A business plan is a roadmap for starting a business, while a contingency plan ensures a business can continue after a disaster. Entrepreneurs use business plans, while established companies need contingency plans. Both plans can overlap, but they are usually separate documents. Contingency plans provide guidance during major disruptions and can be incorporated into a company’s overall strategy. Writing both plans can help identify weaknesses and necessary changes.
The difference between a business plan and a contingency plan is that the former is a roadmap for starting a business whereas the latter is there to ensure that a business can continue after a disaster. Disasters can include fire, theft, major weather events, or labor strikes. Entrepreneurs are normally the users of business plans, while companies established in business for several years will have a need for a contingency plan. These are the most common differences between a business plan and a contingency plan.
Writing a business plan is often the first step in starting a business. Sections include: information about the general idea of the business, steps needed to find a location and materials to produce the goods or services, detailed financial needs, a marketing plan, and other information. While the business plan and a contingency plan may overlap in some parts, more often than not they will be two completely different documents. Entrepreneurs usually draw up a contingency plan that provides information on what actions will be taken if the new business venture experiences difficulties during the first few months and years of operation. Banks, lenders and investors are usually the main users of business plans. These groups plan to lend money to new businesses, hoping to make an investment out of business growth. Eventually, the business plan and contingency plan can grow and come together as the company grows in size.
Contingency plans provide focused information for use by internal users. Owners, managers and supervisors often need the contingency plan for guidance during major business disruptions. Large or established companies can incorporate a business plan and contingency plan into their overall corporate governance strategy. Publicly traded companies will need these plans to assure investors that the company will not be prepared for natural or man-made disasters or unplanned events. Lenders may also require these plans for companies that operate in dangerous or unstable environments, such as oil, mining or shipping companies, as these companies are more prone to outages.
Writing a business plan and contingency plan will also help owners and managers discover weaknesses in planned business operations. Businesses may determine that they need to change operations if they are unable to continue normal operating procedures during a major disruption. In some cases, plans are just that – plans – and may need to be changed or scrapped at any time. Companies may not have contingencies for all unforeseen circumstances. Sometimes changes are needed that were not previously written into the plan.
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