Research has proven that businesses with a plan have grown faster, both in terms of turnover and profitability, than those that don’t. Whilst a business plan is often mandatory for those who want to borrow money from the bank or seek funding from investors, it should not be optional for the rest.
Research has proven that businesses with a plan have grown faster, both in terms of turnover and profitability, than those that don’t. Whilst a business plan is often mandatory for those who want to borrow money from the bank or seek funding from investors, it should not be optional for the rest. In today’s highly competitive markets, adequate planning and research is almost certainly necessary if a business is to be successful – whatever it’s size and however long it has been in existence.
Various terms are used to describe the business planning process – business plans, business strategy, marketing strategy, strategic business planning, sales planning – but they all cover the same basic principles. When faced with a business planning or strategy development task it’s important to clarify exactly what is required and that means committing to writing.
A plan is a statement of intent – how to organise effort & resources to achieve an outcome.
Take for example a building project – whether it be a small extension, a new five-bedroom house or a multi-storey office block. You couldn’t start work without a plan, to determine the design and structure of the building, the materials to be used, the labour required, the costs involved and, equally important, whether the end result will meet the added value, sales or rental targets envisaged. And so the parallel with business becomes apparent. In this context, a written plan enables all those involved in managing a business to plan, review and monitor its development.
Whatever the size of your business, the plan should cover FIVE keys areas:
This is the process by which a business decides its strategy as to what it will sell, to whom, when and how and then how it does it. This covers everything from company culture and positioning, through to market research, new business/product development, advertising and promotion, PR and all the sales functions as well.
People are essential to the success of a business. The plan needs to cover details of the key personnel who will run the business, their background, capabilities and their roles. Employment policies and procedures, skill requirements and training processes for all staff also need to be covered.
An outline of how the business will operate and all the operational processes involved, including the premises, plant and equipment required. This section should also cover matters such as quality control, health & safety, use of sub-contract services and so on.
The plan must include spreadsheets of the sales, profit and loss and cash flow forecasts, together with a resume of how the assumptions have been arrived at. Details of any finance needed and where and how it is intended to obtain it. Also details of how the accounting policies and procedures will operate.
Whether you are writing a business plan for a new business opportunity or for an existing business, the principles are basically the same. It involves taking a hard-nosed and honest look at the business. Using the knowledge of research or past experience, the plan should set targets and objectives. It should involve building sustainable strategies – working through ideas and the implications so they are not just introduced on a whim. It should provide the benchmarks against which to review progress and measure success or failure.
It does involve taking the time out to do it, but if you’re serious about the success of your business, then you must make the time. While the plan should essentially be the product of the owner/manager to ensure ownership and commitment, it would be wise to enlist some help to complete it in a reasonable timeframe. An external consultant can advise you on the best format to use for your business and will also provide guidance and, most importantly, be objective about the plan in relation to the business. If you have an existing business, contributions from senior staff may help with some lateral thinking and their involvement should encourage successful execution of the finished plan.
Here are some guidelines on how to write the plan:
The way you write your plan will depend on who is ultimately going to read it. Should the emphasis be placed on ‘selling’ the plan to investors or is it just an internal strategic plan for the management team?
Equally important is selecting a format to use, which both suits the purpose and is practical for you. You may consider a software package, which has the advantage of being interactive and updateable for future use. Make sure the template is adequate for your needs (See Business Plan Software and Business Plan Template)
Set out target dates for completion in sections and allow enough time to review and produce revised drafts of the plan – at least five drafts would not be unusual. But do not extend the dates over too long a period (ideally limit to two months for a complex plan, less for smaller plans) otherwise you may be forever incorporating changes and never get the plan finished!
Keep the written part of the business plan as concise and brief as possible – it’s the quality of the content that counts, not the length. Start each section on a new page. Number and date the pages. The plan should be neatly presented, with no grammar and spelling errors, clearly laid out in an easy to read format – use short paragraphs, plenty of headings and bullet points. Write in layman’s terms, in the third person and avoid any personal viewpoints
Everyone thinks their business will grow exponentially but in reality, this is rarely the case. Avoid being over-optimistic with your figures – your business plan must show a realistic path to profitability with adequate marketing support and a sound operational and personnel infrastructure.
You need to produce financial projections that accountants will endorse without question, so it is advisable to get an accountant to check your figures. If an investor finds a flaw they may start to doubt the integrity of the whole plan. It would also be wise to get an outsider opinion. It would also be wise to get an outside advisor or business colleague to review the plan.
As it will be you who will have to answer any questions from your lender or investors, you need to understand everything that is written in your plan. Having someone else write your plan may save you a headache, but you might be caught out under scrutiny if you don’t fully understand it.