A startup business plan can take many forms. A traditional business plan is quite extensive and detailed. A lean startup business plan, in turn, is fairly simple and requires less time to prepare. Which format of the business plan is better? Each of them has its advantages and disadvantages, which are worth keeping in mind. Read on to find out more.
Traditional business plan vs. lean startup plan – table of contents:
- Traditional business plan
- Lean startup methodology
- Lean startup business plan
- Benefits of a traditional business plan
- Benefits of a lean startup business plan
- Which one is better?
Traditional business plan
A traditional business plan takes a traditional approach to planning a business venture. What does this actually mean? First of all, this approach requires putting a lot of work into preparing a startup and getting it off the ground. It involves a lot of effort before the product or service is launched, which can take not only weeks, but months. Before we move on to the alternative approach, let’s take a closer look at the traditional business plan, which is often also called a formal one.
A traditional business plan contains a lot of details about the company. It is 50-60 pages long, which doesn’t make it a quick read. It usually has the following structure:
- summary of the document,
- a description of the startup and the goals that have been set for the company,
- a detailed description of the product or service offered,
- an analysis of the market and target group,
- a description of the people involved in the startup,
- financial analysis,
- implementation plan and overall schedule,
A traditional business plan describes the company in detail, shows its current position in the market and forecasts its future.
Lean startup methodology
In 2010, a book written by Eric Reis, titled “Lean Startup” appeared. The author presented a different view of business in it. In fact, the lean startup methodology is very simple. According to the proposed concept, you should start a business as soon as possible, at the same time gathering feedback and learning the market.This is what many startups that are widely known today have done (e.g. Dropbox). The lean startup methodology can be described in three steps:
- finding a business idea that solves customers’ problems (you start creating a business plan at this stage),
- executing your business idea and creating an MVP,
- validating your business concept. Here you will receive information on whether the MVP has worked or whether another one should be prepared.
Lean startup business plan
You already know what the lean startup concept focuses on. But what does a lean startup plan look like? Such a document is created to determine the business needs and to verify the idea, to check if it can be implemented. At first glance, you can see the difference between a traditional business plan and a lean startup plan. The latter is only one or two pages long, which is as much as the summary of a traditional business plan.
Lean startup plan usually includes:
- a description of the problem the startup is solving,
- characteristics of the target audience for the product or service,
- an explanation of how the product or service solves the customer’s problem,
- information on what differentiates your product or service from competing solutions,
- the cost of producing the product or launching the service.
Benefits of a traditional business plan
The advantages of a traditional business plan certainly include:
- eliminating risk – in the case of the lean startup methodology, there is a high risk that the product will be launched too quickly,
- easier acquisition of external financing – banks and other financial institutions are more attached to a traditional business plan and, having seen such a document, it is easier for them to decide whether to grant a loan or not,
- a better presentation of larger, more expensive and more exclusive products – in this case, it is not always possible to prepare several versions of the MVP, as each of them will be quite expensive.
Benefits of a lean startup business plan
How do the advantages of a lean startup plan compare to a traditional business plan? Without a doubt, its advantages include:
- you can get your company on the market faster which is especially important in a highly competitive industry,
- you can abandon your business idea more easily if it turns out to be wrong as you haven’t spent so much time preparing and writing a business plan,
- you are more likely to get investors because a concise business plan is an asset to them and they can get a quicker look at it.
Which one is better?
Unfortunately, there is no clear answer to this question. It seems that the solution that is more concise will be more attractive, but this doesn’t have to be the case at all. What matters, after all, is saving time. A traditional business plan and a lean startup plan are two different approaches to business development. Each has its advantages and disadvantages. Choosing the right option should really depend on the specifics of a particular startup and its product.
Read also: 7 important startup roles.
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