model Generation. The book will walk you step-by-step through each section and provide several examples.

4. Business Pitch

A business pitch is a short explanation of your business in about 60 seconds. Many people also call this the elevator pitch. If you’re involved in the tech world, a business pitch is typically a 10 to 20-minute presentation given to angel investors and venture capitalists.

However, the typical business owner won’t be traveling to Silicon Valley, asking for a large sum of money.

When starting their business , the typical business owner will be explaining their business hundreds, if not thousands, of times. So in our perspective, the short verbal explanation is the business pitch. Use it to get customers, vendors, business peers, or potential partners excited about your business.

Business Pitch Structure

Depending on who you are telling your pitch to, the structure of your business pitch will change. For example, you probably won’t be including the business model info with a potential vendor; however, you would use it with a prospective business partner.

• Problem: In the first few seconds of the pitch, describe the problem your customer is having. If possible, try to connect it with the listener because it will make your message more personal.
• Solution: Immediately after the problem, discuss how you will solve it with your product or service.
• Business Model: If it isn’t apparent how your solution will make money, discuss it next. This clarification is especially important if you’re speaking to someone like an investor.
• Opportunity: Use statistics about your target customer and industry to explain how much potential your business has.
• Team: Mention your background and the team’s background. Consider mentioning facts like the total number of years’ experience in the industry, or prior successes.
• Ask: At the end of your pitch, your listener should be excited. Don’t let that excitement go to waste. Always ask for support in some way, which could be as small as visiting your website, or as large as asking for a million-dollar investment—just like Shark Tank!

How To Get Good At Delivering The Pitch

It’s a simple formula to get good at delivering the pitch: practice. Resolve to say your 60-second pitch 10 times per day. Say it in front of the mirror, in the car, and while walking the dog. The ultimate goal is to not stumble through your pitch, or stop to think what to say next.

Once you are somewhat confident in delivering the pitch, start saying it in front of people. Notice their body language. Do they make a face when you say a particular word or sentence? Maybe they are confused about what you’re saying. Do they look bored after 15 seconds? Perhaps your beginning hook isn’t strong enough.

Business Plan Software

A business plan software holds your hand step-by-step through the business plan creation process. Typically, software helps you create a traditional business plan that is ready to present to a banker or investor.

If you’re creating financial projections, I highly recommend purchasing business plan software. This purchase will keep you from working within a complicated Excel spreadsheet and makes your financial data look well organized in charts and graphs.

What To Look For In A Business Plan Software

Price: The cost of a business plan software is fairly similar. Expect to pay around $15 per month to access the software.

Ease of use: If possible, try a demo of the software to ensure it’s easy to use. Some biz plan software may not have been updated in several years and could be difficult to navigate.

Business plan design: When you print out your business plan, you want it to look professional. Also, certain software allows you to add graphics and visuals throughout your plan.

Diversity of products: In addition to the biz plan software, many companies provide resources such as marketing tools or connections with investors.

Educational materials: It’s important for a software to have quality educational materials so that you can learn as you create the plan. Some software includes video teachings.

Customer support: If you need help navigating the software or have questions about your biz plan, you’ll want to be able to reach a customer rep for guidance.

The Most Popular Biz Plan Software

The most popular business plan software available is from LivePlan They provide a 60-day free trial of their software so you can test it and make sure it’s the right fit for you.

One of LivePlan’s strongest features is its detailed and easy-to-use financial projections. The software asks you questions about your business, and it automatically calculates financial data like the gross margins and business ratios.

Software For A Tech Startup

If your business is a tech startup, your goals are different from the average business. You may need a large amount of capital to fuel your high-growth business.

Appealing to venture capital firms require different business plan elements such as working capital, gross margins, and available cash. Bizplanprovides those features for startups and helps them connect with potential investors.

Business Plan Writing Services

If you need a business plan, but don’t want to write it yourself and don’t want to use a software, you can pay a professional to create it for you. Several companies provide business plan writing services with experts who do market research and create custom-designed plans. Many of these companies also offer other writing services such as a pitch deck, feasibility study, or franchise-specific plan.

How To Choose A Biz Plan Writing Service

When choosing a business plan writing service, you first want to review the background of the writers. Some companies provide writers with MBAs (Master of Business Administration).

You also want to review samples of the business plans created. Remember, the company likely provided the best-designed business plans they have, so make sure to ask how much a particular well-designed business plan will cost, which may be out of your budget.

Cost Of A Business Plan Writing Service

A basic business plan writing service usually costs a minimum of $2,000. However, if your plan requires extensive research, custom graphics, and enhanced overall design, that cost can go up to over $10,000.

Contact Your Local SBDC For A Review

If you have your business plan and are looking for someone to review it for feedback, your local SBDC (Small Business Development Center) may be able to help. The SBDC provides no-cost consulting and is funded in part by the SBA (Small Business Administration). There are over 1,000 SBDC locations across the US.

One of the SBDC’s core services is to provide detailed reviews of business plans. Depending on the expertise of your local SBDC Consultants, you may get lucky and have a business plan expert at your local center. Inquire if he or she can review your biz plan and provide feedback.

Obtain Capital

After creating your business plan, the next step in your journey to start a business is to obtain adequate capital . When potential business owners hear the word “capital,” they often think about big loans from banks. However, capital could also be a much smaller amount, such as $2,000 from a credit card or $5,000 from a crowdfunding campaign.

Bottom Line

Remember to revisit your business plan often. Even after one month, you may learn new insights about your product and market that requires a business plan revision. If you’re creating financial projections, it’s a business best practice to update your projections monthly with actual sales and expense data to determine if your assumptions you made are accurate.

About the Author

Find Blake On LinkedIn Twitter

Blake Stockton

Blake Stockton is a staff writer at Fit Small Business focusing on how to start brick-and-mortar and online businesses. He is a frequent guest lecturer at several undergraduate business and MBA classes at University of North Florida . Prior to joining Fit Small Business, Blake consulted with over 700 small biz owners and assisted with starting and growing their businesses.

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Start » startup, 5 types of business plans for startups.

If you’re a startup, here are five different types of business plans to help achieve your professional goals.

Writing a business plan is an important process for every startup. In its simplest form, a business plan is a formal document that contains your goals for the company and the timeline in which you'd like to achieve them. While many stick to writing the "standard" business plan, there are various types of business plans you can choose from, depending on your goals. Choosing the right plan for your business can ease the writing process and help you better achieve your objectives. Here are five types of business plans to help you decide which is right for you.

[Read: 5 Common Sense Reasons to Write a Business Plan and 7 Mistakes to Avoid ]

Standard plan

A standard business plan (often referred to as a “working plan”) sets an overview of your company, states your goals and outlines how and when you will achieve them. For any business, they’re an important tool in helping you secure financing, such as a loan or an investment. Lenders and investors will want to know how you plan to use their money and make a profit. A business plan will accurately state how you intend to do this, list the achievable goals and put them in a realistic time frame.

Other aspects to include in your plan depend on your audience. You may include more information about cash flow and expenses for investors, or more of the day-to-day operations and goals for your employees.

What-if plan

In business, not everything will go according to plan. A what-if business plan outlines different roadblocks your company might battle so you can be prepared for anything. Because businesses are often at the whims of external factors such as the stock market or supply chain, this plan outlines the various predictable scenarios your company could face. In writing this plan, you might consider including the worst-case scenario to reassure investors that even if something goes wrong, you will have a way to financially recover. This plan can be part of the standard business plan or exist entirely on its own.

In business, not everything will go according to plan. A what-if business plan outlines different roadblocks your company might battle so you can be prepared for anything.

One-page plan

Your business plan should be filled with detailed information about various aspects of your business. However, sometimes you'll come across someone outside of a formal pitch and want to give them a condensed version of your plan for quick reference. A one-page business plan outlines your plan in five simple, easy-to-read sections: the demand, your solution, your business model, your management team and your plan of action. The content on your one-page plan should be a summarized version of your more robust business plan.

[Read: Starting Over? How to Write a Business Plan for a Post-Pandemic World ]

Startup plan

If you're an entrepreneur who's in the early stages of planning their business, your plan may look a little different. A startup business plan is for potential investors to get an idea of your new company and what you hope to achieve as your company grows. This plan should include an executive summary, your background, what your service or product will provide, your market evaluations, startup costs and your financial projections.

Because this is a plan for a business that does not yet exist or is in its infantry, it is essential to outline who you are and your background, as well as your proven track record. Investors want to know if they can trust you with their money to start a brand-new business. They'll be more open to financing your idea if they know you have similar experience or have worked in or created a startup previously.

Expansion plan

An expansion plan is written when a business is looking to scale themselves and requires additional resources for that development. These resources can include additional employees, new materials or a financial investment. Within this plan, include details of your company's background and how you've grown to where you are today. Then, outline how these additional resources will contribute to the expansion of your company and what that expansion will mean for your overall growth.

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Home » Business Plan Tips

14 Types of Business Plans and Their Functions

Are you about starting a business but you don’t know what kind of business plan to write? If YES, here are 14 types of business plans and their functions.

A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. Business plans guide owners, management and investors during the start off stage of the business, and it equally guides the business as it grows from one stage to the other.

Savvy business owners write a business plan to guide management and to promote investment capital. Businesses without a solid plan typically burn out fast or fail to turn a profit in the long run. Without a well-planned business strategy, it is not possible for a business to scale through problems smoothly, and it would equally be an uphill task to achieve success.

A foolproof business plan highlights varying aspects of a potential business and integrates few essential features like business objectives, possible growth rate and many other characteristics that your business will include and assimilate. How to promote investment capital will be illustrated broadly in a business plan.

There are various kinds of business plans and in this article we will outline the various business plans and tell you the function of each.

• Start-Up Business Plans

One of the very popular business plans in the world of business is the startup business plan. The startup business plans contain an exhaustive approach for starting and growing a business. It is different from all other business plans because of its nature and the details that are taken into consideration right from the inception of the business till the growth stage along with the vision of at least five years.

With this business plan, new businesses need to detail the steps they need to take while starting a business. This document typically includes sections describing the company, the product or service the business will supply, market evaluations and the intended projected management team.

Potential investors will also require a financial analysis with spreadsheets describing financial areas including, but not limited to, income, profit and cash flow projections. Startup business plans can equally be used by established companies to launch a new product line or to enter an entirely new business segment in the market . Conglomerates use this plan if they are launching a new business.

• It xrays the Business:  The startup business plan explains what a business is all about by describing the products or services in detail and what the ultimate goals of the business are. For example, your plan may stipulate what your revenue goals are for each of your first three years of operation. Your plan should also indicate why you believe there is a need for your business and who your main competitors will be.
• Helps in securing funding: It’s no secret that businesses can’t function without any operating capital to kick-start their production cycle. Entrepreneurs are often required to take loans from financial institutions to purchase property, get the equipment or hire manpower. Startup business plans would help them access funding speedily.
• Outlines Possible Weaknesses:   Startup business plans helps businesses to find out the weaknesses of the business in question. Highs and lows are a part of life and without them; we wouldn’t feel the need for improvement. A startup business plan helps you preempt the lows and maximize the highs.
• It provides an execution plan: Describing how your business will function and perform in the market is important when dealing with sponsors and investors. A startup business plan will explain your products and services, your targeted customers, the required funds and what’s necessary for your startup to thrive
• Internal Business Plans

As the name suggests the internal business plan is for internal stakeholders of the business. This type of business plan helps to evaluate projects which are specific and they keep the team up to speed about the current status of the company.

The company has more chances of success if everyone in the team is entirely on board, that is why the internal business plan is needed to keep everyone in the company on the same lane. It contains strategies and ways to improve the current business working and suggests a new pattern for growth.

• It answers questions pertaining to the internal workings of the company: Is the company growing or declining? Does the working pattern need change, improvement or modification? These are the type of questions which internal business plans answer. The primary purpose of the internal business plan is not to show the balance sheet of the financial position of the company to the external stakeholders but it is to run the business as smoothly as possible.
• It targets specific teams to streamline their functions: Internal business plans target a specific audience within the business, for example, the marketing team who need to evaluate a proposed project. This document will describe the company’s current state, including operational costs and profitability, then calculate if and how the business will repay any capital needed for the project. Internal plans provide information about project marketing, hiring and tech costs.
• Strategic Business Plans

A strategic business plan provides a high-level view of a company’s goals and how it will achieve them, laying out a foundational plan for the entire company. While the structure of a strategic plan differs from company to company, most include five elements: business vision, mission statement, definition of critical success factors, strategies for achieving objectives and an implementation schedule.

A strategic business plan brings all levels of the business into the big picture, inspiring employees to work together to create a successful culmination to the company’s goals. These types of plans typically skip the more detailed financial data and milestones because they are not important to the team at this point.

Strategic business plans also help to create internal efficiency so you can get the best results. The strategic business plan also comprises business vision, mission statement, strategies for achieving objectives, success factors and implementation schedules.

• They help in the execution of business strategies: Strategic business plans help to outline how the company will get to where it wants to go. They outline the strategy your team must carry out to achieve your goals, including your strengths, weaknesses and how you’re going to utilize your opportunities.
• To keep the company focused: The primary purpose of the strategic business plan is to carve the way to go ahead and answer the questions like What are you going to get and How do you intend to go about it. These answers are nothing but the strategy that the team must execute in order to achieve their targets.
• Feasibility Business Plans

A feasibility business plan answers two primary questions about a proposed business venture: who, if anyone, will purchase the service or product a company wants to sell, and if the venture can turn a profit. Feasibility business plans include, but are not limited to, sections describing the need for the product or service, target demographics and required capital. A feasibility plan ends with recommendations for going forward.

• Identify the target market of a business:  The feasibility business plan determines who will purchase the service or product of the company.
• To answer the ‘why’ question of a company: The feasibility business plan describes the need for a product or service including the target demographics and the financials required to start the business.
• Operations Business Plans

Operations plans are internal plans that consist of elements related to company operations. An operations plan, specifies implementation markers and deadlines for the coming year. The operations plan outlines employees’ responsibilities. Operational business plans are typically very small because they are cut down to a year’s worth of information.

• It projects the business on a yearly basis: The operations business plan isn’t made to tell investors how you intend on turning a profit in the span of five years. It’s simply where you expect to be in 365 days. An annual plan can also be an internal plan (i.e., the strategy your employees intend to enact over the next year).
• It is used to scout for investors: The operations business plan can also be used to attract investors at the very beginning. Annual business plans are perfect for companies that expect to make big changes in the not-so-distant future. Investors love to see this.
• Growth Business Plans

Growth plans or expansion plans are in-depth descriptions of proposed business growth and are written for internal or external purposes. If company’s growth requires investment, a growth plan may include complete descriptions of the company, its management and officers. The plan must provide all company details to satisfy potential investors.

If a growth plan needs no capital, the authors may forego obvious company descriptions, but will include financial sales and expense projections. If you’re looking for a hyper-focused business plan, this is it. Growth or expansion plans focus on a specific area within your business, like opening a new location or launching a certain product.

Growth business plans are internal and external facing. Internal growth plans are a lean version of a strategic business plan. You’ll use them if your company’s growth or expansion is being funded internally, such as if you’re launching a new product line from the last product line’s revenue. You already know what you’re funding, so you don’t need to deeply explain the product.

For an external or investor-facing growth plan, you’re going to need some different information. This type of plan assumes that the bank, investor or individual you’re pitching doesn’t know much about your business at all. You’ll need to look at it like you’re a startup and include additional details about your growth or expansion.

• Helps a company attract investors:  Growth plans are aimed at investors and banks so as to attract external investment. This plan usually include everything in a standard business plan. You need the financial data and projections, the market research and the funding request.
• It helps to analyse the business on a yearly basis: Growth plans are also termed as Annual Business plan and as the name suggests, the plan is for annual purposes. These types of business plans are more important to startups. This is because you only need a years’ worth of information to write it.
• It helps during the time of big changes in company: Growth plans are very helpful to companies that are trying to make monumental changes in a short time.
• The Lean Plan

Businesses use the Lean business plan to manage strategy, tactics, dates, milestones, activities, and cash flow. The Lean Plan is faster, easier, and more efficient than a formal business plan because it doesn’t include summaries, descriptions, and background details that you and your partners or employees already know. A Lean Plan includes specific deadlines and milestones, and the budgets allotted for meeting them.

• It is used to track milestones:  The lean business plan is most useful if you’re trying to grow your business and want to use it as a tool to track your financials and milestones against what you projected so you can respond to opportunity and react to challenges quickly.
• The standard business plan

You’ll need to put together a stand business plan if you have a business plan event, which is what it is called when a business needs to present a business plan to a bank, prospective investor, vendor, ally, partner, or employee.

The most standard business plan starts with an executive summary and includes sections or chapters covering the company, the product or service it sells, the target market, strategy and implementation milestones and goals, management team, and financial forecasting, and analysis. The exact order of topics is not important, but most people expect to see all of these topics covered as part of the standard plan.

Think of your Lean Plan as a good first draft of a standard plan. Those complete projections include the three essential financial projections (also called pro-forma statements): profit and loss, balance sheet, and cash flow. Every standard business plan needs sales plus these three essentials.

• To analyze cash flow:  The cash flow is an essential part of a standard business plan. Businesses need cash to stay open. Even if a business can survive temporarily without profits, it still needs the cash to pay its bills. And since profits alone don’t guarantee cash in the bank, projected cash flow is essential.

Many standard plans also include a table for personnel spending. Some standard plans will need additional projections to meet the needs of the specific business plan event.

For example, plans for seeking outside investment should include a discussion of an eventual exit for investors, and of course the planned use of the invested funds. Plans supporting a bank loan application might include projected ratios the bank wants to see, such as debt to equity, quick, or current ratios.

• One-page business plan

A one-page business plan is typically a one-page summary of the business, and it includes highlights only. This business plan is used to offer a very quick overview of a business.

• To provide a quick business summary: The one-page business plan summarizes the target market , business offering, main milestones, and essential sales forecast of a business in a single page. Such a summary can be useful as a summary for banks, potential investors, vendors, allies, and employees. A one-page business plan can also be called a business pitch.
• The Miniplan

The miniplan is a sort of abridged version of the normal business plan. This business plan is preferred by many recipients because they can read it, or download it quickly to read later on their iPhone or tablet. You include most of the same ingredients that you would in a longer plan, but you cut to the highlights while telling the same story.

• It provides a quick overview of the business for investors:  The miniplan provides a quick summary of the business or company for someone who may not have the time to go through the longer version.
• The Presentation Plan

The advent of PowerPoint presentations changed the way many, if not most, plans are presented. And while the plan is shorter than its predecessors, it’s not necessarily easier to present. Many people lose sleep over an upcoming presentation, especially one that can play a vital role in the future of their business. But presenting your plan as a deck can be very powerful.

Readers of a plan can’t always capture your passion for the business nor can they ask questions when you finish. But in 20 minutes, you can cover all the key points and tell your story from concept and mission statement through financial forecasts.

• It helps to present the company in a detailed format to an audience: The presentation plan helps to present the company in a concise to a listening audience. In 20 minutes, you can cover all the key points and tell the story of your organisation from concept and mission statement through to financial forecasts.
• The Working Plan

A working plan is a tool to be used to operate your business. It is usually long on detail but may be short on presentation. As with a miniplan, you can probably use a somewhat higher degree of informality when preparing a working plan. It is there to work for your company and provide the required guide.

The plan is usually intended strictly for internal use, and so you can omit some elements that you need not explain to yourself and your team. Likewise, you probably don’t need to include an appendix with resumes of key executives. Nor would a working plan especially benefit from product photos.

• It provides guidelines for the day to day running of the business: The working plan is like an old pair of slacks you wear to the office on Saturdays. It’s there to be used, not admired. It provides pointers on how things are to be done in the company.
• The What-If Plan

When you face unusual circumstances, you need something a bit different from your usual working plan. For example, you might want to prepare a contingency plan when you’re seeking bank financing.

A contingency plan is a plan based on the worst-case scenario that you can imagine your business surviving—loss of market share, heavy price competition, defection of a key member of your management team. A contingency plan can soothe the fears of a banker or investor by demonstrating that you have indeed considered more than a rosy scenario.

Your business may be considering an acquisition, in which case a pro forma business plan (some call this a what-if plan) can help you understand what the acquisition is worth and how it might affect your core business. What if you raise prices, invest in staff training and reduce duplicative efforts?

Such what-if planning doesn’t have to be as formal as a presentation plan. Perhaps you want to mull over the chances of a major expansion. A what-if plan can help you spot the increased needs for space, equipment, personnel and other variables so you can make good decisions.

• It helps in analyzing various business scenarios, good or bad: If a company wants to make sudden changes, a what-if business plan is used to analyse the changes properly so the company knows what it is getting itself into.
• They provide insight: This business plan provides insight into the decisions companies makes at every point in their existence. What sets these kinds of plans apart from the working and presentation plans is that they aren’t necessarily describing how you’ll run the business. They’re essentially more like an addendum to your actual business plan.
• It helps the company make good decisions: A “what if” plan helps a company consider major changes that affect the core of the business, so they can make good decisions. It’s the plan you should consider before you consider any expansion or growth plan.

14. Development Business Plan

Development plans or extension plans are top to bottom depictions of proposed business development and they are composed to display inward or outside purposes of a business. A development policy incorporates overall details of the organization, its administration and responsibility the personnel share among themselves.

The policy must show the organization detail and emphasize the elements required to fulfill potential speculators. If in case the development plan requires no capital, the plan composers may pass by those organization portrayals, but will surely incorporate money related deals and cost projections.

• It is used in detailed industry analysis: A development policy incorporates overall details of the organization, its administration and responsibility the personnel share among themselves.

More on Business Plan Tips

What are the Different Types of Business Plans?

• March 27, 2022

When it comes to business needs, no two businesses are the same. There might be some similarities, but if you look deeper, you’ll also find that there are just as many if not more differences. Similar to businesses, there are several different types of business plans. On the surface, they might look the same. But, if you go beyond the headings and look deeper, you’ll find that their functionalities, thrusts, and the way they speak to the reader are markedly different. This happens because in many instances, there are plans … within a plan. What this means is that certain planning components are built into a business plan based solely on where a business stands, where they want to be, and, in some cases, the types of resources they’ll need to get them there. To help you gain a better understanding of this dynamic, we’ve come up with a few helpful insights.

Operational Planning

An operational business plan focuses on near-term goals, in most cases those that will be pursued within a year. It outlines the activities your business will undertake and places a heavy emphasis on budgeting and human resources that will be needed in order to achieve the stated goals. In most cases, department heads are involved in the development of this section as many of the decisions that are being made with regards to goals and objectives require their approval. An operations business plan must answer four questions:

• Where is your business now?
• Where do you want to be, (typically within the next year)?
• How can your business get there?
• What tools can be used to measure your progress?

Strategic Planning

A strategic business plan is more of a long-term document, and it focuses on how each of the departments can successfully work together. Unlike an operational business plan, the strategic business plan is a much broader document that requires senior level approvals before it can be implemented. In a strategic business plan, three questions must be answered:

• How can you achieve your goals? Remember, in your operational plan, you’ve defined where you want to be, now your strategic planning segment spells out how you’ll get there.
• What resources will you need? The resource decisions you make are directly correlated to how you plan to get there.
• What is your plan of execution? You’ve got the tools in place to measure your progress. During this portion of the plan, discuss the tools you’ll need as your plan becomes actionable.

Tactical Planning

Your tactical business planning stage is where you begin to break goals and objectives into smaller, more digestible pieces and really begin doing the hard work. Tactical plans are far more focused than any other segment. The two most important components of a tactical plan are:

• The timeline: Every business must adhere to a timeline of some sort. In the tactical planning segment, timelines are defined and set with controls also being put in place to make sure they’re followed. Examples include such things as securing 10 new clients within the first six months, hiring four new sales managers during first quarter, and things of that nature that can easily be measured.
• Resource allocations: During the strategic planning segment, you touched on the resources you projected you’ll need. During the tactical planning segment, those resources will be secured, allocated, and at some point, the success of your entire operation will be measured based on how they were used.

Contingency Planning

The hope in business and life is that you always succeed. During those times when you don’t it helps to have what’s known as a contingency plan. Contingency planning is a portion of your document that focuses different scenarios, how they might affect your business, and more importantly, how you plan to address them. In some businesses, a contingency plan can be written to address positive outcomes, but the vast majority focus primarily on potentially negative situations. When undergoing contingency planning, remember to focus on these five key things:

• Resource prioritization: Understand how your contingency planning will impact the resources you’re allocating for the business.
• Risk evaluation: Honestly assess all of the risks your business faces and the true impacts failure or success can have on your stated goals and objectives.
• Transparency: Every member who plays a role in creating this portion of your document must come forward with full transparency. Their willingness to do so will help your organization develop a plan that is representative of your business, what it could potentially be faced with, and how to best manage any challenges that might be incurred.
• Distribution: Once the contingency plan is completed, it must be distributed to and signed off by every key member of your organization. This ensures everyone is operating on the same page, with the same understanding of what’s at stake.

A business plan is a complex document with many layers, functionalities, and components. It’s a living document that just like your business, should evolve over time. If you find yourself constantly revisiting your business plan to adjust, review strategies, and resources, consider it a good thing so don’t dismiss these all-important tasks.

It might be an operational planning piece that addresses growth or a strategic planning element that focuses on resources and how they’re to be allocated. Another time, the tactical planning might need to be re-visited to document the results of an action you or a key member of your staff took at some point. Contingency planning will always come into play as planning in this way is essential to the success of your business.

Regardless of the stage of business or type of business plan writing you might find yourself needing, The Coley Group can deliver. Our team of MBA professionals have years of experience in writing all types of business plans. For more information on how we can best serve your needs, please visit us at www.coleybusinessplans.com or contact us at 817-813-1929 and a representative will be happy to serve you.

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The 4 Types of Business Plans Learn which of these four business plan formats best fits your needs.

By The Staff of Entrepreneur Media, Inc. • Dec 4, 2014

In their book Write Your Business Plan , the staff of Entrepreneur Media offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors describe four different types of plans you could write and what you'd use each one for.

Business plans can be divided roughly into four distinct types. There are very short plans, or miniplans, presentation plans or decks, working plans, and what-if plans. They each require very different amounts of labor and not always with proportionately different results. That is to say, a more elaborate plan isn't guaranteed to be superior to an abbreviated one. Success depends on various factors and whether the right plan is used in the right setting. For example, a new hire may not want to read the same, elaborate version of your plan that might be important to a potential investor.

The Miniplan

The miniplan is preferred by many recipients because they can read it or download it quickly to read later on their iPhone or tablet. You include most of the same ingredients that you would in a longer plan, but you cut to the highlights while telling the same story. For a small-business venture, it's typically all that you need. For a more complex business, you may need the longer version.

The Presentation Plan

The advent of PowerPoint presentations changed the way many, if not most, plans are presented. And while the plan is shorter than its predecessors, it's not necessarily easier to present. Many people lose sleep over an upcoming presentation, especially one that can play a vital role in the future of their business. But presenting your plan as a deck can be very powerful. Readers of a plan can't always capture your passion for the business nor can they ask questions when you finish. But in 20 minutes, you can cover all the key points and tell your story from concept and mission statement through financial forecasts.

Remember to keep your graphics uncluttered and to make comments to accentuate your ideas rather than simply reading what's in front of your audience.

While a presentation plan is concise, don't be fooled: It takes plenty of planning. The pertinent questions who, what, where, why, when and how all need to be answered.

The Working Plan

A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a miniplan, you can probably can afford a somewhat higher degree of candor and informality when preparing a working plan. In a plan you intend to present to a bank loan committee, you might describe a rival as "competing primarily on a price basis." In a working plan, your comment about the same competitor might be "When is Jones ever going to stop this insane price-cutting?"

A plan intended strictly for internal use may also omit some elements that you need not explain to yourself. Likewise, you probably don't need to include an appendix with resumes of key executives. Nor would a working plan especially benefit from product photos.

Internal policy considerations may guide the decision about whether to include or exclude certain information in a working plan. Many entrepreneurs are sensitive about employees knowing the precise salary the owner takes home from the business. To the extent such information can be left out of a working plan without compromising its utility, you can feel free to protect your privacy.

This document is like an old pair of khakis you wear to the office on Saturdays or that one ancient delivery truck that never seems to break down. It's there to be used, not admired.

The What-If Plan

When you face unusual circumstances, you need a variant on the working plan. For example, you might want to prepare a contingency plan when you're seeking bank financing. A contingency plan is a plan based on the worst-case scenario that you can imagine your business surviving—loss of market share, heavy price competition, defection of a key member of your management team. A contingency plan can soothe the fears of a banker or investor by demonstrating that you have indeed considered more than a rosy scenario.

Your business may be considering an acquisition, in which case a pro forma business plan (some call this a what-if plan) can help you understand what the acquisition is worth and how it might affect your core business. What if you raise prices, invest in staff training and reduce duplicative efforts? Such what-if planning doesn't have to be as formal as a presentation plan. Perhaps you want to mull over the chances of a major expansion. A what-if plan can help you spot the increased needs for space, equipment, personnel and other variables so you can make good decisions.

What sets these kinds of plans apart from the working and presentation plans is that they aren't necessarily describing how you'll run the business. They're essentially more like an addendum to your actual business plan. If you decide to acquire that competitor or grow dramatically, you'll want to incorporate some of the thinking already invested in these special purpose plans into your primary business plan.

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What Are the Six Elements of a Business Plan?

What are the benefits of a business plan, examples of business feasibility reports.

• How to Write a Business Synopsis
• How to Create a New Business Plan

Business plans guide owners, management and investors as businesses start up and grow through stages of success. A business owner or prospective business owner writes a business plan to clarify each aspect of his business, describing the objectives that will anticipate and prepare for growth. Savvy business owners write a business plan to guide management and to promote investment capital.

Types of business plans include, but are not limited to, start-up, internal, strategic, feasibility, operations and growth plans.

Start-Up Business Plans

New businesses should detail the steps to start the new enterprise with a start-up business plan. This document typically includes sections describing the company, the product or service your business will supply, market evaluations and your projected management team. Potential investors will also require a financial analysis with spreadsheets describing financial areas including, but not limited to, income, profit and cash flow projections.

Internal Business Plans

Internal business plans target a specific audience within the business, for example, the marketing team who need to evaluate a proposed project. This document will describe the company’s current state, including operational costs and profitability, then calculate if and how the business will repay any capital needed for the project. Internal plans provide information about project marketing, hiring and tech costs. They also typically include a market analysis illustrating target demographics, market size and the market’s positive effect on the company income.

Strategic Business Plans

A strategic business plan provides a high-level view of a company’s goals and how it will achieve them, laying out a foundational plan for the entire company. While the structure of a strategic plan differs from company to company, most include five elements: business vision, mission statement, definition of critical success factors, strategies for achieving objectives and an implementation schedule. A strategic business plan brings all levels of the business into the big picture, inspiring employees to work together to create a successful culmination to the company’s goals.

Feasibility Business Plans

A feasibility business plan answers two primary questions about a proposed business venture: who , if anyone, will purchase the service or product a company wants to sell, and if the venture can turn a profit. Feasibility business plans include, but are not limited to, sections describing the need for the product or service, target demographics and required capital. A feasibility plan ends with recommendations for going forward.

Operations Business Plans

Operations plans are internal plans that consist of elements related to company operations . An operations plan, specifies implementation markers and deadlines for the coming year. The operations plan outlines employees’ responsibilities.

Growth Business Plans

Growth plans or expansion plans are in-depth descriptions of proposed growth and are written for internal or external purposes. If company growth requires investment, a growth plan may include complete descriptions of the company, its management and officers. The plan must provide all company details to satisfy potential investors. If a growth plan needs no capital, the authors may forego obvious company descriptions, but will include financial sales and expense projections.

• Entrepreneur: The 4 Types of Business Plans
• YourBusinessPal.com: Business Plan Example
• BPlans.com: Free Sample Business Plans

Alyson Paige has a master's degree in canon law and began writing professionally in 1998. Her articles specialize in culture, business and home and garden, among many other topics.

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Types of Business Plans

Everything you need to know about the types of business plans. Business plans help the managers in managing day to day affairs, utilising resources of organisation efficiently and in regulating working behavior of subordinates.

Plans are classified as – Purposes (or) Missions, Objectives (or) Goals, Strategies, Policies, Procedures, Rules Programs and Budgets.

Some of the types of business plans are:-

1. Short-Term Plan 2. Long-Term Plan 3. Operational (or Tactical) Plan 4. Strategic Plan 5. Functional Plan 6. Single-Use Plan – i. Budget ii. Strategy iii. Objective iv. Programme 7. Standing (or Repetitive-Use) Plan – i. Policies ii. Procedures iii. Methods iv. Rules.

Types of Business Plans: Short-Term, Long-Term, Operational, Strategic, Functional, Single-Use and Standing Plans

Types of business plans – classification: on the basis of time span, scope of operation and repetitiveness.

Business plans can be of various types.

ADVERTISEMENTS:

They have been described as follows:

1. Based on Time Span :

On the basis of time span, plan is divided into two types:

i. Short-Term Plan:

This plan relates to a relatively short period. This plan is concerned with the determi­nation of activities to accomplish short-term objectives of the enterprise. Normally, operational (or tactical) plans are related to short periods. Short-term plans are developed within the framework of long-term plan­ning. This plan is normally prepared for a period of one year or less.

ii. Long-Term Plan:

This plan relates to a relatively long period. This plan is concerned with achieving the long-term goals for the enterprise. This plan determines long-term objectives of the enterprise. It is normally made for the period of five years and more. This plan aims at providing the required information on various elements of the future environment. It provides a broad framework within which short-te rm action plans are developed.

2. Based on Scope of Operation :

On the basis of scope of operation, plan is divided into three types:

i. Operational (or Tactical) Plan:

This plan is concerned with the optimum use of available resources for a shorter period of time. Production plan of a month is an example of operational plan. This plan is concerned with simple, routine, and repetitive problems. This plan is prepared at middle and lower levels of manage­ment. It facilitates participation and involvement of the middle and lower level managers. It is a blue print for current actions within the framework of long range plans.

Operational plan is prepared for a short period (i.e., one year or less). It helps in achieving tangible goals for a short period of time. It divides long-range and strategic plans into various sub-plans and programs. Operational planning is done at the departmental and divisional levels which deal with performance of oper­ations. This plan involves conversion of long-range and strategic plans into detailed operational programs. Operational planning is pragmatic as it requires actual commitment and utilization of resources.

ii. Strategic Plan:

Strategic plan determines how to achieve long-term goals of an enterprise in a dynamic business environment. This plan involves important strategic decisions for achieving long-term overall goals of the enterprise. This plan is prepared at higher level of management for the development of the enterprise. Strategic plan covers vital matters and issues concerning profitability, development, survival, and growth of the enterprise.

This plan designs the ways and means of achieving growth, diversification, stability, etc. and develops integrated program of action accordingly. Strategic plan gives special emphasis on environmental changes and uncontrollable factors. Strategic plan has a long-term perspective, and it goes beyond five years. This plan needs more managerial judgement and expertise.

Strategic plan chalks out future direction and develops a suitable course of action for the entire organiza­tion. This plan enables the top management to explore the future impact of changes and makes current deci­sion to move towards a visional future. It enables the enterprise to predict technological changes and achieve strategic objectives successfully.

It ensures rational allocation of available resources of the enterprise for key activities. It creates greater awareness of the business environment and systematic review of the business itself. It helps the top management to respond quickly to the changed environment and manages a complex enterprise with limited resources.

Strategic plan develops an intensive course of action for achieving organizational objectives in an ever changing environment. It aims at scanning’ organizational strengths, weaknesses, opportunities, and threats (SWOT) by making situational analysis for attaining long range goal of the enterprise. It helps in devis­ing a course of actions in the form of a move or counter-move to competitors in the changing environment. This plan calls for creativity and farsightedness on the part of managers for attaining goals in the changing situations.

iii. Functional Plan:

This plan is prepared for various functional areas (such as purchase, production, finance, marketing, etc.) of the business enterprise like purchase planning, production planning, and finance planning, and marketing planning. This plan serves as a guide for the actions of employees of the concerned functional department. The departmental managers formulate their functional plans for one year in consultation with their subordinate officers. Functional plans require approval of the top management with or without modifi­cation. The master plan of an enterprise is based on the functional plans of various departments.

3 . Based on Repetitiveness :

Plans may be single-use plans and repeated-use plans. Single-use plans lead to the development of budget, strat­egy, objectives, and programmes. Repeated-use (standing) plans lead to the development of policies, proce­dures, methods, and rules.

i. Single-Use Plan :

A single-use plan is meant for a particular situation. It is designed to accomplish a specific objective within a relatively short period. It is tailored to fit a specific situation. This plan ceases to exist once the objective is achieved. It is basically non-repetitive in nature. Budgets, strategy, objectives, and programmes are examples of a single-use plan.

(a) Budget:

A budget is a plan covering operations of an organization for a definite period in the future. It is a statement of expected results, expressed in quantitative terms. It is an estimate of future needs, arranged in an orderly basis. It is prepared after an in-depth analysis of past, present, and future conditions.

A budget may be prepared for all activities performed in an organization (such as purchase budget, pro­duction budget, sales budget, capital expenditure budget, cash budget, etc.). Preparation of a budget is a planning process, as it is based on certain assumptions. A budget is also a controlling device so far as its imple­mentation is concerned. A budget furnishes budgetary standards against which actual results are compared. Therefore, budgets serve two purposes, namely, planning as well as control.

(b) Strategy:

Strategy is a comprehensive action plan designed to achieve specific objectives in the event of diffi­culty. It is a special kind of plan prepared basically to meet the challenge of a special situation. It is concerned with the means of gaining command over complex external problems and threats. It spells out priorities of the enterprise in specific terms to cope with external situations. Strategy may be considered as an action plan for accomplishing specific objectives in a disturbed state of affairs.

It is a set of moves and counter-moves to be used by an organization to get over a problematic situation by restricting rival organizations. It is formulated on the basis of careful situational analysis of the organization and its environment. It is formulated to handle the changes arising out of the environment. It is prepared to cope with the changing business environment and ensuring the survival and development of the organization. It is concerned with perceiving opportunities, threats, and taking initiatives to cope with them in the best possible manner.

(c) Objective:

Objective means planned target of performance. It is the desired end-result of an activity. Objective justifies the scope of operations and activities. Objective is the end-result towards which all the activities of the enterprise are directed. Objectives are multiple in natures and are laid down in numerical terms. Objectives provide the basis for planning and the focal point for all managerial functions.

Objectives are the goals established to guide the efforts of an enterprise, its departments and sections. Objectives serve as barometers for measuring the efficiency and effectiveness of the enterprise. The objectives must be defined in clear terms. Objectives may be general or specific, short-term or long-term, tangible or intangible. A good management is always ‘Management by Objectives (MBO)’. Objectives are fixed after collecting relevant facts and figures pertaining to a particular situation. Objectives are crucial for the existence of an organization.

(d) Programme:

A programme is a sequence of activities designed to implement policies and accomplish objec­tives. It is a precise plan which lays down the different operations to be carried out to achieve a given task.

It is result-oriented and provides practical guidelines to managerial actions. A programme is drawn up in con­formity with objectives. It consists of all steps to be taken to achieve the tasks. It involves planning for future events and establishing a sequence for required action.

A programme may be considered as a complex network of policies, procedures, task assignment rules, methods, and budget to carry out a given course of action. A programme is usually supported by capital budgets. It is developed under the umbrella of organizational goals. It can originate at any level in the organi­zation and can be a major programme or a minor one. Different programmes are to be prepared for different situations.

ii. Standing (or Repetitive-Use) Plan :

A standing plan is a permanent plan. It is used again and again. It is meant to serve as a standing guideline and criterion on managerial decision-making. It is repeatedly used for tackling recurring problems and issues. Policies, procedures, methods, and rules are examples of standing plans.

(a) Policies:

Policies are the guidelines (or framework) within which employees of an organization are supposed to work. Policies prescribe the most desirable ways and means for the accomplishment of a given objective. Policies are standing decisions made to ensure uniform action in the handling of repetitive problems. Policies define the boundaries within which the decisions should be made by the employees. Policies are aids to the manager on how objectives are to be achieved. Policies provide parameters within which managers have to make decisions consistent with the objectives.

The policies of an organization may be in writing (or implied from conventions and practices). Normally, policies are written and communicated to managers for avoiding confusion and to provide a ready reference. Generally, policies are formulated at the top level on major and vital matters. Sometimes, policies originate at lower levels and move upward for final sanction and approval. Policies should be pragmatic, actionable, and understandable to those employees who have to follow them. Policies should be reviewed periodically and recast as circumstances warrant.

(b) Procedures:

Procedures indicate the specific manner in which a certain activity is to be performed. These procedures determine the sequence of definite acts. Procedures outline the steps taken in performing specific jobs of a repetitive nature. They show the way to implement policies and are guides to action. The essence of procedure is a chronological sequence of required actions.

Procedures are very rigid and do not leave scope for individual judgement. They are clear-cut administra­tive specifications prescribing the time sequence for the work to be done. They are formulated on the basis of analysis of the various components of the work to be done. Procedures ensure uniformity in performance and action. They are developed to avoid the chaos of random activities. They involve planned sequences and consistency.

(c) Methods:

Methods deal with the best way in which a particular task is to be performed. Methods provide details about a particular operation. They prescribe the exact manner in which the operation will be per­formed. A method is only concerned with a single operation. Use of standard methods brings in uniformity in action. Methods specify how each step of a procedure is to be performed.

Methods are viewed as specific, detailed, and rational means of simplifying and standardizing the work. They prescribe the way in which a particular task is expected to be performed. The use of scientific methods in performing various operations may lead to higher efficiency and less fatigue on the part of the workers. Normally, the methods are based on research and in-depth analysis of a particular operation. Methods are desirable for various administrative and managerial activities.

Rules are specific statements used for guiding what may or may not be done. Rules are prescriptive directives to employees in organizations to do or not to do certain things. Rules are generally formalized in writing and are impersonal in nature. They are meant for strict observance. Employees are expected to comply with rules (i.e. a specific set of directions) while performing an activity. Violation of the rules is asso­ciated with some sort of disciplinary action.

Rules are framed to regulate and control the working behaviour of employees. They indicate acceptable patterns of human behaviour in an organization. Usually, rules are made in writing to avoid confusion. Rules should be very precise, specific, and clear, so that there cannot be any controversy or ambiguity. Rules are very rigid and leave no scope for description and deviation. Non-compliance of the rules attracts punishment. The rules are enforced for maintaining discipline among employees. The observance of rules by employees leads to higher efficiency and smooth functioning.

Types of Plans – Top 8 Types: Purposes (or) Missions, Objectives (or) Goals, Strategies, Policies, Procedures, Rules, Programs and Budgets

Plans are classified as:

1. Purposes (or) Missions

2. Objectives (or) Goals

3. Strategies

4. Policies

5. Procedures

7. Programs and

8. Budgets.

Type # 1. Purposes (or) Missions:

Every kind of organisation has a purpose or a mission. The mission (or) purpose identifies the basic function of any organisation. For example, the purpose of college is teaching and providing services to the community.

The purpose of housing board is to design, build and distribute the houses to people with nominal price. The purpose of any business is the production and distribution of goods and services normally, the mission (or) purpose are often used interchangeably.

Type #   2. Objectives (or) Goals:

Objectives are the ends toward which activity is aimed, objectives are goals (or) aims which the management wishes the organisation to achieve. Objectives are the end points towards which all business activities like organising, staffing, directing and controlling are directed. Objectives are the specific targets to be reached by an organisation.

They are the translation of an organisation’s mission into concrete terms against which results can be measured. For example, a university can decide to admit a certain number of students (or) a hospital can decide to admit a certain number of indoor patients.

Type #   3. Strategies:

Strategy is defined as the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals. Strategies analyse the organisational strengths and weaknesses and the environmental opportunities and threats and provide an optimal match between the organisation and environment.

Type #   4. Policies:

Policies are general statements (or) understandings that guide in decision making. It is a guideline for decision-making.

Policy is a verbal, written (or) implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place. Policies provide a framework within which decisions must be mode by the management in different spheres. Thus we hear about personnel policy, recruitment policy, price policy and advertisement policy.

For example, the policy of the company is to recruit through the employment exchange. Or In some companies, policy is to promote from within. The advertisement policy id company is to avoid cut throat competition with its rivals in the field.

Policies define an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to an objective.

Objectives are end points of planning while policies channelise decisions to these ends. Policies lead to objectives in the similar way as series of alternate high way routes lead to a city.

Examples of Policies:

(i) Policies of hiring only college trained engineers.

(ii) Encouraging employee involvement for management decision.

(iii) Promoting people from within the organisation.

(iv) Conforming strictly to a high standard of business ethics.

(v) Setting competitive prices etc.

Type #   5. Procedures:

Procedures are guides to action and they detail the exact manner in which certain activities must be accomplished. Procedures establish a required method of handling future activities.

The college policy may grant vacation for staff members. But procedures for implementing this policy will provide for scheduling vacations to avoid disruption of work, maintaining records to assure each staff member of a vacation and spelling out the means for applying for a vacation.

Type #   6. Rules:

Rules shows specific required actions (or) non actions, allowing no discretion. ‘No Smoking’ is a rule. The rule reflects a managerial decision that some action should be taken (or) should not be taken. The purpose of policies is to guide decision making by marking off areas in which managers can use their discretion. Rules allow no discretion in their application.

In sanctioning overtime to worker, in regulating travelling allowances, in sanctioning entertainment bills and in other similar matters, a uniform way of handling them (or) dealing with the case has to be followed. These all are covered by the rules of the organisation. These rules avoid repeated reference to higher levels for authorization of routine matters which occur frequently.

Type #   7. Programmes:

Programmes include all the activities required for achieving a given objective. Programmes are drawn in conformity with the objectives and are made up of policies, procedures, budgets etc.

For example, an organisation may have a programme of:

a. Opening five branches in different parts of the country.

b. Deputing its employees for training.

c. Acquiring a new line of business.

d. Installing new machines in the factory.

e. Introducing a new product in the market.

The most important elements for programme are:

1. Time phasing and

2. Budgeting.

Time phasing means that specific dates should be laid down for completion of each successive stage of a programme. Budgeting means that a provision should be made in the budget for financing the programmes.

Type #   8. Budget:

A budget is a statement of expected results in numerical terms.

A budget may be expressed in terms of:

b. Labour-hours

c. Unit of product

d. Machine hours

The important budgets are:

a. Sales budget

b. Production budget

c. Cash budget

d. Revenue and expense budget

The sales budget shows the expected sales of finished goods for a period.

The production budget shows the anticipated production over a period.

The cash budget reflects the expected flow of cash for a period in advance.

The revenue and expense budget shows the anticipated revenue and expenses for a period.

Budgets are very useful for an organisation. Since budgets are expressed in numerical terms, they facilitate-

a. Comparison of actual results with the planned ones.

b. Serve as a control device and yard-stick for measuring performance.

c. Help in identifying and removing dead heads of expenditure.

Types of Plans – 2 Main Types: Standing and Single-Use Plans

The plans help the managers in managing day to day affairs, utilising resources of organisation efficiently and in regulating working behavior of subordinates.

The plans may be classified into two categories:

Type # 1. Standing Plans:

These plans are recurring plans and they are used repeatedly in situations of a similar nature. It is used again and again over a long period of time. It helps manager in dealing with routine matters in a predetermined and consistent manner.

Standing plans are essential for smooth operations. Objectives, policies, strategies, procedures and rules are important standing plans.

I. Objectives:

The term objective indicate an end result to be sought be management. According to Robert C. Appleby, “objectives are goals they are aims which management wish organisations to achieve.” They lay down guidelines for the various activities of the organisation and decide the direction, nature and quantum of efforts needed for these activities.

The two widely accepted definitions of objectives are as follows:

i. Objectives are goals established to guide the efforts of the company and each of its components.

ii. Objectives indicate the end point of a management programme.

Objectives constituted the basic plan of the organisation, involving the planning process and represent future direction towards which organisation to move in without objectives, meaningful planning cannot be done. It is the basic responsibility of the managers to formulate of other plans like policy, strategy, rules and budgets to the large extent depends on objectives.

The organisational objectives provide strong base to design and develop a workable plan. It gives a specific direction to formulate an operational system which reflects the purpose of the organisation. The objectives should be coordinated in a manner that department’s goals may contribute of organisational or corporate goals.

The following aspects are to be considered during formulating the objectives of an organisation:

i. Productivity.

ii. Physical and financial resources.

iii. Profitability.

iv. Managerial performance and development.

v. Marketing and innovation.

vi. Worker performance and attitude.

vii. Public responsibility such as – accountability to society, ethical and moral aspects.

Characteristics of Objectives:

The important characteristics of business objectives are as follows:

(i) Objectives are Basic Plans:

The objectives of an organisation are the foundation of other plans. It provides justification for the establishment an operation of an organisation.

(ii) Objectives are Multiple in Nature:

The objectives are required in every area of business where the survival and success of the business is important. As per opinion of Peter F. Drucker, “The objectives of the business may relate to market standing, innovation, productivity, human and non-human resources, profitability, worker’s performance and development and social responsibilities”.

These multiplicities of objectives should be properly balanced to avoid class between different objectives. Managers should see the various goals exist in harmony and decide priority of 1, 2 and 3 depending on the importance of each objective.

(iii) Objective has Hierarchy:

The objectives which are based on a mission of the organisation form a hierarchy from the top level to the lower level in the organisation structure. They differ in the degree of importance that is corporate, departmental, sectional and individual objectives. The objectives in an organisation are described through means-ends chain.

The means-ends chain helps to see how broad goals are translated in to operational objectives. The objectives of each low level become means to the ends (objectives) of the next higher level in the organisation. Each level of objectives stands as ends relative to the levels below it and as a means relative to the levels above it.

(iv) Objectives may be Long Range or Short Range:

Every business organisation must have both long range and short range objectives. The long range objectives generally cover a period of five years or more while short range objectives normally cover a period of up to one year depending on the nature of business.

The long range objectives such as – survival and growth of organisation and short range objectives like market standing, maximisation of sales, product development, productivity and effective utilization of resources. The short term objective must be integrated with long term objectives in order to achieve overall objectives of the organization.

(v) Objectives are Tangible or Intangible:

The tangible objective have quantifiable value such as – productivity, market standing, physical and financial standing etc., while intangible objective have quantifiable like manager’s performance, worker’s morale and attitude.

(vi) Objective has a Priority:

Objectives implies that at a given point of time, the accomplishment of one objectives is relatively more important than that of others. For examples, an organisation which is facing difficulty in meeting pay rolls on due date on accounts, the goal of maintaining a minimum cash balance may be critically important.

Importance of Objectives:

The achievement of objectives is essential for the survival and growth of the organisation. Objectives affect the size, shape, and design of the organisation and they are important in motivating and directing personnel.

The well-defined and properly stated objectives provide the foundation for effective management and serve the following functions:

(i) Mission of Business – Objectives Provide direction to the individual tasks, efforts of the organisation and also serves as a guide to the members of the organisation. It indicates the destination of the business. A manager would be like a blind folded archer and expending useless effort without looking the target.

(ii) Legitimacy – Objectives describe the purpose of the organisation. It helps to legitimise the presence of the organisation in its environment and also serves as a basis for consistent and integration of planning.

(iii) Generates Motivation – Objectives make job worthwhile and meaningful. The setting of an objective leads to an increase in performance because it makes clear to the individual what he/she is supposed to do.

(iv) Tool for Control – Objectives serve as performance standards against which actual performance may be checked. The performance standard are helpful not only to take corrective action but also in deciding financial compensation and promotion to the individual.

(v) Decentralisation of Business – The well-designed objectives are helpful in effective delegation of authority. Objectives provide basis for fix responsibility to achieve the results.

(vi) Coordination – The effectiveness of organisation depends upon the degree of coordination between individual goals and organisational objectives. It keeps activities on right direction. The degree of coordination improves interpersonal and intrapersonal relationship among employees of the organisation.

As per opinion of Peter F. Drucker, “Objectives help to organise and explain the whole range of business phenomena in a small number of general statements, to test these statements in actual experience, to predict employee behavior, to appraisal the soundness of decisions when they are still being made, and to enable practicing businessmen to analyse their own experience and as a result, improve their production performance”.

Advantages of Objectives:

The following are the important advantages accruing from scientific and carefully chosen objectives:

(i) The various Plans prepared by several people are adjusted to a common objectives and this encourages unified planning.

(ii) Objectives provide the yardstick to measure the performance at various levels of employees.

(iii) There is a common agreement on a set of objectives.

(iv) There is a great degree of coordination of work and efforts.

(v) The assigning of decision making power to subordinate to enable them to perform their work effectively.

(vi) Objectives provide a basis for planning and for developing other types plans such as – budgets, policies and procedure.

(vii) Objectives eliminate haphazard actions which may result in the undesirable consequences.

(viii) Objectives reduce misunderstanding and conflict and facilitate communication among employees minimizing jurisdictional dispirits.

(ix) Objectives provide a basis for leading, guiding, directing and controlling the activities of employees of various departments.

(x) The fair and justifiable goal setting increases the level of motivation among employees of the organisation.

II. Policies:

Policy is a basic statement that guides decision making. The notion of guidelines is common to both objectives and policies. Objectives describe what is wanted or what is to be achieved whereas policy describes the major features of how the accomplishment of objectives will be pursued.

Policies lay down the boundaries within which decisions have to be made for accomplishing the objectives of organisation. They are the basis for executive operation and provide ready answers to all questions faced in running the organisation. They also facilitate co-ordinations by creating uniformity and consistency in individual action.

Some definitions of policy are as follows:

Policies are general statements or understandings which guide or channel thinking in decision making of subordinate. – Koontz and O’ Donnell

A policy is a verbal, written or implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place. – G.R. Terry

Policies are standing decisions made to ensure uniform action in the handling of repetitive problems and questions that are significant to the organisation at large. – Allen It should be remembered that a policy does not provide ready-made decision, but its purpose is to secure consistency indecisions made in similar situations.

The well-defined policies enable a manager to delegate authority to his subordinates. Policy formulation becomes an important activity as the organisation balloons to gigantic proportions. There is a direct relationship between organisational structure and policies. The larger the organisation, the more elaborate its policies.

Characteristics of Policies:

The top management is responsible for developing effective policies of the organisation.

The characteristics of a sound policy are as follows:

(i) The policy should help in achieving the objectives of the organisation.

(ii) The policy should be clear, positive and in understandable language.

(iii) The policy should be constructed on the basis of facts and sound judgment and not on personal feelings.

(iv) The policy should provide a broad outline so the initiative of employees is not hampered.

(v) The policy should be fair and stable but should be flexible enough to keep the organisation in tune with the times.

(vi) The policy should reflect the internal and external business environments.

(vii) There should be as many policy as necessary to cover conditions that can be anticipated.

(viii) The policies should not be mutually contradictory and there should not be inconsistency between two policies.

(ix) The polices should be just and equitable to internal as well as external groups.

(x) The periodic review of policies is essential to avoid organisational complacency or managerial stagnation.

Importance of Policies:

The following importance of policies:

(i) Policy provides a frame work with which decisions can be made.

(ii) Policy provides guidelines which help the organisation to keep the activities on proper lines.

(iii) Policies are the base and main instrument for the delegation of authority.

(iv) It creates unity of efforts and uniformity of action.

(v) Policies have a considerable contribution to make the coordination of individual efforts and diverge activities.

(vi) Policy helps to prevent unwarranted deviations from planned course of action.

(vii) It helps the management that action taken by subordinates will be consistent with goals of the organisation.

(viii) Policy gives a practical shape to objectives by elaborating the way in which the goals are to be achieved.

Process of Policy Formulation:

The top management is responsible for formulation of policy in the organisation along with middle or lower management if necessary. The policy decision involves standing decision while other decisions taken within the frame work of a policy decision. As per view of R. Bandhopadhyay, “Policy making even today remains a subtle art form that must include a large element of programatism such as – requires judgment and experience.”

The policy formulation consists of the following steps:

i. Analysis of Environment:

The first step in policy formulation is the identification and analysis of both external and internal environment of the organisation. Both external and internal environments are interrelated and interdependent on each other.

The internal environment is concerned with human and non-human resources, union management relations, values, norms, and organisation structure while external environment relates to social, economical, political, and technological and risk opportunities.

ii. Policy Alternatives:

The relationship between goals and policies should be constantly kept in watch during identification of alternatives of policies.

iii. Examination of Alternatives:

The each and every alternative should be carefully examined in the light of his contribution to the organisation goals.

iv. Consequences of Various Alternatives:

After examination of alternatives the next step in policy formulation is the study of consequences of various alternatives in the perception of goal attainment of the organisation.

v. Selection of Policy:

The last step in this process is the selection of policy. The main emphasis on selection of policy is that the policy is helpful in getting organisation’s objectives and goals. If the selected policy does not confirm the acceptable norms then the search for new policy alternatives has to be made.

III. Strategy:

The term strategy means to counter the moves of the enemy forces. It involves preparing oneself for unforeseen and unpredictable events. In modern times the word strategy has found its way into the management field. In the context of a business concern strategy indicates a specific.

Programme of action for achieving the organisation by objectives by employing the organisation’s resources efficiently, effectively and economically. A strategies plan made in the light of the plans of the competitors and situation demands and constantly modified in the light of the moves of the rivals.

Some definitions of strategy are as follows:

Strategy in the process of defining the objectives of the organisation, on changes in their objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources. – R.N. Anthony

Strategy is the pattern of objectives, purposes of goals and major policies and plans for achieving these goals stated in such a way as to define what business is in or to be in and the kind of company it is to be. – E.P. Learned

Strategy refers to the determination of purpose and the long term objectives of the enterprise and the option of courses of action and allocation of resources necessary to achieve these aims. – Horold Koontz

Strategy may be considered as an action plan, initiative of an organisation for seeking achievement of the objectives in a changed specific situation. It is also organisational response in the form of deploying, mobilising and utilizing its resources and strength either for facing problems arising out of the changing environment.

Characteristics of Strategy:

The following characteristics of strategy are:

(i) It is an integrated action plan for achieving objectives in the current and changed situation.

(ii) It relates the business organisation to its environment.

(iii) It depends on both external and internal factors.

(iv) It is flexible and dynamic in nature in order to cope with the environmental business changes

(v) It is generally drawn for a long period but it has short term implication also.

(vi) It is formulated at the top level management and not delegated downward in the organisation.

(vii) It is action oriented and more specific than objective.

(viii) It helps for deploying, mobilising and utilising limited resources for achieving objectives.

(ix) It is a means to amend and not an end in itself.

(x) It involves assumption of certain calculated risks.

IV. Procedures:

Procedure prescribes the specific way in which a piece of work is to be done. It is also called as action guidelines. Objectives and policies do not state the ways and means through which the organisational goals are to be accomplished. There is a need for procedures. It may be defined as an administrative action guide prescribing a sequence in which various activities are to be performed by management.

As per opinions of G.R. Terry, “a procedure involves a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished”. It denotes a list of systematic steps for handling events that occur regularly. The chronological sequence of required actions is the essence of any procedure.

It involves planned sequence of operations for handling recurring business transactions uniformly and consistently. This, procedures tell how a particular activity is to be carried out in order to achieve organisational goals. Procedures are used in all major functional areas of operations.

All routine tasks can be performed effective efficiently, if unnecessary steps are eliminated and one procedure is laid down. The well-conceived procedures allow effective delegation of authority without loss of control and coordination. It helps in integrating organisational efforts and facilitates control process.

Procedures are operational guide to actions as they routines the way certain recurring jobs are to be performed. A streamlined system of procedures helps to expedite and accelerate pace of work without duplication and waste of efforts and resources.

It will lubricate the channels of information and help the management in timely decision making. The flow of information can be procedurised so that management gets information continuously in vital areas like sales performance, cash flow, inventory position and so on. However, procedures must be periodically reviewed and updated to keep pace with the changing requirements of the volume of work.

Features of Procedures:

The important features of procedures are as follows:

(i) Procedure is a systematic way of handling regular events.

(ii) Procedures are a guide to action.

(iii) Procedures are established in keeping with the objectives, policies and resources position.

(iv) Procedures are concerned with establishing the time sequence for work to be done.

(v) Procedures are generally meant for repetitive work so that some steps are followed every time that activity is accomplished.

(vi) Procedures encourages delegation of authority to the lower level manager.

Advantages of Procedures:

The following uses of procedures illustrate their utility:

(i) It should focuses on desired objectives.

(ii) It leads to simplification of flow of work and elimination of unnecessary steps.

(iii) It reduces the decision making process because the sequence of steps to be followed is standardized.

(iv) It should help in bringing coordination in the organisation.

(v) It should help in reducing the wastage that is ultimately the direct profit of the organisation.

Limitations of Procedures:

The some drawbacks of procedures are as follows:

(i) It brings rigidity in the performance of operations.

(ii) A more effective way of doing a job may not be given proper attentions

(iii) They become obsolete with the change in business operations.

Rules are the simplest and most specific type of standing Plans. They specifies what is to be done and what may not be done in given situation. They do not leave any scope for decision making. It more rigid than a policy. It is generally pertain to administrative area of a procedure.

A rule may not be part of any procedure, for examples, “Hard hats must be worn in the plant at all times”, “Stop when the red light is on,” and “No smoking zone” etc., are not related to any procedure. They demand stick compliance. There violation is generally associated with some sort of disciplinary action. Rules help to regulate behaviour and to facilitate communication.

Type # 2. Single Use Plans:

These plans are non-recurring in nature and will not be repeated in the same form in future. It is designed to fit the demands of a specific situation or goal. Programmes, budgets, schedules and projects are import single use plans.

I. Programmes:

A programme is a single use plan which lays down the operations to be carried out to accomplish a given work. It lays down the definite steps in proper sequence that will be taken for the purpose of achieving a specific objective. As per views of Alien, “Programme is a sequence of action steps arranged in the priority necessary to accomplish an objective.”

A well deigned programme covers all actions that are necessary to achieve a mission and indicates who should do what and at what time. Programmes are result oriented and provide practical guidelines to managerial activities. They also provide greater motivation to the managers.

Newman and Logan have advocated a six steps process for effective programming:

(i) Stepwise Division of Work – Manager is expected to write the series of steps to be followed to achieve the objective.

(ii) Relationship and Sequence between Steps – Division of work into different elements create the problem of achieving coordination between different activities.

(iii) Fixing Responsibility – If manager is satisfied with the division of work, then he should be paid to the attention on fixing of responsibility to subordinator at each and every step.

(iv) Arranging for Resources – The success of a programme is largely dependent on the availability of both human and non-human resources.

(v) Scheduling – The manager should decide two things at this stage – (a) the date when a step can begin; and (b) the time needed to complete an operation once it is started.

(vi) Dates Sheets for Each Task – It is essential to establish a definite time schedule for each part of programme, the starting date and the completion date separately. The final schedule should be as realistic as possible.

II. Budgets:

Budget is a statement of expected results expressed in numerical terms for a definite period of time in the future. It is the blueprint of future course of action. It provides a standard by which actual operations can be measured and by which variations can be checked.

Like any other plan, the budget must have flexibility, objectivity and structural form. The important budgets prepared in a business organisation are cash budget, production budget, sales budget, capital budget and master budget.

The basic features of a budget may be as follows:

i. It is a statement in terms of money or quantity or both.

ii. It is prepared for a definite future period.

iii. It is prepared in advance; and

iv. It aims at achieving a given objective.

Advantages of Budgets:

Some of the important advantages of budgets are as follows:

(i) Budget lays down organisation goals

(ii) It is time bound and helps in introducing definiteness in planning.

(iii) It provides a basis for the future course of action by the management.

(iv) It lays down attainable targets and prescribing means to achieve them.

(v) The objectives and plans are presented in numerical terms in budget; it facilitates the verifiability of planning.

III. Schedules:

Scheduling is a part of action plan includes the process of establishing a time sequence for the work to be done. It is a core and vital part of a programme or project. A schedule specifies time limits with in which activities are to be completed. It is necessary for avoiding delays and ensuring continuity of operations.

It translates programmes into action in an orderly fashion. In all types of organisations, scheduling is necessary to provide for a systematic and even flow of operations. For example, in organisation recruitment, selection, training and placement activities are sequenced.

IV. Project:

A project is a distinct cluster of function and facilities for a definite purpose and time period. It is a part of a general programme which can be designed and executed as a distinct plan in it. It facilitates an integrated work package within a heterogeneous mass of activities and resources. The project is itself may consist of several sub plans.

For example, new product developing project may be a complex process including sub plans like developing and exploring new markets for existing products, selling existing product more intensively in current markets, and marketing new product.

As per views of J.M. Stewart a project has the following features:

(i) The activity has a clear object.

(ii) The activity is complex and critical to the organisation.

(iii) The activity is temporary with respect to duration of need.

(iv) The activity is somewhat unique and unfamiliar to the present organisation.

Related Articles:

• Classification of Plans: 4 Types | Management
• Action Plans: Top 3 Types | Management
• 8 Important Types of Plans | Management
• 2 Main Types of Plans | Planning | Functions | Management

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Term life vs. permanent life insurance

• Term life insurance 

Whole life insurance

Universal life insurance, variable life insurance, variable universal life insurance, simplified issue life insurance, guaranteed issue life insurance, group life insurance, choosing the right type of life insurance, types of insurance faqs, exploring the types of life insurance: a comprehensive guide.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

• Permanent life insurance lasts your lifetime and accrues cash value in addition to offering a death benefit.
• Term life lasts for a specified time and then expires, but it's cheaper than permanent life.
• There are several types of term and permanent life policies, and some don't require a medical exam.

Life insurance is a contract between you and the life insurance company. You'll pay monthly or annual premiums for coverage. If you pass away while your policy is in effect, your insurer must pay a death benefit or your policy's proceeds to your chosen beneficiary.

Life insurance is a crucial tool to manage your risk and protect your loved ones financially. "If you don't make it home and someone relies on your income to live, you need life insurance," says Mark Williams, CEO of Brokers International.

The best life insurance policy for you depends on your budget as well as your financial goals. There are two main types of life insurance policies to choose from: permanent life and term life.

The difference between term life insurance and permanent life insurance is similar to the difference between renting an apartment (term life) and owning a home (permanent life).

When you rent, you have a lease for a certain amount of time. When that lease is over, you can renew it. Likewise, term insurance lasts for a specified period. When it ends, you can reapply for coverage, but your premiums will likely increase based on your age and health status.

Permanent life insurance has a death benefit for your beneficiaries and a cash value you can use during your lifetime. It's like owning a home. Like a home, you build equity in your policy, which you can use as collateral. You can also use your cash value to leave a larger death benefit to your heirs when you pass away. 

Whether you choose permanent or term life insurance, you must undergo the underwriting process. During the underwriting process, your insurer gathers information about your health, job, income, finances, and other personal information to evaluate your risk level. It may require a medical exam, which includes collecting a blood and urine sample. Based on your risk level, the insurer determines your eligibility, premiums, and coverage amount.

The table below highlights the core differences between term and permanent life insurance. 

Term life insurance 

What is it .

The most popular type of term life insurance is a level term policy. You pay fixed premiums for a designated term—usually between ten and 30 years—for a fixed death benefit. If you die during your term, your beneficiaries receive a death benefit. If you outlive your policy and pass away without renewing your coverage, your beneficiaries won't receive a death benefit.

There are also other types of term life insurance policies, some more popular or expensive than others. Take a look at the list below for the top term life policies and their features.

• Annual yearly renewable (ART): This policy provides coverage one year at a time up to a specified age, without an additional medical exam. However, premiums increase each year as you age.
• Return of premium: Returns part or all of the money you've already paid if you haven't used the policy once your term ends. You'll pay an extra premium for this feature.
• Convertible term life: This allows you to convert a term life policy into permanent life insurance without additional evidence of insurability.

Who is it best for? 

Term life insurance provides coverage for a certain amount of time. This makes it suitable for most applicants, as most people's financial obligations decrease as they age. It's also the most affordable life insurance policy, making it accessible to most individuals. You can find our guide on the best term life insurance here.

Whole life insurance is a lifelong or permanent policy in which you pay a fixed premium for a guaranteed death benefit. The insurance company saves a portion of your premium in its own portfolio to increase your policy's cash value. Since whole life insurance offers many guarantees, it's one of the costlier life insurance policies.

Whole life insurance is an excellent option if you need long-term coverage, like if you have lifelong dependents or are a business owner. If you'd like to build a tax-free legacy for your dependents with little to no market risk, a whole life policy may be the way to go. You can find our guide on the best whole life insurance here.

Universal life insurance allows more flexibility than a whole life policy. You can raise or lower your death benefit, which increases or decreases your premiums based on your financial situation and needs. For example, if you find that you need less coverage because your children are grown up and your mortgage is almost paid off, you can lower your death benefit. As a result, this decreases your premiums. 

If you'd like lifelong coverage, steady cash value growth, and flexibility in your premium payments and coverage amounts to align with changing financial needs, universal life insurance could be the perfect policy for you. You can find our guide on the best universal life insurance here.

Variable life (VL) insurance policy, a type of permanent life insurance , was created years after universal life for people who didn't like how whole and universal life commingled their investments with the insurance company. 

Your money is invested in subaccounts that track underlying mutual funds, bonds, and stocks. If the market does well, so do you. If the market falls, so does your cash value, making it riskier than whole and universal life.

VL insurance is best for someone who wants control over how their cash value is invested and can tolerate increased market risk for higher returns. Since life insurance policies tend to yield subpar returns, VL may be best suited for high-net-worth investors who have maxed out other tax-advantaged investment vehicles (i.e., 401(k)s, Individual Retirement Accounts (IRA)s, etc.). 

Variable universal life (VUL) insurance is a combination of universal and variable life insurance. You can raise or lower your death benefit and have your cash value invested in subaccounts that mirror the performance of underlying investments. Again, this is risky, but if the market does well, so does your cash value.

Like a VL policy, VUL is best for those who want lifelong coverage, more investment options, and the ability to weather increased risk for higher returns. It's also suitable for those hat want flexible premium payments and coverage amounts. You can find our guide on the best universal life insurance here.

Simplified issue life insurance doesn't require a medical exam, but you still have to complete a health questionnaire and provide access to medical records. If you fail to disclose a condition and die, your insurance company can deny death benefits to your beneficiaries. 

It's worth noting that some insurance companies enforce graded death benefits, which refers to your insurer withholding your full death benefits for the first few years of coverage.

Simplified issue life insurance is suitable for applicants of all ages with mild to moderate medical conditions (e.g., asthma, obesity, mental health issues, etc.) You can find our guide on the best no exam life insurance .

Guaranteed issue life insurance is easier to obtain because it doesn't require a medical exam or health questionnaire. However, it has several drawbacks. One of those drawbacks is you must be 50 and older to apply. Plus, since this policy is catered towards high-risk applicants, premiums are usually higher, and coverage amounts are limited. 

Guaranteed issue life insurance is also known as final expense insurance since it offers low death benefit amounts and tends only to cover funeral and burial expenses. 

Guaranteed issue life insurance is a viable option for individuals who struggle to obtain traditional life insurance, like seniors, smokers, and applications with chronic, severe, terminal illnesses or multiple health conditions. You can find our guide on the best life insurance for seniors here.

Group life insurance is employer-provided life insurance, usually offered for free as part of the company's benefits. However, if you are discharged, retire, or quit, you will lose coverage. Plus, group life insurance usually has limited coverage amounts and options compared to private life insurers. 

Consider group life insurance if you're employed with a company that offers this benefit and you anticipate staying with the company in the long run. 

The best life insurance policy for you depends on your budget and financial situation. If you have a fixed income with temporary needs, term life insurance may be best for you. If you have health issues that may prevent you from traditional coverage, you may want to consider no medical examination life insurance . If you want coverage for your dependents in the event of your untimely death, then a term life policy works. If you want to build wealth and leave a legacy, a permanent life insurance policy is best.

Your life insurance needs will change as you age, and you'll need to consider children , marriage, divorce, retirement, and caring for aging parents. Consider consulting a financial advisor, estate attorney, and accountant to ensure you have the proper coverage for your goals and life changes. Also, talk to your insurance agent or financial planner about what works best for you and your budget based on your financial situation.

Term life insurance provides coverage for a certain period of time (usually ten to 30 years). Whole life insurance offers lifelong coverage along with a cash value component.

Many term policies have built-in term-to-perm conversion options. If not, you can include it as a rider or an add-on to your policy at an additional premium. This allows you to convert your term policy to a whole life policy without undergoing an additional medical exam or health questionnaire. 

Policies like variable life and variable universal life insurance insurance allow policyholders to invest the cash value in separate accounts that track underlying investments, This offers the potential for growth but exposes you to market volatility, increasing your risk. 

If you don't qualify for traditional life insurance, no medical exam policies like simplified issue or guaranteed issue may be an option. However, these policies tend to have higher premiums and lower coverage amounts.

Consider your financial goals, coverage needs, budget, and any current or potential health issues. Work with a financial advisor for personalized guidance on your individual situation.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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Pension plans, once a staple of retirement planning , have become less common as more companies transition to defined contribution plans like 401(k)s. Despite this trend, traditional pension plans remain one of the best retirement plans out there.

Here’s everything you need to know about pension plans, from their structure and types to taxation and payout options.

Pension plans are a type of retirement plan where an employer commits to pay a set monthly amount to employees when they retire. The amount is usually based on the employee’s salary and years of service, among other factors. The employer is primarily responsible for contributing to the plan and managing the investments. Pension plans are designed to provide a steady income stream for workers during retirement.

Only 15 percent of private industry workers had access to a traditional pension plan, also called a defined benefit plan, in March 2022, according to the Bureau of Labor Statistics .

How a pension plan works

Pension plans operate on the principle of accruing benefits over an employee’s career. During their employment, the employer contributes to the plan on behalf of the employee. The money is then invested, and the returns are added to the plan’s funds. Voluntary employee contributions may be allowed as well.

During retirement, the employee begins to receive monthly payments, the amount of which is determined by a formula that takes into account factors like the employee’s final salary and years of service. Pension benefits are typically payable for the remainder of the employee’s life.

Two types of pension plans

Pension plans can be categorized into two main types: defined benefit plans and defined contribution plans. Here’s a closer look at both.

Defined benefit plan

A defined benefit plan provides a specific monthly benefit at retirement, which is calculated using a formula that typically factors in salary, years of service and age. The employer bears the investment risk and is responsible for ensuring sufficient funds exist to pay the promised benefits.

These plans are often referred to as traditional pension plans, and they’re generally seen as more advantageous for workers since they provide a predictable income in retirement. However, they’re less common today due to their high costs and complexity for employers.

Defined contribution plan

In a defined contribution plan, the employer, employee or both make regular contributions to the employee’s individual account within the plan. The final benefit amount depends on the total contributions and the performance of underlying investments. The most common type of defined contribution plan is the 401(k) .

While these plans give workers more control over their investments, they also transfer the investment risk from the employer to the employee.

Options for pension plan distribution

When it comes to receiving pension benefits, retirees typically have two main options: monthly annuity payments or a lump-sum distribution. The most suitable option depends on the retiree’s financial situation, life expectancy and personal preferences.

You can use a pension calculator to estimate your earnings and compare pension distribution options. You might also consider speaking with a financial advisor to determine which payout option works best for your retirement needs.

An annuity distribution provides a steady stream of income for life. Some plans may offer options for survivor benefits, which continue payments to a spouse or other beneficiary after the retiree’s death. While annuities offer the security of a regular income, they may not keep pace with inflation.

A lump-sum distribution pays out the entire value of a pension plan in one go. This can be an attractive option for those who want immediate access to their funds, have a shorter life expectancy or feel confident in managing their own investments. However, taking a lump sum can lead to higher taxes in the year of the distribution and poses the risk of running out of money if not properly managed.

Are pension plans taxable?

Pension plans are usually taxable. When retirees start receiving pension benefits, the payments are treated as ordinary income and are subject to federal income tax. Depending on where the retiree lives, the payments may also be subject to state income tax.

Advantages of pension plans

Pension plans offer several benefits, including:

• Guaranteed income: They provide a steady and predictable income in retirement, reducing the risk of outliving one’s savings.
• Employer-funded: Most of the funding for a pension plan comes from the employer, which can be a significant benefit for employees.
• Low maintenance: Since the employer is responsible for managing the plan’s investments, employees don’t have to worry about choosing and managing their own investments.
• Inflation protection: Some pension plans offer cost-of-living adjustments to help keep pace with inflation.

Risks associated with pension plans

While pension plans have their benefits, they also come with risks, particularly the financial health of the employer. If the company faces financial distress or goes bankrupt, it may not have the funds needed to meet its pension obligations.

Additionally, pension benefits are often based on the employee’s final years of salary and years of service. If an employee leaves the company before reaching retirement age, the pension benefit may be significantly reduced.

Finally, since pension plans are typically managed by the employer, workers have little to no control over the investments, so workers must trust that their employer or plan administrator is investing funds responsibly.

How pension plans compare to other retirement savings options

Traditional pension plans are becoming increasingly rare. Instead, defined contribution plans like 401(k)s are now the standard way most people save for retirement.

• 401(k) plan: This defined contribution plan allows employees to contribute a portion of their pre-tax salary to a retirement account. Employers often match a portion of the employee’s contributions.
• Traditional Individual Retirement Account (IRA) : An IRA is a tax-advantaged account that individuals can open on their own, regardless of their employment status. Contributions are made with pre-tax dollars and provide a tax deduction in the year they’re made. However, taxes come due when withdrawals are made during retirement.
• Roth IRA : Contributions are made with after-tax dollars, so they aren’t tax deductible. However, withdrawals in retirement are tax-free.

401(k) vs. pension plan

Both 401(k) plans and pension plans offer workers income in retirement. But unlike pensions, which put the onus of saving for retirement on the employer, 401(k) plans require direct buy-in from workers.

Here are other similarities and differences between a 401(k) and a pension:

• Investment control: 401(k) participants pick the investments inside their accounts, while in a pension plan, the employer controls the investment decisions.
• Benefit predictability: Pensions offer a guaranteed benefit at retirement, while the benefit from a 401(k) depends on contribution amounts by employees and investment performance.
• Risk: With a pension, the employer bears the investment risk, while with a 401(k), the employee assumes the risk.

Frequently asked questions (FAQs)

What is pension plan vesting, can a pension plan go bankrupt, when can you access your pension account, who gets a pension, bottom line.

Pension plans can provide a reliable income stream in retirement, but they’re increasingly rare for the average worker. If you’re fortunate enough to have a pension plan, it’s essential to understand how your plan works, the benefits it provides and any potential risks. Ultimately, a diversified approach to retirement planning that combines different types of accounts and investments will help ensure a more secure and comfortable retirement.

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