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Functional Business Plan vs Textbook Business Plan – The differences are in the details

Amie Laura Parnaby
January 19, 2022
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functional Business plan

What differentiates a genuinely functional business plan from the textbook perfect that you create from a template? The difference is all in the details.

When you first set up your business, I sincerely hope you defined a business plan for your company’s development, maintenance and expansion – even if it started as a solo enterprise. Now, you know that business plans are crucial for securing finance, property and equipment purchases and leasing. It’s particularly critical if you want to ensure investment from other sources, such as business partners and angel investors.

However, a business plan is more than just a broad framework of what you’d like for your business. If it will work for you, it needs to be both a working document and a clear snapshot of your business proposals and processes. That is the crucial difference between a functional business plan and one that looks good on paper.

What is the Purpose of a Functional Business Plan?

A business plan has two primary functions:

  • An operational, hands-on guide to running your business;
  • A convincing framework to attract investment or secure financing.

Unless you plan on creating two different business plans, you want a functional business plan that does both.

Using a Business Plan Template

For the first time entrepreneur, there are some fabulous templates and guides available for helping you to create your business plan. However, while they are excellent resources, they can only give you a very vague outline to start. 

Sure, these templates cover all the different sections that potential investors, financiers, and business partners will want to see. They will help you format your business plan properly for the appropriate audience and tell you what essential information is necessary. 

The great thing about using a business plan template is that it gives you a framework that looks good on paper and is easily understandable to all interested parties. But it is what you put into that framework that will make a business plan stand out as both an operational document and a demonstration of your vision and proposals for your business.

Whichever template you use, they will all be textbook business plans. They can’t be anything else. The functionality and greatness you should strive for are in the details, and the intricacies come from the entrepreneur in you.

4 Crucial Differences Between Functional and Textbook Business Plans

A business plan usually consists of four distinct sections and all the supporting data you have :

  • Executive Summary
  • Company Overview
  • Marketing
  • Financials

You might want to include supporting data in the same sections or add appendices at the end of the document. Either way works, but be sure to include it because empirical projections and accurate figures will go a long way to making your business plan operational and proving your plan’s quality to those who need to know.

If you already have a business plan, you should have these sections. The following four enhancements will turn your plan framework into an operational and functional business plan.

Mission, Vision & Brand Identity

When you create your business idea, and work out the details, it is your drive, ambition and creativity that make your business proposal unique to you. You define what your business is, what need it will fulfil, and how it will help people.

These are fundamental aspects of a business plan, but we quite frequently allow ourselves to be guided towards a very brief and concise explanation in the executive summary.

Knowing the basic outline and what you intend is not enough. People in the know need to know more about you and your vision – and how you will achieve it.

Dedicate a significant proportion of your business plan development time, and some and love and effort to creating your brand identity. That means defining your business name and logo, developing a colour scheme that fits, and, of course, the mission you will undertake on behalf of your clients. You will also determine the tone and your plan of execution for the product or service you provide.

This is how you will get noticed and attract your niche clients – as well as partners and investors.

While the executive summary is traditionally only about half a page long, don’t feel overly constrained by that approximation. However, if you find your self going for more than a page, transfer your comprehensive detailing to the company overview.

Client Targeting, Marketing & Competitive Anlysis

Define your clients, how you will get them, and how many you will need to make your business profitable. This is the basics of what you need to describe in your business plan.

However, a truly functional business plan will detail where you will source your clients, predict demand, and stipulate how you’ll attract more business without chasing individual leads or customers. No one has the time or budget for that.

If you can display a sound understanding of your target market, how to find them and how to attract rather than chase them, you will show yourself to be a well-prepared business owner.

Marketing is not all about advertising and brand awareness, it is also about knowing the market in which you intend to operate. Not only should you be able to specifically target your audience demographics through tools such as Facebook and Google, but you should also know the companies that will be your competition. Facebook audience targeting is excellent when you come to any paid advertising.

When you can define your competitor market and how you will differentiate from them, you will also be able to demonstrate how you will share (or eventually steal) their clientele.

Without sound competitor analysis you can’t define your position in the market. Unless your business will be a very narrow niche that is otherwise untapped, you will have competition.

The ability to define your share of the market is crucial. However, detailing how you will defend that share will show interested parties you know what you’re doing.

Financial Sustainability

Small business owners now are in a period of financial instability, and the last one wasn’t that long ago.

One of the most important sections of your functional business plan is the financials. While you already know that you need running costs, and projected incomes, there is something else that will set you apart.

Contingency plans.

No one expected the events of 2009 (Global financial crisis) or worse 2020 (Global COVID Pandemic). Yet they came around anyway and devastated businesses worldwide. Despite government assistance programmes and other relief efforts, many companies have endured mass lay-offs, profit deficits and even bankrupcy

The thing about financial crises is that they are rather cyclic in nature. Looking at the last 100 years, you can see the “boom and bust” pattern from the depression to the present. A robust understanding of financial cycles and how your business would combat the effects of those economic cycles will show that you are well-prepared with contingency plans if the worst should happen.

The chances are if you run a business for 40-50 years until retirement, you’ll experience at least one financial crisis. You should have a plan and know what you will do if it happens..

No expects business owners to be claivoyant. However, understanding what can happen in devastating circumstances and how to maintain cash flow (or at least mitigating capital loss) will go a long way in showing how your business might deal with the unexpected.

“If it ain’t broke…” But there’s room for improvement

No one is saying that your business plan is broken or wrong. However, running your own business is competitive and can be brutal. With that in mind, you need all the advantages you can get when it comes to making a success of your business development. Whether you’re attracting investors or approaching a financier with your proposals.

For some context in the UK, US and Australia, small businesses with fewer than 100 employees, make up 99.2% (UK), 99.9% (US), and 99.8%(Aus) of all businesses. When you’re looking to attract outside investment or secure financial assistance, “good enough” in a business plan will simply not be good enough. to compete with every other small to medium-sized enterprise in your region.

You want to guarantee the future of your business through growth, development and diversification. To do that, you need excellence to compete with every other small business vying for the same thing.

Plugging the Gaps In your Business Plan

So while there is technically nothing essentially wrong with your business plan, you can bet there are gaps in there that could use some patching and repair. OR maybe you should rewrite some pieces – you can’t tweak everything.

Use the ideas above to make your business stand out as an excellent prospect in a world full of people trying to run their own businesses – there are more than you think.

Create a fully functional business plan that impresses everyone you approach and helps you detail your business’s day-to-day runnings.

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