How business plan and strategy build a great enterprise

Most entities think of a business plan when they intend to arrange for a loan facility or to arrange for some financing be it a start-up or business expansion.

This way, it can be argued many business owners appreciate the value of a business plan. Many people will be at a loss on whether what they need is a business or strategic plan.

What sets a business plan apart is market and operational feasibility. The business plan brings out salient issues by answering key questions: who and what?

The business plan tells who is in charge of business, their qualifications and the value they bring to the entity.

It also explains who the customers are, their preferences and how the business will meet them. It goes further to determine market size, who the competitors are and any relative or absolute competitive advantage they have over the business.

The business plan helps to explain the products, services, and operations so that they are offered in a way that satisfies the customer. It goes further to explain how the business intends to finance operations; is it a debt or equity or a combination of both?

A business plan will not be complete without explaining how the business intends to mitigate against risk factors. Because of overlap, it is possible to enter into strategic planning mode within the business plan without realising.

A business plan is preliminary and broad and is a document that sets you on course when the company is relatively young or just starting. Rare as it may be, the business plan can be used by companies of any age.

As the business grows, the business plan may pave way for strategic plan.

Strategic plan on the other hand sets the action plan for the business. Strategic plan ordinarily covers three to five years, with milestones set for specific dates.

A strategic plan involves participation of players to help in planning, development and execution. A strategic plan is meant to help the company achieve its goals. It is targeted to align itself to the company’s vision.

Debatable as it may be, there are differences between business plan and strategic plans. The business strategy is meant to manage the strategic direction of the company. A business plan covers a period of no more than a year in many cases.

A business strategy’s focus is on direction and action plans that will catapult the business to its dreamland. It is more futuristic but the business plan focuses on products, structure and ideas that initially define the business.

It focuses on tactics. Strategic plan gives priority to optimal resource allocation, market share expansion (by possibly outwitting competitors), revenue growth and consideration of return on investment.

A business plan is mainly meant for initial funding through debt providers and investors by way of equity.

Annual plans of large corporations are derived from strategic plans. Small and medium-sized enterprises develop business plans with a view to obtaining funding and seeking business investors.

Planning tool

A strategic plan’s boundaries may be defined by the contents of the business plan such as mission, vision, objectives.

Also, although business plan is short-term in nature, it has some elements which are key components of strategy, for example operational, marketing and financial plans.

Just like in business plan, developing financial projections, including cash flow forecast, however abridged version is important in strategic planning.

Managers and business owners develop a strategic plan mainly for internal use. It is used as an internal planning tool although it may be shared— depending on need—with external stakeholders.

It can be used to motivate, inspire, and lead staff. Externally, it can be used to communicate the future of the company to funders and other stakeholders.

A business plan is an externally focused document that provides details on proposed development of the company, and is normally shared with external stakeholders; mainly creditors and investors.

A strategic plan has specific activities, due dates and clearly states who is responsible for what. The plan ensures any growth initiative is undertaken in a co-ordinated, systematic and informed manner.

In reality, a fantastic business plan with a poor strategy is unlikely to succeed. On the other hand a great strategic plan without a proper business plan may also fail.

Mr Were is a consultant with Anchorage Ltd, a business and financial advisory firm. [email protected]