People will ask an entrepreneur “what is your plan and too often that question is met with a dazed and confused look. What does it mean to have a plan? It comprises three components – strategic plan (which sets your strategy), financial plan (which sets your financial goals and performance) and operating plan ((that details how the company will align its efforts to achieve the financial plan and the overall objectives of the company. In a startup, it is not essential that you have these as three separate plans like a larger organization would. It is important that your plan includes elements of your strategy and how that strategy is translated into financial results and your daily operations.
“It is important that includes elements of your strategy and how that strategy is translated into financial results and your daily operations.”
The strategic plan is about setting a direction for the organization and identifying a range of strategies to pursue so that the organization might achieve its long term goals. The strategic plan is a general guide for the management of the organization but does not stipulate the day-to-day tasks and activities involved in running the organization. It is a general guide for the management of the organization and it suggests strategies to be employed in pursuit of the organization’s goals. With a strategic plan in place, you can now work to translate your strategy into a financial and operating plan.
Your financial plan shows how your business idea and strategy translates into a business that is financially viable. It takes into account your projected revenue, expenses, cash and other financial needs. The financial plan comes to life in three financial statements: income statement, cash flow projection/statement, and balance sheet. Your financial plan outlines how the business will function from a financial perspective.
Your Operating Plan presents highly detailed information specifically to direct people to perform the day-to-day tasks required in the running the organization. The purpose of the Operating Plan is to provide personnel with a clear picture of their tasks and responsibilities in line with the goals and objectives contained within the Strategic Plan and the Financial Plan. The Operational Plan provides the what, who, when and how much. It is characterized by a specific plan for the use of resources in pursuit of the strategic plan, details specific activities and events to be undertaken to implement strategies and may differ from year to year significantly.
Having your strategic plan to set your strategy, your financial plan to see how that translates your strategy into your financial performance and needs and your operating plan to drive your daily activities toward your goals, sets your organization up with the “plan” to succeed.