The competitive world of business is like a dense jungle that’s hard to navigate.
Since the business landscape has uncertain outcomes and many moving parts, companies and entrepreneurs need business plans to serve as roadmaps for success.
Without a plan, even big companies tend to suffer setbacks.
Whether establishing a startup or building something more traditional, a plan guides internal stakeholders or helps acquire funding from outside sources.
But since startups are a new breed of business, they have also developed their own versions of business plans to gain traction.
In this article, I’ll discuss how startup business plans differ from the ones used by businesses for centuries. I’ll also share the pros and cons of each type of plan.
But before we get into that, let’s first find out the difference between a startup and a traditional business.
A traditional business tends to provide products or services through a physical structure like an office, a shop, or any similar building.
Given its physical presence, most customers of the average traditional business come either from its local neighborhood or from nearby regions.
A traditional business’s product and service offerings tend to be ordinary or have existed for centuries. Examples of traditional businesses include most big-name hotels, tool factories, and shopping malls. These money-making ventures range from sole proprietorships to corporations.
A startup is a form of business that offers products and services that are either totally new or have significant improvements to those provided by traditional companies.
A startup that relies heavily on technology to provide unique products or services is called a tech startup.
Unlike traditional businesses, many startups are temporary organizations.
At the beginning of their operations, startups tend to be more loosely organized than their traditional counterparts. This lack of definite organization gives startups elbow room to gradually improve their innovative product or service offerings. Once startups see solid demand for their offerings, they either sell shares to traditional businesses or be organized like them.
Airbnb is an example of a startup that eventually became a traditional business. In 2007, Airbnb’s three founders rented out their apartment room and air mattresses, just to make ends meet. With a little help from mentors and investors, the founders eventually leveraged digital technology to turn millions of private properties into part-time hotels. By 2020, Airbnb had become a publicly-traded corporation, partly due to its unique service.
Our client MyDeal also successfully used digital technology to expand. The Australian e-commerce giant enlisted our mobile app development expertise to grow its customer base exponentially. Read the MyDeal case study to learn how we helped turn the e-commerce company from self-funded to a business worth around $200 million.
Now that you know how to distinguish between traditional businesses and startups, it’s time to learn how they stack up against each other.
I laid out in the table below the key differences between a startup and a traditional business in terms of different criteria. Here’s what to take note of:
|Vision||Aim to shake up and be creative in their respective industries||Their goal is mainly to earn money through a tried-and-tested business strategy|
|Source of Funding||Can avail of advanced financing schemes from entities like venture capitalists, angel investors, or even grant funders||Usually get financing from established organizations like banks or other lending companies|
|Growth||Endeavor to grow as fast as possible, with a business model that is easily scalable||Tend to have a conservative growth strategy. Aim for long-term stability.|
Aside from these distinctions, startups differ from regular businesses in using the so-called minimum viable product (MVP).
An MVP is a trial product with the most basic features. Startups gradually develop the MVP into something more valuable as more paying customers come in.
The MVP way of doing business came from the groundbreaking book of Eric Ries called The Lean Startup. In this landmark work, Ries emphasized that MVPs help startups learn what people really want as quickly as possible and at the least possible cost.
Our article on how MVPs helped specific startups succeed is filled with valuable business insights you could take inspiration from.
Now that you know how startups differ from regular businesses, you know what type of business plan is appropriate. But before I compare the two major types of business plans, let’s first define what a business plan is.
A business plan is a document that explains the goals of any money-making venture and how these goals will be achieved.
How a business attains its goals is defined primarily by its business model, which considers activities like financing, marketing, and production.
Now you know the nature of a business plan, it’s time to compare traditional business plans with their startup counterparts.
Since conventional businesses have a more conservative business strategy than startups, their business plans tend to be longer and more detailed.
You will discover in the succeeding sections that the goals and parts of traditional business plans are well-suited to a conservative strategy.
This document is a more detailed business plan that specifies how a conventional business will be structured, operated, and managed.
This business plan format aims to:
- Align a company’s executive team with its managers regarding company goals and action plans
- Guide entrepreneurs who are more inclined to have a fixed operational plan
- Help acquire investments or avail of loans from banks or other investors
A business plan for a conventional business usually has the following parts:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Product or service line
- Operational plan
- Marketing and sales
- Financial projections
- Funding request
Let’s look at each section of the typical business plan.
Probably the most vital section, this part aims to hook whoever will read your business plan.
The executive summary tells your reader as briefly as possible what your company is and why it will be successful.
This part usually contains a condensed version of the following vital information:
- Problem or market need that your business will address
- Solution/s that your company proposes
- The philosophy and a short bio of the founders or owners
- Key financial details
To ensure your executive summary will include all key details, I recommend writing this section after finishing the rest of your business plan.
This section contains information about your business, like your company’s name, its legal entity (sole proprietorship, corporation, etc.), and where it is registered.
A little bit of your company’s history will also give readers context on why you built your business.
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Here, you will brief your readers about two stakeholders: your competitors and your target market. You can gain more information about these two groups through market research.
The market analysis part aims to survey the competitive landscape. This section answers questions like the following:
- Which companies provide a similar product or service?
- How can your business outperform them?
- What marketing strategy do your rivals use? How can you improve upon their strategy?
It will help if you also say something about your target customers, such as their gender, age bracket, and other demographic data.
This plan section digs deeper into your business entity and who will be in charge.
Are you organizing and registering your business as a corporation, as a limited partnership, or as another business entity? Answering this question as completely as possible is vital in this part.
Meanwhile, an organizational chart helps lay out the key personnel running your business. A brief but relevant background of vital leaders like board members and managers is also useful in this section.
This section contains your business’s value proposition. It would help if you discussed how your product or service would benefit your customers. If applicable, you must also include research and development plans and patent filings.
This business plan section highlights how you will run your business and what you need to execute it.
For example, you can discuss here what equipment and facilities your business has and how you will use them to provide your products or services.
This part highlights your marketing strategy and sales process. Marketing and sales strategies range from the traditional (e.g. print ads) to the more avant-garde ways like mobile marketing.
Any information explaining how you will deliver your offering to your potential customers should be written in this section of the business plan.
This section aims to explain to the reader that your business is stable and will succeed financially.
If your business has already been running for a few years, you should include actual income statements, balance sheets, and cash flow statements in this part of the business plan.
If you’re new to the game, provide financial forecasting for the next five years. Write hypothetical but credible financial documents similar to what I just mentioned. It’s also crucial to justify your projections here.
However, consider your readers when deciding how detailed you will be with financial projections. Investors and financing providers need more comprehensive information than, for example, your managers or executives.
Leave out this section, especially if your business plan does not aim to get financing or investments.
But if you use your business plan to get funding, this part should outline your funding needs over the next five years. Make sure the funding request section connects seamlessly with the financial projections part to increase your success in getting funding.
This part contains supporting documents that will bolster your business plan. For example, credit histories, resumes of key people, government permits, and other similar documents.
Since startups differ from traditional businesses in many ways, they need a unique kind of business plan.
Plans for startups tend to be simpler and slightly more flexible than traditional business plans.
To learn how this is so, let’s look at the goals of a startup business plan and its major parts.
The goal of a startup is to gradually develop its products or services (remember MVPs?).
Since the incremental development of products or services requires flexibility in planning, the startup business plan is more appropriate than the rigidly-detailed traditional business plan.
This type of business plan is written in such a way that it can accommodate the frequent operational changes that startups often undergo. That is why a startup business plan can sometimes be a one-page business plan.
A lean plan is also ideal for quickly communicating a startup’s goals and other vital information to employees and managers.
You can find the following pieces of information in a startup plan (also known as a tech startup business plan):
- Value proposition
- Key partners
- Key activities
- Key resources
- Customer segments
- Customer relationships
- Cost structure
- Revenue streams
Let’s learn what each of these contains.
This part explains your product or service and how it helps customers solve their problems.
Mention here strategic business partners like suppliers, manufacturers, or subcontractors.
This section answers the following questions:
- How do you make your products or provide services? How is your offering better than your rivals?
- What marketing channels do you use to reach your target markets?
Any productive asset like human resources, equipment, funding sources, and intellectual property can be discussed here.
This section specifies information about your target market, like age, gender, educational attainment, and other demographic data.
Your customers will interact with your startup from when they avail of your offering to when they need after-sales support. In this part of the startup plan, you should explain how you will manage these interactions.
These refer to the technologies or methods by which you will communicate with customers. Consider all possible stages of the startup-customer relationship when writing this section.
Will your startup focus on minimizing costs or investing in adding value? List any major expenses your startup may incur for growth goals here.
List down all the ways by which your startup can earn money regularly. Examples of recurring income include direct sales, subscription fees, and selling advertising space.
Well-written and industry-appropriate business plans are good starting points toward success. But there is more to making it big in business than just writing an awesome plan.
We at Appetiser provide the right companions on your journey toward expanding whatever business or vision you have. Many successful clients can attest to the competence of our product strategists in ensuring maximum return on investment from custom-made mobile or web apps.
Are you ready to think big and go beyond just planning? Book a free consultation with us and let’s explore pathways toward your business’s or organization’s success.
Jesus Carmelo Arguelles, aka Mel, is a Content Marketing Specialist by profession. Though he holds a bachelor's degree in business administration, he also took courses in fields like computer troubleshooting and data analytics. He also has a wealth of experience in content writing, marketing, education, and customer support. Outside office hours, he finds deep joy in reading, traveling, and photography.
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