Different types of Business Plans (Business Plan Series)

A business plan, in essence, is part blueprint of your business and part sales pitch for those reading it.

This is true for lenders, investors, stakeholders and employees.

However, each person looks at a business plan from his/her own perspective since everyone wants something different from it.

This post is about the 3 major kinds of Business Plans based on the type of Organization/People involved

 

There are 3 types of business plans

1. For Startups/Investors

2. For Banks/Lenders

3. For Corporates/Organizations

 

For Startups/Investors

This Business Plan is meant for those investors who want to be part of your growth story and are in it for the long haul. You need this while raising funds for your Startup in return for Equity.

What is it all about?

1. This business plan must be created with the view of someone who wants to invest in you today, so that he can reap the benefits of your success at a later date. 

2. Depending on the kind and background of your investor, it is essential to tell him about the dynamics of your market and why it is an exciting space to work in.

3. Projections are known to be assumption based to a great extent.

4. The focus, especially if you are a startup, is to showcase traction and not necessarily the financials, unless you are a revenue generating startup looking for 2nd round and above investments.

5. Factors of Management Team, Skills, Past experience are of great importance.

6. A stressed out credit situation may be seen as a positive, if it is due to sudden growth/scale of your business.

7. A well thought out Go-To-Market strategy is essential.

8. Long term vision of the organization and future plans must be underlined to showcase various avenues of growth and diversification.

9. Exit plan for your investors is important – After all, they want to make their moolah at some later date.

10. Competitive risk may not be as important as risk from the environment and internal issues.

11. Past performance is not that important.

The Bottom Line

This type of Business Plan must be able to communicate to your investors why this is such a great idea, how exciting this space is and when you expect to make it large (By extension making them lots of money) 

 

For Banks/Lenders

This type of Business Plan is required for Banks and Lenders when you are looking at a Loan/Debt for your Startup/Company. It is also known as a Project Report.

What is it all about?

1.This Business Plan must be created from the point of view of lenders/banks who want to minimize their risk while funding your business with the expectation of making a small margin (interest).

2. While it is essential to mention the dynamics of the industry/market you aim to work in, one must realise that Banks have all the resources at their disposal and that bankers are usually comfortable with funding businesses which are in established markets and matured ecosystems. This is because there is a fair amount of personal discretion involved, which finally hinges on the fact whether they understand the market well enough or not.

3. Projections may be based on assumptions, but they need to have a rational and mathematical basis especially in comparison to the industry and your own historical financials.

4. The focus is on showcasing past successes, financials and investments with an emphasis on future projections.

5. The Project Report must mention, how the loan will be utilized by you to create capacity or assets for future revenues which may enable you to pay off the loan.

6. The reputation of the Management Team, Market Dynamics, Macro Industry Financials, Competition and Credit history are of great importance.

7. A well document financial record is essential along with credit rating, investments etc.

8. A long term vision is not essential, what is important is a plan on how you aim to pay back the loan.

9. No Exit plan is required.

10. Competitive risks are very important as the Banks and Lenders will use your competitors and market as a benchmark of your performance.

11. Past performance is very important.

The Bottom Line

This type of Business Plan must be able to communicate to your lenders why your plan has a great chance of success due to present market conditions, reputation of the company/management and the absence of major risk issues. 

 

For Corporates/Organizations

This type of Business Plan is required for Corporates and Organizations when they are looking at buying an asset, acquisition, creating a new Product/Service, entering or exiting a market etc. It is also known as a Business Case. You need this to get an approval from decision makers for the required resources and Go-Aheads to make the plan successful. 

What is it all about?

1.This Business Plan must be created from the point of view of how your company will be effected due to the proposed actions and how to communicate them to members of your team, bosses and decision makers. Benefits to revenues, awareness, customers etc need to be underlined

2. Your bosses, department heads know the macro dynamics of the market and industry and unless you have something new to tell them, or have a new insight, the emphasis of the business plan should be firmly on ‘Whats New!’ and not “As we all know”.

3. Projections are essential to your Business Plan. A hint of bullshit will be caught by competent colleagues and bosses since they all know the market and industry you are talking about. The Projections must be based on numbers derived from business realities, competition, market realities and existing projection models.

4. The focus is on future projections, effects, benefits and how you aim to get to them. 

5. The plan must mention in detail, how the resources required will be allocated and utilized by the company to create capacity or assets for future desirable results. This will also include the support required from various departments and functions of the organization and change in existing budgets and projections.

6. The reputation of the execution team, overseeing authority and reporting authority are important. However, based on the hierarchy and structure of the organization, care must be taken to ensure that one isn’t stepping on toes or handing over the project to those without the capacity or capability to execute. Competency and compatibility must also be underlined while allocating work related to the project.

7. ROI figures will help push the case further.

8. A long term vision is essential and must follow or be aligned to the vision of the organization. 

9. An exit plan known as Plan B here, is required in the event of failure or due to uncontrollable risks. Also a credible plan to hedge risks will make the plan far better.

10. Competitive risks and relevant competition details /activities are very important.

11. Past performance of competition and the market or proposed area of business is essential for comparitive study and projections 

 The Bottom Line

This type of Business Plan must be able to communicate to your bosses, superiors, department heads and other decision makers why the proposed set of activities will be beneficial and what will be the effect on the company/division/department.