A business plan or a strategic plan?

When meeting with business owners, often there is a question of do I need a business plan or a strategic plan?  How are they different?

A strategic plan is primarily used for implementing and managing the strategic direction of an existing business. A business plan is used to initially start a business, obtain funding, or direct operations.  The two plans have different time frames as well. A strategic plan generally covers a period of 3 to 5+ years, whereas a business plan is usually not more than one year.

A strategic plan is for established businesses and business owners that are serious about growing their organization. A business plan is normally used for new businesses and entrepreneurs who are start-ups.

A strategic plan is used to communicate the direction of the business to the team and stakeholders.  However, a business plan is used to present the entrepreneur’s ideas to a bank.

Another difference is the difference in ‘scale’ between a strategic plan and a business plan. Larger companies with multiple business units and a wide variety of products frequently start their annual planning process with a corporate-driven strategic plan.  Smaller companies and start-up companies typically use only a business plan to develop all aspects of the business on paper, obtain funding and then start the business.  Many smaller companies – including start-ups never develop a Strategic Plan.

Often, the goal for a strategic plan is 1% about Vision and 99%  about Alignment!  In both cases it is useful to remember the words of Alfred Lord Whitehead “The art of progress is to preserve order amid change and to preserve change amid order.”

Do you need a business plan or a strategic plan?