Fortune 100 and 500 companies all have them—mission and vision statements.

They tout them in their annual reports and in their building lobbies, but what purpose do they really serve, and are they needed for smaller companies? The resounding answer is “Yes.”

Your mission and vision are what your company stands for and where it wants to go in the future. From these two main points, you’ll derive your business strategy and  to live out your mission and achieve your vision.

However, the two terms are often confused and used interchangeably. Before you start crafting both for your business, it’s important to understand the difference.

The first thing that needs to be understood is the difference between a mission and vision statement. While they are similar in nature, they are not the same thing.

Mission: A short, succinct explanation of who your company is, what your company believes in, and what it’s doing to grow the business and become even more successful in the future.

Vision: The “perfect world” scenario as to where the company will be in the future, by following the tenets laid out in the mission statement. 

Your business’ vision and mission statements are extremely important parts of your business plan. Each has it’s own purpose in helping your business succeed.

The mission statement serves as the rudder of the ship that is your business. It steers every individual in your company toward the same destination. These words aren’t just for those in management positions, but a strong mission provides direction for every employee to understand what their role is in helping accomplishing those goals.

A clear, concise mission is an integral part of your company’s culture. When exemplified on a daily basis from top management, everyone else in the organization will be excited to follow suit, because they see the words in action.

When everyone in your company not only knows what the mission says, but whole-heartedly believe in it, they can be prime advocates to promote your company, build respect within your industry, and help steer your organization to that designated destination that is stated in your vision.

If the mission statement is the rudder that steers the ship, then the vision is the far-off land that can be viewed through the spyglass in the crow’s nest—becoming ever closer and clearer with each day.

The vision statement spells out where the company wants to be one year, three years, and five years from today. It is a short, succinct comment that tells both internal and external audiences “by adhering to our mission, this is what we will become.”

A clear vision encourages everyone in the company to proactively innovate and share ideas that will spur the organization on to attain that goal more quickly.

When planning out your company’s short- and long-term strategy, strong mission and vision statements are instrumental in identifying what steps need to be taken, in what order, and by whom, to best achieve your company’s vision while making sure you are adhering to the mission.

Mission Statement: "Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Vision Statement: “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”

Mission Statement: “At Microsoft, our mission is to enable people and businesses throughout the world to realize their full potential.”

Vision Statement: “Empower people through great software anytime, anyplace, and on any device.”

Mission Statement:  “The Walt Disney Company's objective is to be one of the world's leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products.”

Vision Statement: “To make people happy.”

To be successful, your business needs to have a purpose, something to stand for and something it wants to work towards. A strong mission and vision statement will set your sight on new goals and help you build a strategy to achieve them.