What are the different types of business plans?
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In order to appreciate all that a business plan can do for you there needs to be an understanding of the different types of business plans. Many entrepreneurs cringe at the idea of writing a business plan. They think they are too hard, to long, and will take to much time. This often happens because entrepreneurs find resources like the SBA which lists a ton of needed info to prepare a plan. While you will not go wrong by following their guidelines you may actually be doing a lot more work then you need to. My guide is not like others. It is written specifically for the entrepreneur who is looking for a way to examine opportunities of all types.
I first want to define the criteria I’m going to use:
Effort: What I mean here is the amount of ‘research’ you will need to do in order to gather, organize, and present the information needed for your plan.
Effort – Min: In this case you will typically have all the needed information in your head or in your notes. There is little need for external research.
Effort- Mod: In this case you will typically have a general idea of the direction you want to take. You will use the internet to conduct much of your research. You may do some market, demographic, and competition analysis.
Effort-High: In this case you will utilize all available resources to gather the materials needed to present your plan. This may include hiring consultants, conducting surveys, traveling to visit competitors and/or potential clients. In most cases you will have your plan reviewed by industry experts before submitting it to its final recipient.
Work: This is more the amount of time and energy that you will invest in preparing your plan.
Work – Min: In many cases a full plan can be written in one day. You typically have all the needed information that just needs to be organized. If you start focused you can do this in one sitting. It is still recommended that you go through a review process before submitting this plan.
Work – Mod: This type of plan will typically be done in three separate parts. First, is the initial preparation of the plan. Second, will be a review/research process where you find supporting information and or market research. Last, will be a final review where you run the plan by other people to gain insight into its value before submitting it to its final destination.
Work – High: In this case you should expect to dedicate months to the preparation of your plan. If you do not have this time available you may have already been given a sign that the project is out of your reach. These types of plans include travel, third party vendors, multiple review phases, and intensive investment.
I’m going to give a brief introduction to each of these types of plans. I’m not saying there are not more types out there nor would I argue that others may define my types of plans differently. Theses are simply the types or plans that I use almost on an everyday bases.
Examination Plan: (Effort: Min – Work: Min – Length: 1-5pgs)
This should be done for EVERY idea you have. This may sound ridiculous to you now but I promise if you do this you will find that staying organized and motivated in much easier. This can be a simple sheet of paper where you write down your idea, you examine opportunities, estimate costs and profitability, and you determine the ideas over all feasibility. You are basically examining your idea from all of the basic aspects. I also recommend creating a file or find a shoe box where you put all of these ‘examination plans’ into. You never know when an opportunity will arrive where you can break out an old plan and capitalize on it.
Start-up Plan: (Effort: Moderate – Work: Min – Length: 2-20pgs)
This is the type of plan most entrepreneurs will have to deal with. This is a complete review of an idea that has made it through the examination plan. At this point you are going to break the plan into four parts; 1) Description of the business, 2) Marketing’ 3) Finances, 4) Management (you can read more about this part at http://rcbryan.com/?p=107). At this point you are going to start create a detailed plan for each of the main elements of a business plan.
Micro Venture Plan: (Effort: Moderate – Work: High – Length: 10-50pgs)
Micro Venture Plans are usually created for business ventures that call for less then $100,000 in initial investment. These plans are much more detailed then a start-up plan. If you know you are going to need funds from an investor it is recommended that you skip the start-up plan and go straight into the Micro Venture Plan. All investors are looking for a solid plan with a great deal of supporting information. You’ll need to not only include you idea. You will need a detailed history of your personal finances as well as a detailed description of you business experiences. This is the type of plan that is typically submitted to a bank, a Micro-VC Firm, and family/friends you are trying to get money from.
Worst Case Scenario Plan: (Effort: Moderate – Work: Moderate – Length: 2-10pgs)
I’ve always used this as a compliment to my business plans. Many people over look the value of this plan. Things that are examined in this plan are lease commitment break even points, back up plans for the loss of a primary client, regulatory changes, entrance of new competition, and many others. You basically sit and brainstorm about all the things that could possibly go wrong and then you work out scenarios of how you will handle each occurrence. Very few people do this but I highly recommend that you spend some time protecting all your bases.
Growth Plan: (Effort: Moderate – Work: Moderate – Length: 2-50pgs)
Growth plans are usually written for a preexisting business. They are an attempt to outline a possible opportunity. This can be entering into a new market segment or taking on a new client. By examining all elements of a possible new opportunity you will look to see your capabilities, the cost parameters, and the potential benefit of taking on the new venture. These types of plans can be a simple spread sheet to a detailed competition/market analysis. A little planning now will go a long ways in the future.
Internal Operational Plan: (Effort: Moderate – Work: Min – Length: 2-50pgs)
Most Internal Operational Plans are flow sheets. They typically outline a process that is not currently in use or is not currently working properly. Some may not consider this a ‘business plan’ but if you run a business and you have ever had to examine an internal process then you understand the importance of this tool. When preparing this plan you may use benchmarking, trial and error, or historical analysis to develop and implement changes to a current or new process.
Internal Expansion Plan: (Effort: Moderate – Work: Min – Length: 10-50pgs)
This plan often compliments a growth plan. When you plan for the external elements of a new deal you have to be sure you look inwards to your staff, office space, IT and phone expansion, and management. Many people take on new projects with the right front line people and forget to examine their middle management structure. This can often prove to be fatal to a new project. You should always have an eye on what your staffing levels would need to be in order to take on that next large client. You never know when they are going to knock on your door.
Full Business Plan for Investors: (Effort: High – Work: High – Length: 20-100+pgs)
This is the big daddy of all plans. I would recommend that before even consider doing a proposal this size that you have a working knowledge of more basic business types. A Full Business Plan can take months and even years to do. You’ll need to have the answer to every question a person could possibly ask before they even know they need to ask the question. Many Full Plans are multi-million dollar deals that require the participation of an organizations board, third party vendors/consultants, basically every thing except the kitchen sink. I could and maybe will type a whole post about this type of plan. For now I think you get the point.
This is a brief introduction to the different types of business plans that you may encounter as an entrepreneur. Each is broken down with the amount of time and energy you will have to commit to the plan. It also gives a loose guideline to the needed length of the plan as well as the basic content of each type of plan.