For many, a business plan is a document written by a start-up business or for businesses looking for investment. But the fact is, pretty much everyone should have a business plan in operation
“What exactly is a business plan?” I hear you ask…
Basically, a business plan spells out your purpose, vision and means of operation. It allows you to communicate your vision and objectives to suppliers, investors, employees and customers. It states your competitive advantage and usually includes thorough market research and detailed information about your competitors, strategies, target audience, obstacles and goals.
It helps you understand how your business comes together. To identify what works and what doesn’t, allowing you to track your success and adjust accordingly; to prioritise your objectives; establish time lines and tools to measure success; reduce costs and change strategies, as necessary and to spot future trouble areas, or identify opportunities in other words to help your business run smoothly, simply and profitably.
For existing businesses, a business plan and its process can be a competitive advantage that drives faster growth and greater innovation. It is a dynamic tool to track growth and spot potential problems, before they derail the business. It can be used to manage and steer the business, address changes in your market and to take advantage of new opportunities. And most importantly to set the schedule for regular review and revision.
When you’re running a business, you are learning new things every day: what your customers like, what they don’t like, which marketing tactics work and which ones don’t.
A study by Professor Andrew Burke, the founding Director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management, discovered that businesses that write plans and use them to manage their business grow 30% faster than businesses that don’t.
“But why do I need a business plan? I’m doing ok without one…”
I once read somewhere ‘that business plans don’t guarantee success but for entrepreneurs with decent ideas, they certainly boost the odds’.
Many things can cause a business to fail, in fact many failed businesses are actually profitable, but mistakes or market changes are realised too late to change the route of the business in time and most run out of cash due to bad planning.
Businesses fail because:
- the lack of short-term and long-term planning. It all begins with a plan, so sit down and write one!
- a great product or service is not enough. Lack of differentiation means you get lost amongst the competition. So develop a unique value proposition and stand out.
- they lose touch with their customers. Every business will tell you that the customer is #1, but only a small percentage acts that way. Do customers still love your products? Do they want new features? What are they saying? Are you listening? Negative reviews are just as important, if not more, than positive ones.
- a lack of focus will lose your competitive edge. A successful business can make the necessary adjustments quickly, positively and at a much lower cost to the business.
- they think their business is a hobby. It might have started out that way, but it is now a business and you are accountable. If you only plan to work in your business a couple of hours a week, you can’t expect great results. If you are only willing to put in a few hours a week, expect to get a few hours a week of income. There are no shortcuts.
- Enthusiasm (although great) is not enough to succeed.You need much more. You need to research your market, your competition, the financial feasibility of your concept, and more. You need to be able to go back to read and re-read your business plan. The concepts laid down in your business plan will help you to convince your bank to give you the loan you need, or to determine the best marketing strategy for your business.
So on a more positive note, a written business plan:
- Encourages you to think realistically, objectively and unemotionally about your business. It questions the past and future assumptions making it easier to communicate planning objectives and strategies to everyone.
- Makes you focus on your business as a whole and review everything in detail: your market, you value proposition, your operations, finances, sales and marketing plan.
- Offers clarity allowing you to really think and plan things through. To identify areas where you may need assistance and to plan growth in a controlled manner while understanding what is needed both physically and financially.
- Gives you a deeper understanding of your market and who your customers are, how they purchase, what attracts them and keeps them loyal.
- Monitors your progress and makes you accountable. It gives you a reference point when determining the effects of alternative courses of action on business operations. For example, if your profit margins are shrinking and in a few months will cost you too much you can take action to fix it earlier with options like a price increase, introduce a new product, get rid of an old one or being marketing profitably.
- Gets you organised! A business is likely to consume a significant amount of time, money and resources so manage them and manage them well.
- Uncovers new opportunities. While writing your plan you will see your business in a different light, and as market conditions change and new opportunities arise you will come up with new ideas for running your business.
A business plan is not a book that is written, read and then filed away on the bookshelf, it is the beginning of a process. The plan itself is a small part of your value: what your company does, how it will make money and why customers will want to pay for your product or service; but it’s the continual going back and seeing where you went wrong and why and working out how you will adapt to improve it, that matters. Keeping you alert making you far more capable than you would be without it whether you are looking for funding or not.
So if you don’t have a business plan, maybe its time to start working on one. Properly planning your business can only increase your chances of success. You are writing your future.
Join us on our next workshop or get in touch for more information.