For any business to be successful, it needs to have a good business plan. Whether you are planning a startup or have been running your business for a few years, creating and updating your plan is essential. Get it right and your business plan can provide a clear, robust road map that propels your company into the future.
But get it wrong and you could find yourself struggling quicker than you think.
What is a business plan?
In its basic form, a business plan is a formal representation of the goals of your company and how you plan to attain them. They are useful in not only helping you put together key performance indicators but can also show how you intend to attract investment or the kind of staff who will want to invest their time and effort in your vision of the future.
Most business plans follow a standard format that includes:
- Your business concept: this is all about where your company sits in the business sector, what your ethos is and what kind of product or service you sell
- Your marketplace: Who you sell to, why they should buy your product or service and how you compare to the competition in your sector
- Your money: You get nowhere in business without understanding how your finances are arranged. That includes how you hope to raise money to expand and how you deal with times when selling is hard
Setting goals for your business
The length of your business plan will depend on a number of factors, not least how simple or complex your operation is. A typical plan will be around 20 pages and should be split into different headings. The more clear and concise a plan is, the more likely you are to attract investment into your business – something that is particularly important for startups. Clear business plans also allow you to set strong and achievable goals that will see your company grow and thrive rather than stagnate.
Making your finances run smoothly
While most of your attention may well be on selling your product or service, keeping track of your finances as a business is vital. Without this you can’t plan for the future and hope to make money available when it is most needed. Your budget guides your day to day performance as well and it’s one of the biggest challenges that startups face in today’s competitive environment.
Most businesses will have what are called seasonal variations. For example, you may do great sales up to Christmas because of the product you sell but find a significant slowdown once the New Year arrives. You may be a farmer who produces certain crops at a certain time of year or you could be a supplier who has to wait months before an invoice is paid by a major customer. You could be merchandiser who relies on particular annual dates such as popular sporting occasions for their income. For all these, you need to have a cushion of cash to help you through the slow times.
It’s not just fluctuations in business that need a good cash flow. There are investments for new products and taking on more staff that may have to be catered for. You may want to attract investment from third parties such as banks and having a strong financial base can help with this. Putting in place a good business plan that caters for your cash flow is vital in all respects. It means:
- You can prioritise spending
- Look for savings when you need them
- Plan more effectively for the future and be confident of success
- Compare forecasts with your actual performance and make necessary adjustments
Measuring and Key Performance Indicators (KPIs)
A business plan enables you to set up achievable goals along with KPIs. Once you know what you want to do and how you want to get there, you can start measuring performance and keep track of everything. Your business plan forms the central nervous system of all this and allows you to set measurable financial and other goals that gear you for success rather than failure.
Reviewing your business plan
Entrepreneurs busy with a startup can often get swamped with running their business and the plan they initially developed can sit on the computer gathering digital dust rather than being used. It’s important for any business to review their plan at regular intervals. It needs to be at the heart of everything you do rather than a box ticking exercise when you first begin to operate.
You should carry out a review whenever you approach a new financial period, you are looking for additional financing, you want to bring a new product onto the market or when you are changing to new management.
Your business plan will be individual to you and your company, though it will undoubtedly have a lot of shared characteristics with other businesses. To guarantee success, it needs to be front and centre of everything you do, the guiding light that gets you through troubled times and pushes you onto even greater success.