Whether you’re starting or expanding a company, having a business plan can get you on track and get some detail behind your ideas.
However, research from Barclays shows that one in four businesses don’t have a business plan.
If you want your business to succeed, there are various tools you’ll need to have at your disposal. One of those is accounting software, which will help you keep track of your business admin (forecast your cash flow, manage your invoices, and more). Another is a business plan.
What exactly is a business plan?
There are numerous reasons for starting a business.
It could be that you have a great idea, or that you’ve always wanted to run your own company. Perhaps you’ve been retrenched due to the COVID-19 pandemic and this has forced you to finally take the entrepreneurial plunge.
For your business to be a success, your passion, enthusiasm, hard work and skills should be built on a practical framework. And that’s the case whether it’s a new business or an existing one. An important part of that framework is your business plan. It maps out the goals of your company, its purpose, strategies, etc.
Creating a business plan will help you clarify your unique selling proposition and help you determine the extent of your market and competition.
You’ll use your business plan to work towards a series of milestones that will help you to grow your company.
Your business plan shouldn’t be a static document though; it should be updated frequently to ensure that you are following your goals and tracking in the right direction.
How is it beneficial?
A business plan is like a flight path. It lets you know where you want to go, what you want to achieve, what you have in order to achieve your goals and – probably most importantly –what problems you can expect along the way.
Being able to identify potential threats and problem areas makes it easier to proactively develop coping strategies, which is key to business survival.
It’s also a great way to share information about your business, to develop your thinking and test scenarios before you make any changes (like leaving your job and going it alone), and it gives you a way to measure how things go when you do start up.
A strong plan can help applications for finance from a business loan to alternative forms of finance and investment.
Why don’t more people do it?
So why, if business plans are so great, don’t more people do them? Here are some of the reasons people think it’s challenging:
- Time. If you’ve thought through your business, creating your business plan shouldn’t take long at all. Keep it short and simple and choose a format that works for you.
- Uncertainty. While it’s true that you can’t know what will happen until you start a business, a plan can help you spot potential pitfalls and better understand the finances behind your idea.
- Lack of agility. Some people think business planning stops businesses from evolving, but a good business plan should be current and adaptable as you test and learn. A business plan should remain a living part of the business as it grows.
What’s the best format?
A business plan doesn’t need to be a tome of facts and figures. The most important thing is that it is in a format that works for your business. That means it must be:
- One you’ll use. You need a business plan that will be used frequently to inform your day-to-day decisions. It is often helpful to have it on your wall as a manifesto or mind map. Creating a presentation or visual guide might work too.
- One that makes it simple to express your views. If you’re a writer, that could mean a document, while a designer might like a more visual medium. Your business plan should excite and inspire, so pick a format that does that for you.
- One that’s shareable. A business plan will be seen by lots of people, including your bank manager and accountant, prospective investors and employees, so pick a format that makes it easy to share.
What needs to be in it?
What should a business plan include? Every plan will differ, but the golden threads are:
- An overview of the business. What does it do and what sets it apart?
- Goals. What does the business want to achieve? Set some SMART (Specific, Measurable, Attainable, Realistic, Time-bound) objectives that will quickly show if the business is succeeding.
- Audience and market. Who does the business cater to, and where does it find them? What size is the market, and what is your competition like?
- Products and pricing. What will you be selling and how will your prices be set? How does this compare with your competitors?
- Who is involved? Investors often look at the people as much as they do the business. Share some information about people’s roles, experience and passions.
- Financials. Provide details about sales, costs, break-even points and where investment will come from. If you’re looking for investment, include likely ROI for potential investors. If you’re looking for ways to finance your business, crowdfunding, alternative finance and government funding are good places to start.
Some business plans will include other sections, like a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis or a full marketing plan. If you find these useful for your business, feel free to include them.
How will you use it?
Many business owners spend a lot of time creating business plans that they never use. It’s most valuable to write a business plan that you can use in the daily running of your business.
Business planning is a continuous process – from the initial start-up of any business to stage two of developing and growth of existing sales and developing new income streams.
As established businesses mature and diversify, business planning continues to play a fundamental role in ensuring that the company’s long-term strategies are being met.
Here are some ways to make your business plan work for you:
- Take the sales, cash flow and expense predictions and measure them against your actual figures to see if you are on track.
- Revisit your goals monthly to measure progress.
- Update your business plan to include customer input and quotes. Real feedback is essential for keeping a business on track.
- Revisit it once a year to see if changes to the market, technology or competition have had an impact. Businesses need to continue to evolve to survive in the longer term.
Who can help you?
Sometimes you’ll need additional information to pull together your plan. Here’s who you could speak to:
- Your accountant. They don’t just help you with financials or accounting software; they can also offer advice about planning your business.
- Your bank. Many have small business experts who can assist you.
- Use business planning templates. There are many free, easy-to-use templates available.
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