What’s the difference between a business plan and a strategic plan?
In my consulting work with small businesses and entrepreneurs, I find that many do not understand the difference between a business plan written for potential investors and a strategic plan.
One conversation I had with a particularly resistant entrepreneur about the need for a strategic plan went something like this:
Me: I want to work on a strategic plan for your company today.
Entrepreneur: I don’t need that. I have a plan. It took six weeks to write it and its 60 pages long with everything you ever want to know about my company. I don’t need another plan. I need to focus on doing things and getting this company launched. I don’t want to write something else and study my navel anymore!
Me: I know you have a business plan. If you recall I helped you write it! I know everything that’s in it and it’s a great plan! It’s perfect for telling your investors what the company is, how it’s situated in the market and where you want to take it. It has nearly everything, but it’s missing an important factor that you need to begin running your business. A strategic plan will help with that.
Entrepreneur: I know how to run my business. I don’t need anything else.
Me: What about the people who are trying to help you run it? You can’t do it all alone. Do they know how to run your business?
Entrepreneur: Of course not! I’m going to tell them how. I’m the one with the idea and the mission!
Me: They don’t know and since you can’t be everywhere you need something to tell them.
Entrepreneur: They can read the business plan. It has everything.
Me: Almost. It has almost everything. Think of it this way; your business plan is the design of your ship. It tells everyone how many cabins it has, where the galley is, the ocean you will sail in, the captain’s quarters design and the engine room design. It tells you everything about that boat. It even tells you everything about other’s boats. How big they are, where they sail, why your boat is better than theirs and how they are less good than you. What else does a sailor need to take a ship somewhere?
Entrepreneur: Directions. But the business plan has directions. It has a pro forma income statement and break even calculations and a pro forma balance sheet. It has all that.
Me: Even a big ship needs a map.
Entrepreneur: Yes, but we have that. I just told you. We have pro formas.
Me: How will you achieve the outcomes listed on the pro formas? Does it tell you that? Does it tell you what activities specifically need to happen in the company to achieve those annual goals? Does it tell you, no wait…Does it tell your employees, your friends, and your spouse, how exactly you will make all that money and build your company? Does it examine in detail the weekly and monthly activities that have to happen to be successful? Let me ask you this…think about your wife. She loves you right? (head nod) Does she feel as committed to this company as you? (head shake) Does she know how you will make that money you say you can make? (head shake) Has she read your business plan? (head nod) Then what is missing?
Entrepreneur: A map?
Me: Bingo! A map that guides everyone who works for you on what will happen when. We need a good marketing plan with details on what ads we will buy and what social media we will invest in. The Business Plan, the design, tells us that we will spend a certain amount each year, but the strategic plan tells us where it will be spent. It’s the granular detail that your employees AND YOU, will use to make sure you are on the right path to getting launched correctly. It’s your map with step by step turns to getting to that visionary place you see in your head, that no one else can see because they don’t have your vision…yet. This gives them the vision. And let me tell you, once you have that done, you will gain a great deal of confidence for yourself and your employees and your wife because they will see you achieving these micro goals that are mapped out to get you to your visionary goal.
Entrepreneur: OH! I see now. Wow! Can we write a strategic plan?
Me: Well, it just so happens that I wrote a draft for you. It has the major goals from the business plan and step by step actions with milestone dates to make sure we achieve these goals. It also has assignments for who is responsible for achieving these goals and the resources we will use to get there.
Entrepreneur: Well this is gonna cost me! (laughs)
Me: You’re paying me to be your consultant and guide. I wrote this as part of our agreement. You already paid for it.
Entrepreneur: Well, thanks… Why didn’t you just give it to me then?
Me: Because it’s a living document. I needed you to be on board with the idea and I could see that if I just handed it to you, it would end up on the shelf. This is your monthly guide to success. You have to check on your progress against the plan and update it regularly. If you miss a milestone, it impacts the following activities and everything must be updated. This will tell you when you’re falling behind and why your burn rate has increased if things aren’t getting done.
Entrepreneur: This seems pretty useful. Can you help me implement it?
Me; Of course, that’s what I do! I want you to succeed. I suggest you share this with your wife. I also suggest that we share this with the team you are building so they can help you make progress.
About three weeks later, after editing and crafting the plan together, we did share it with the team and the employees said things like:
“Wow, now I get it! I had no idea what was going on and I was just confused all the time…just doing what I was told. But this makes it really clear what we are aiming for and I feel really excited to be a part of this team!”
“Oh my gosh, I had no idea we were working to do this! I kept getting requests for graphics but I had no idea how it all fit together! Thank you so much for sharing this!”
If you have a great business plan but no strategic plan, get busy. It’s important to have a map to guide yourself and everyone else to the goals you state in your business plan. It will also make you far more confident in your investor pitch because you will be able to state that you are hitting your milestones and making progress on the goals you claim in the business plan.
Written by Terri FrielTags: business, business plan, Chicago Business Startups, education, Entrepreneur, entrepreneurship, Founder, growth, idea, plan, Progress, small business, starting a business, startup, strategic, success, team, traction, VC, VCVetted, Venture Capital, Venture Connects