Business Plan vs Business Strategy – A Complete Comparison

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When starting or growing a business, it’s important to have a clear plan of action in place. But what’s the difference between a business plan and a business strategy? And which one should you focus on?

In this article, we’ll break down the key differences between business plans and business strategies, and help you decide which is best for your company.

What is a Business Plan?

A business plan is a formal written document used by both new and established businesses. The business plan contains information on all aspects of the business including a marketing plan, financial plan, etc.

Many business owners usually consider to create a business plan when they begin a new business, but a business plan serves many useful purposes. The business plan consists of the following such as the goals of the business, the strategies the business aims to use to achieve them, and so on.

In this article, we will discuss the key differences between a business plan and a business strategy! First, let’s look into what is inside a business plan.

Contents of a Business Plan

A business plan essentially contains a detailed note on all aspects of the business. The following are the contents found on a business plan:

  • Executive Summary: It contains a summary of the whole business plan
  • Company Description: It contains the basic information about the company including its name, founder, what the company makes or sells, etc
  • Vision and Mission: It details the long-term goals of the business
  • Milestones: It details the achievements and successes the company has managed to achieve so far
  • Products and Services: It contains a list of all the products and services that the business sells
  • Marketing plan: It consists of the marketing goals and strategies of the business
  • Competitive Analysis: This section analyses the competitors in the industry and how your business has a competitive edge to attract customers
  • Management Plan: It consists of details on the number of employees required for the business, their roles, salaries, etc
  • Risk Analysis: This section analyses the possible risks in the market and finds solutions for the business can overcome it
  • Financial Planning: This section deals with all the financial matters of the business

What is Business Strategy?

A business strategy is a plan of action designed to achieve a specific goal or objectives. formulating and then implementing the business strategy is a process that requires careful planning and execution.

The first step in any business strategy is to decide what your goals and objectives are. What are you trying to achieve? Are you looking to expand into new markets? Are you looking to develop new products or services? Once you have a clear understanding of your goals, you can begin formulating your business strategy.

Your business strategy should be based on a thorough analysis of your company’s strengths and weaknesses, as well as an understanding of the opportunities and threats present in your industry and market. This analysis will help you determine where your company needs to focus its resources.

Business Strategy vs. Business Plan

Though business strategy and business plan sound similar and many use the terms interchangeably, the two terms refer to two completely different things. In this section, we will look into the differences between the two, but first, let us look into the definitions of both the terms.

Definitions of Business Plan and Business Strategy

According to Investopedia, the following are the definitions of a business plan and a business strategy:

Business Plan

So what is a business plan, it is a document that defines in detail a company’s objectives and how it plans to achieve its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.

Business Strategy

Business strategy can be understood as the course of action or set of decisions that assist the entrepreneurs in achieving specific business objectives.

Objective

Both the business plan and the business strategies are created for certain purposes. The following are some of the objectives of the respective plans:

Business Plan

  • The business plan is created for the purpose of analyzing all aspects of the business
  • The business plan is used to create goals for the business
  • The business plan is made to evaluate the business activities and revise those activities that are not in the best interests of the business
  • The business plan is used to seek investment for the business
  • The business plan is created to keep track of the goals and their progressions for the business
  • The business plan provides insight through market research

Business Strategy

  • The business strategy helps in creating a vision for the business
  • The business strategy helps identify important trends in the market
  • The business strategy gives value for the business to base its activities on
  • The business strategy provides a roadmap to achieving the goals of the business

Components of the Business Plan and Business Strategy

The following are the different components present in a business plan and a marketing plan:

Components Of A Business Plan

  • Executive Summary
  • Business Description
  • Market Analysis and Strategy
  • Marketing and Sales Plan
  • Competitive Analysis
  • Management and Organization Description
  • Products and Services Description
  • Operating Plan
  • Financial Projection and Needs
  • Exhibits and Appendices

Components Of A Business Strategy

  • Vision and Mission of the business
  • Values of the business
  • Long-term goals of the business
  • Financial Objectives
  • Operational Objectives
  • Marketing Objectives
  • SWOT Analysis
  • Financial Plan
  • Operational Plan
  • Marketing Plan
  • Contingency Plan

Difference Between Business Plan and Business Strategy

The following are the differences between a business plan and a business strategy:

  • The primary goal of a business plan is to start a new business, get funding for the business, and direct the operations.
  • The primary goal of a business strategy is to implement and manage the strategic direction of an established business
  • A business plan talks about all aspects of the business including its goals, the current situation of the business, and how it aims to grow.
  • The business strategy on the other hand talks about the goals of the business and the specific actions the business has to take to achieve the goals.

Strategic Business Planning

The main purpose of strategic business planning is to strengthen business and grow it in a strategic direction to achieve its goals. The business strategy helps to do it in the following ways:

1. Your Business

When an entrepreneur wants to grow his business in a particle direction, he must first understand the current state of the business, how the business works in the industry, and its relation to other businesses in the market. The key is to ask the following questions:

2. Where is the business now?

This question helps you understand the business as much as possible. This includes the internal operations of the business, the Unique Selling Proposition,  the profitability driver, what is the competitive edge of the business, etc.

This question must be analyzed thoroughly to get a realistic view of the business. The cause and effect of the business workings must also be analyzed. These analyses must be noted down and reviewed again and again between periods to keep them up to date.

3. Where do you want the business to reach?

This question deals with finding out the goals and objectives of the business as well as its vision and mission. Finding out where you want the business to reach is essential to find the steps that could help the business go there.

This section also deals with finding core values and techniques of the business that will help the business take key decisions to reach its goals.

Some questions that help find the aim of the business are “Where do you want the business to be in the next 5 or 10 years?” “What should be the main focus of the business be?” “What competitive advantage should the business have over its competitors?”

These questions will help find appropriate business activities to achieve those goals.

4. What activities do the business have to do to reach the place?

After analyzing the current state of the business and fixing the place the business wants to reach, the next step is to find out how to get there. Some questions that can help find the answer for it include, “What changes must the business do for it to reach its goals and objectives?”

“What is the strategy that will be best to bring forth those changes?” “Will a change in the structure and finance of the business help reach the goal faster?” All areas of the business must be analyzed to form a plan of action that will help the business grow in the best way possible.

5. Analyzing Your Strengths, Weaknesses, And Threats

Another important way of finding the current state of the business is to find what are the strengths and weaknesses of the business. The best way to find this is by conducting a SWOT analysis for the business.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The first two parts deal with the internal environment of the business and the next two parts deal with the external environment of the business.

To perform a SWOT analysis, the entrepreneur must think about the strengths and weaknesses of the business realistically. What makes the business unique? What does it do differently than its competitors? What is the drawback of a particular activity of the business? Why is a particular department lacking behind in achieving a goal?

Finding the strengths and weaknesses of the business helps to make use of the strength and find a strategy to overcome the weaknesses of the business.

The opportunities and threats section deals with what opportunities lie in the market that the business can take advantage of and what threats act as obstacles to the growth of the business.

Analyzing these two helps the business grow faster by taking up opportunities that are in the best interest of the business and finding ways to overcome or avoid the potential threats such as heavy competition, low demand for a product or service, etc in the market.

6. Defining Objectives And Setting Goals

Goal setting is an important task for all businesses. Without a goal, the business has no direction to move towards. The goal must be realistic and as specific as possible. Having a vague goal does not lay down the foundation for creating a good plan of action.

A business strategy helps to analyze all functions of the business and find appropriate goals that are feasible as well as manageable by the business using the resources available to it at the period.

7. Putting The Plan Into Action

The most important function of the business strategy comes when it is put into action. The responsibility of each goal must be assigned to particular people and the resources for achieving the goals must be allocated accordingly.

The people assigned to the goals must be able to think of creative solutions to an existing problem and also have the technical skills to carry out the job. Having one and not the other will lead to a lot of waste of time and money. Hence careful thought must be given to assigning the right person for each job.

The business usually might have limited resources to reach a goal such as time, money, manpower, equipment, etc. Hence a plan must be created to make the best use of the resources available to achieve the goal.

Key metrics must also be assigned to each task to know the progression of the goals. If a particular strategy does not seem to work in the way it was expected to, changes must be made to the business strategy to create a better one that can achieve the required goals.

Why A Strategic Plan Is Crucial to The Organization

The key function of a strategic plan is to position the business in the industry in an effective manner. To do so the business needs a clear path of action that enlists and details the step-by-step direction it has to take.

The strategic plan does this job for the business. Without a strategic plan a business will suffer having no place or destination to reach, or worse yet have a goal but have no ways to reach it. A strategic plan decreases all the guesswork and helps the business take effective steps aimed toward the growth of the business.

Conclusion

So, what is the difference between a business plan and a business strategy?

A business plan is a document that outlines your company’s goals and how you plan on achieving them. It includes an overview of your company, your target market, and your product or service. Your business strategy is the implementation of your business plan– it’s how you make your plans a reality.

There are many different strategies you can use, but some common ones include targeting a specific market segment, creating unique value propositions, or using differentiation to set yourself apart from the competition. When creating your business strategy, it’s important to keep in mind who your target customer is and what needs they have that aren’t being met by the current market landscape.

This post is also available in: English

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