Every successful business starts with a plan. Creating a strong business plan helps clarify what a business is, where it is going, and how it intends to get there. But new entrepreneurs are often unsure what to include in a business plan, when they actually need to create one, and which type of plan best fits their situation.
Even many experienced business owners are surprised to learn that there is more than one type of business plan. Business plans are not static documents. They can, and should, evolve over the life of the business. In fact, it is often best practice to have multiple business plans that align with a company’s current stage, priorities, and goals.
Not all business plan formats are appropriate for every business. However, understanding the different types of business plans makes it much easier to choose the right one, or the correct combination of plans, to meet your needs. This brief guide explores the seven most common types of business plans and helps you determine which ones you need and which ones you may want to skip.
Why are there different types of business plans?
Each business is unique, and so are effective business plans. Naturally, a solo freelancer just starting out is not going to need the same type of business plan as an established family-run hotel. The correct business plan, or plans, must reflect the nature of the business, the intended audience, and specific, articulable goals.
Choosing the wrong business plan type can waste your time, stymie expansion, or even prevent a viable business from getting off the ground. Therefore, it is worthwhile to invest a bit of time understanding the various business plans available to you and select the ones that best align with your current stage, aims, and audience.
The 7 most common types of business plans
While you can find an infinite number of business plan templates online, they generally fall into seven categories based on their intended aim and level of detail. Is the business plan for an angel investor ready to fund your start-up? Or maybe it is only for internal use, focusing on how to run your business more efficiently? Which plan makes sense depends more on the current needs and less on the business itself.
Traditional business plan
This is the format most people think of when they hear the term “business plan,” and it is generally the longest and most detailed option. Traditional business plans are often used when a business needs to apply for funding, such as business loans, since lenders are most familiar with this format and expect to see information such as financials, operational overviews, and business strategy to help assess risk. While thorough, this type of plan can take significant time to create and is not always necessary for every business or situation.
Lean business plan
For very early-stage companies or solopreneurs with limited time and resources, a traditional business plan may be a little over-the-top. What these companies need is a flexible business plan format that allows them to focus on testing a business idea and adapting to feedback. A lean business plan does that by concentrating on core assumptions, key activities, and how the business creates value, instead of impressive narratives and data-backed long-term financials. But, due to the feelings over facts aspect of this type of business plan, it is not very effective for raising capital.
Startup business plan
New concepts and untested products may benefit from a startup business plan format. This type of plan overlaps with many of the same elements as a traditional business plan but places greater emphasis on market opportunity, scalability, and long-term viability. Startup business plans are common in technology and online businesses, though they may not be the best fit for more traditional brick-and-mortar ventures.
Internal business plan
This is an in-house business plan that focuses on alignment, goal-setting, and tracking progress, not impressing outsiders. Often, the language and structure of these plans are informal, and milestones, upcoming challenges, and priorities are emphasized. Since internal business plans are never meant to go beyond the owners and employees, this type of business plan can be open and honest. Of course, that means it has no value outside the company.
Operational business plan
This may be more of a manual than other business plans since it focuses on the day-to-day running of the business. An operational business plan tends to cover procedures, staffing, and workflows, with the goal of maintaining consistency and efficiency. Because this plan concentrates on actions, not theory, it is typically paired with a broader business plan.
Strategic business plan
A strategic business plan is another internal document that is not intended for external audiences. Unlike an operational business plan, it does not focus on day-to-day operations but instead takes the long view. A strategic business plan outlines the company’s vision, positioning, and major initiatives, often with a timeframe measured in years. These plans are designed to be revisited and revised periodically as priorities and conditions change.
One-page or simple business plan
The shortest business plan, although not always the easiest to write, is the one-page version. This document condenses the essentials into an easy-to-read plan, which then can be shared with co-founders and potential stakeholders. These plans revolve around the core idea of the business, mainly the problem, and how the business will solve it. A one-page business plan is wonderful for sharing your idea and getting others excited about it, but it doesn’t usually have the depth to attract backers.
How to choose the right business plan type
One of the biggest mistakes entrepreneurs make when selecting a business plan is not being honest enough with themselves about their business. For a plan to have the most impact, it is essential to view your business through a critical lens. It is important to realize that there is no need to impress anyone, and you are only deceiving yourself. The goal is to choose a plan that supports where your business is now and where you want it to go.
The answers to the questions below can help steer you towards the right business plan for your company:
- What stage is my business in right now: concept, start-up, or established?
- Is the primary purpose of the plan clarity, funding, growth, or consistency?
- Who is this plan for: just me, partners, employees, lenders, or other outsiders?
- Are the time and resources required to create this plan worth the potential outcome?
- Will this plan be updated over time, or is it meant to serve a single, short-term purpose?
Once you have clear, honest answers, it becomes easier to match your needs with the strengths of each type of business plan. Remember that it is perfectly fine to start with a streamlined plan and move to a more detailed one later.
Can a business have more than one type of plan?
Yes, having more than one business plan is not only acceptable, it’s common. Many one-person companies which are bootstrapping their businesses off savings will start off with a one-page plan, and then move to a traditional business plan when they seek funding for an expansion. Even many established businesses will have more than one business plan. For example, operational and strategic business plans aren’t really stand-alone documents, but expand on ideas presented in other plans.
At the end of the day, there is no need to discard a business plan if it is working, but there is no need to stick with it if it isn’t.
Getting prepared before writing any type of business plan
Writing a business plan isn’t easy, so anything you can do to simplify the process is welcomed. Start by gathering all the information you’ll need in one place so it is easy to access. Combine accessible facts and figures with a deep understanding of your business basics, including goals and business model, and you greatly increase your chance of coming up with a business plan that is realistic, focused, and genuinely useful.
One of the biggest mistakes entrepreneurs make when selecting a business plan is not being honest enough with themselves about their business. When you’re learning how to start a business, choosing a plan that matches your current stage is often more helpful than trying to create the most impressive document possible.
Conclusion
There is not a single “correct” business plan out there. But there is an ideal plan that is right for your business at a particular moment. That’s okay. You should never feel like you are locked into the business plan you started with, nor feel you’re restricted from editing your plan as your business changes. At the end of the day, a business plan is nothing more than a tool for success, and like any other tool, it works best when chosen carefully and is well-maintained.