Get All Access for $5/mo

10 Business Plan Words Every Manager Needs to Know By Heart If you're starting or running a business, you'll need to know this list of essential business planning words.

By Tim Berry Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

10 Business Plan Words Every Manager Needs to Know By HeartTwo months ago, I used this column to suggest that we need to find a better term for business planning that doesn't conjure up fear and dread like the mention of a high-school paper or graduate thesis. Business planning is supposed to be about managing and steering a company. In the comments readers posted below that column, I saw several valiant efforts to suggest new phrases (road map and business blueprint, for example). But I ended up agreeing with several people who disagreed with my basic thesis. They essentially said business planning is too important to mess with changing the words.

So I've changed my mind -- again -- and come up with this list of essential business planning words every manager should know:

1. Business plan: An organized collection of milestones, tasks, assumptions and basic business numbers. It covers strategy and details what's supposed to happen when, who's in charge of what, how progress is measured, when money is to be spent and from where, and when money is expected to come in. It isn't a document; it's a plan. If it isn't reviewed and revised monthly, then it won't be very useful. So it has to be practical and just big enough to serve the business need.

Related: To Make Business Planning Less Daunting, Let's Call It Something Else

2. Business planning: Steering a company using a cyclical process. Plan, review and revise as necessary to optimize. Business planning is management.

3. Business strategy: A combination of strengths and weaknesses, opportunities and threats, target market, business offering and product-market fit. Focus is vital. Who isn't in your market and what you're not offering can be more useful information than who is and what you are offering. All of this can be expressed in bullets, slides, a few key paragraphs or any other way that keeps strategy and focus top of mind.

4. Business forecast: A simplified, manageable set of assumptions about future cash flow, including sales, cost of sales, expenses, assets, liabilities and capital. It isn't about predicting the future; it's about connecting the dots on assumptions and drivers in your monthly projections over the next year and your annual forecasts for the subsequent two years. It focuses on what drives the key components, expressed as money. Those drivers include factors like capacity, sales and marketing activities, management compensation, direct costs, and so forth. The goal is to lay out connections between key assumptions in projections spread month by month as expected amounts. For example, you would project how direct costs look as a percentage of sales. Usually the relationships are more important than the actual numbers. So, to follow the example, if your actual sales are higher than expected, you can tell from your forecast that direct costs also will be higher than expected. Companies with a good forecasting process rarely get through a month without some change in the forecast.

5. Strategic plan: A business plan that leaves out the nuts and bolts.

6. Operations plan: A business plan that leaves out the strategy.

7. Marketing plan: A business plan that leaves out the overall company financial strategy.

Related: The Top 10 Business Plan Mistakes

8. Annual plan: A business plan that leaves out plans for the second and third year.

9. Bank-ready business plan:

a. A document created as output from a business plan, formatted for easy reading and highlighting past financial performance and current financial position. Bankers look for payment history and assets backing the loan.

b. When used to describe a canned boilerplate document somebody is selling, as in turnkey or ready-made, it is just sleazy sales hype for a bad product. Buyer beware: A ready-made business plan is always a waste of money.

10. Investor-ready or funding-ready business plan:

a. A document or pitch created as output from a business plan, describing a business investors will be interested in based on the specifics of that business. The most common and essential highlights are management team, product-market fit, potential market, potential growth, defensibility (some hard-to-copy elements like technology or knowhow), scalability and potential return for investors. No matter how brilliant, beautiful or creative it might be, it isn't investor ready -- and never will be -- if it doesn't describe a business with real prospects for investors.

b. See 9b above.

Related: Three Financial Guesstimates Every Business Plan Needs

Tim Berry

Entrepreneur, Business Planner and Angel Investor

Tim Berry is the chairman of Eugene, Ore.-Palo Alto Software, which produces business-planning software. He founded Bplans.com and wrote The Plan-As-You-Go Business Plan, published by Entrepreneur Press. Berry is also a co-founder of HavePresence.com, a leader in a local angel-investment group and a judge of international business-plan competitions.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business Solutions

Increase Productivity with This Microsoft 365 Subscription, Now $25 Off

It can make the entrepreneur life a lot easier.

Business News

Apple Pay Later Is Ending. Here's What's Taking Its Place.

The program was available for less than a year.

Leadership

This Artist Answered a Businessman's 'Powerful' Question — Then His Work Became 'the Poster Child for Juneteenth': 'Your Network Really Becomes Your Net Worth'

Reginald Adams was the executive director of a Houston-based art museum for more than a decade before he decided to launch his own public art and design firm.

Leadership

Harvard Business School Professor Says 65% of Startups Fail for One Reason. Here's How to Avoid It.

Team alignment isn't nice to have -- it's critical for running a successful business.

Business News

Here's What Companies Are Open and Closed on Juneteenth 2024

Since it became a holiday in 2021, Juneteenth has been recognized by some major corporations as a paid day off.

Growing a Business

I Hit $100 Million in Annual Revenue by Being More Transparent — Here Are the 3 Strategies That Helped Me Succeed

Three road-tested ways to be more transparent and build relationships that can transform your business — without leaving you feeling nightmarishly over-exposed.