PSU Insight

Writing Your Business Plan

Which Type of Business Plan Do You Need?

What sort of business plan should you write? Generally speaking, there are two types of business plans — “formal” business plans and “working” business plans. They're very different types of plans, and you need to be sure that you're developing the right one for you!

Formal business plans are what people normally think of (if they consider business plans at all). A formal business plan is an objective description of your business, typically used to explain your business to outside parties (such as potential members of your Board of Directors), or more often to solicit funds (such as acquiring a bank loan).

Because of what they’re supposed to accomplish, formal business plans need to follow rather strict, standardized rules. After all, if you’re hoping to talk somebody out of a large sum of money, you follow whatever rules and guidelines they expect of you.

But a “working” business plan is different — it’s your business’s plan of action, your thoughts on paper. It is usually not seen outside of your company. If you’re a typical speaker, this means that it’s for your eyes only! (And possibly a close friend or business adviser — but no one else.).

Consequently, “working” business plans do not need to follow the rigid standards of formal business plans. This makes them easier to write (but not easier to develop). Also, “working” business plans should be subjective as well as objective. This makes them much more valuable.

For example, let’s say that you’re going to embark on a new marketing campaign, something you’ve never tried before. You’re understandably nervous. All your estimates tell you that your effort will probably succeed; but you just can’t shake the feeling of dread at tackling something unproven. Do you put your feelings in your business plan?

As you can imagine, it is totally inappropriate to express these fears in a formal business plan. A banker doesn’t want to hear any doubts that you’ll be able to repay your loan. Potential stockholders expect you to have absolute confidence in your plans.

But that’s where the power of a “working” business plan comes through. Since your working plan is only going to be seen by a few people deeply involved with your company, it’s acceptable — and even appropriate — to voice your concerns in your business plan.

After all, the emotional well-being of the speaker is one of the greatest assets of a speaker’s business. So including your emotional state in your “working” business plan is just listing one more of your business’s assets and resources.

But because your working business plan may contain subjective, emotional information, I need to re-emphasize an important point —

Your “working” business plan is to be read only by you and your trusted advisers. Be sure not to show it to anyone else until you edit out everything that isn’t rock-solid and completely objective.