More than 80% of businesses fail in the first 5 years, a large part of this failure is attributed to lack of planning - never was a more accurate saying than Alan Lakein's "failing to plan is planning to fail".
A strategic business plan is a pre-requisite of running a business, providing the essential focus and clarity that all successful businesses have.
Going through the business planning process provides a realistic view of your business’ objectives, your expectations and the pathway for a sustainable and successful business.
Generally a business plan is the compilation of a number of smaller plans including management, marketing, operational, financial and action. To be strategic the plan must also be long-term (think 3 years plus).
If you get it right, a business plan will also provide a way of determining the probability of success of the business into the future and will become a means by which to measure progress.
Benefits of planning for the future of your business
Sound strategic direction and business analysis provided through a business plan:
- Presents clear goals and objectives with the direction on how they will be achieved.
- Concentrates effort and investment on important business decisions.
- Reveals whether it is possible to meet future needs and goals.
- Assists in negotiating finance at competitive rates.
- Provides goals and direction for the manager to help improve profitability.
- Provides a clear physical and financial position of the business defining seasonal and market opportunities and hence efficient decision making.
- Builds the confidence to consider new options and predict and plan for more difficult periods.
- Helps to clearly communicate the nature and direction of the business when more than one person is involved in its ownership and/or management.
So, what's in a plan?
Through addressing the areas outlined below you can be sure that the major topics important in the business planning process are covered.
Analyse the current situation
This is an important component of the business planning process. You should be able to step back from your business and given an honest, objective account of how your business is currently tracking including, for example:
- Financial position
- Market share
- Product/Service offering
- Target market, their demands and requirements
- Competitor analysis
- Your competitive advantage
A SWOT analysis can be useful in this section. See our SWOT Rot blog to ensure you are on the right track.
Develop your objectives
- Vision/Mission: One sentence detailing what you want the business to be.
- Objectives: What do you want to achieve in the period covered by the plan.
Write the plans (plural)
A real business plan is actually made up of small plans:
- Includes information on current and required management capabilities and business structure (including legal entity and associated considerations such as taxes, laws and licenses).
- This plan should examine whether current operational systems are sufficient for the present and projected needs of the business, including such issues as suppliers, premises, equipment, IT, personnel, systems and procedures.
- Essentially your marketing plan should examine whether you are meeting the needs and wants of your target market and how this could be improved going forward.
- Your financial plan needs to address the financial concerns of your business now and in the future including such details as capital needs, finance, cash flow, tax, budgets etc.
- This should explain the major decision points and timescale responsibilities, actions and priorities necessary to progress the business plan. Keep the action plan a living document and update it as situations or circumstances change.
A business plan provides clarity and focus for your business. Through analysing your current situation, developing your objectives and including your management, operational, marketing, financial and action plans you can be confident you are addressing all necessary business components to maximise the sustainability and success of your business into the future.
Remember that failing to plan is as good as planning to fail, so view the time spent on compiling a comprehensive business plan as some insurance for the future sustainability of your business.