Business Plan Types

As professional business plan consultants, we see a wide variety of business plans. The three most common types are for the purposes of bank financing, internal planning, or investor financing. They are listed here, roughly in order of increasing detail and complexity.

Bank Financing

Banks like stable, consistently growing businesses with proven business models and lots of collateral (equipment, land, buildings). This allows them to focus on historical performance, hard assets, and cash flow rather than market projections and future potential. This type of business plan usually requires a modest level of detail in the financial projections, market opportunity analysis, and competitor analysis. Many established businesses fall into this category, especially “bricks and mortar” businesses. Generally, any business seeking an SBA loan, a working capital credit line, or a non-SBA loan fits into this category. Note that although some banks will lend money to start-up businesses, they usually focus on tried and true business categories where industry data is plentiful (such as restaurants, nightclubs, retail stores, etc.)

Internal Planning

This type of plan applies to any business, independent of growth stage or industry vertical. Since the whole purpose is to guide internal planning, the formatting and packaging is less important than it would be for a plan designed to raise debt or equity capital. In some cases, the financial projections, supplementary materials, and other documents (such as a PowerPoint presentation) are either not needed or are only needed in a simpler form. However, the most important variable for a business plan of this type is the underlying complexity and novelty of the business. A complicated or unusual business will usually require a more in-depth business plan.

For established businesses with annual revenues above a few million dollars, there are special considerations. Multiple stakeholders, such as a larger management team, a Board of Directors, Advisory Board, outside investors, department heads, remote office managers and directors, supply chain vendors, and others need to be involved with the business planning process. Larger businesses also often have multiple revenue streams from different products and services, serve multiple markets across geographic boundaries, and have more complex requirements for technology applications and services. All of these factors must be considered carefully during the business planning process.

Investor Financing

Many businesses are simply not good candidates for bank financing. Generally any start-up or early stage business that involves new technology, innovative business services, practices, products or concepts will be unable to obtain bank financing. Most technology business plans (Internet, Information Technology, biotech, cleantech), and green or sustainable business plans fall into this category.

These types of business usually seek to obtain equity financing, typically from angel investors or venture capital firms. Most angel investors are successful entrepreneurs or business executives who have many places to put their money. If they see a flawed business plan (sloppy, inconsistent, or poorly conceived) they will walk away. Angel investors and venture capitalists expect and demand the highest quality. That usually means a proven or innovative business model; detailed, accurate market research; scenario analysis; well-documented financial projections, as well as extensive supplementary materials (charts, graphs, sample materials, letters of intent, sample contracts, patent or trademark documentation, etc.)

Other Types

The above list is not exhaustive. For example certain visa plans for immigrants to the United States require a formal business plan. These include the E1, E2, and EB5 visa programs. The requirements for these business plans are rather minimal.