Most think a business plan is only necessary if funding is needed. However, a well-prepared business plan can be a functional road map for any growth strategy.
By developing a comprehensive business plan, you are incorporating a powerful tool to ultimately gain success. However, for true success, a business should operate ‘continuously’ with a clear understanding of the market in which it competes; its competitive environment; its customers; its strengths and a vision of how it is to evolve. The initial plan should be the blue print and, its recurrent use, the tool which gains you success.
When you go into business for yourself, you have to strike a balance between the risks that you assume and the return you expect to receive if you succeed.
Only by looking back and analysing what worked and what didn’t, can you understand how to move the business forward and remain relevant in current and developing market conditions.
Using your business plan to understand business
Preparing a business plan takes time, but laying out the ‘game plan’, including the context in which it operates is an important investment towards your success. Most entrepreneurs have a good business idea but very few are apt in all areas of running a business. The process of writing a plan can teach you a lot about your business that you are unlikely to learn through any other process.
Using your business plan to understand the numbers
Looking at the ‘numbers’ (money in, money out, profits, sales, etc.) and forecasting throughout your business journey will also give you a good sense of the potential of your business. You have to be selling at a profit to sustain the business long term. Understanding account payables and receivables, and cashflow can allow you to take action. Leaving it all to chance is nothing short of a gamble. There is no point in planning for failure, but there is a point in writing a business plan that’s willing to admit the possibility of failure and, then, continually checking failure isn’t on the horizon.
Using your business plan to make clear, informative decisions
Some questions you may find yourself asking when writing your plan are:
- is there a market for my business?
- is there sufficient demand for my product?
- do I have a customer base?
- do I have a sustainable competitive advantage?
- what are my unique selling points (USPs)?
- is my pricing competitive and earning me enough margin?
These are important questions, and ones which should be asked of the business regularly to ensure that if conditions change you remain focused, and decisions aren’t made hastily.
Using your business plan to attract good people
A business plan is a highly confidential document, after all, it is yours and you have done all of the hard work; however, it would be a shame to keep the benefits of a well-done plan to yourself. A plan is a valuable tool for communicating your visions, goals and objectives to all stakeholders. You can use elements of your plan to help sell your products/services, and your whole company to prospects and suppliers and, ultimately, to empower and motivate your employees. When employees get the key information managers are using to make decisions, they understand management better and make better decisions themselves, and efficiency and profitability often increase as a result.
Using your business plan to understand and monitor your performance
This has many benefits. By comparing planned projections with actual results, you gain a deeper understanding of your business’s pressure points or the components of your operation that have the most effect on results. So, for example, if your cash flow is running shorter than projected, even though you’re not currently in trouble, that information may help you to spot disaster before it occurs.
Two questions on most business owners’ minds are:
- am I making money?
- how do I know if my business is on track?
I have heard many times, “I must be making money because there is money in my bank”…..Having cash available and turning a successful profit are two completely different things.
A good business plan has definitive goals with a timetable for achievement. However, if you wait until the end of the year to see if the target has been reached, you won’t have any opportunity to react to anything that alters your plans. The only way to know for certain whether those goals are being met is to track actual performance against predicted performance throughout the year. Forecasting and evaluation can keep you both motivated and successful.
Writing a business plan is one of those skills that improves with practice. The first time you create one, you may feel a little unsure of yourself but you can and should be constantly honing your business planning skills by updating and rewriting your business plan. Trust me, you will soon become an expert. Updating a plan is so much easier than starting one from scratch and far less time consuming. It’s important, however, that updating a plan does not become a mechanical task. Take the time to challenge some of the core assumptions to see if they still hold up. Utilising your plan makes directing the business so much easier; through motivating growth, clear direction and instilling confidence.
Whether your business requires a plan from the start or after a few years of trading, it should be written and used as an interactive tool that is in constant use, be it monthly, quarterly or yearly.
Business planning is a powerful tool for evaluating the feasibility of business ventures. Make sure you use it.
Using our workshops to get you started
We appreciate the there is a lot to consider when running a business and we aim to ensure all of our workshops help you to understand the basic and most important elements to help you create a business plan that works hard for your business.