What Is a Business Plan and why do you need one?

The fundamental reason anyone should contemplate writing a business plan is to increase revenue. You should also be able to determine exactly how much you will add to your bottom line. I’ve read many business plans, including those from ASX Top 100 companies and so many businesses fail to deliver this first essential rule.

There are too many plans written or half developed that have unrealistic budgets or targets, don’t deliver a clear action plan that can be implemented, or are so long-winded no one is going to ever read them.

All businesses need to work out what it is they want to achieve. A business plan or strategy is a model for how your business will run, it lays out your objectives and the details on how to accomplish those goals.

You don’t need to spend ridiculous amounts of time and money on writing your business plan. Business planning is just starting to change and is now moving away from the historical 40+ page format. Business plans need only be a few pages long, they need to be smart, kept simple and easy to communicate.

So, what is a business plan?

At some stage you’ve undoubtedly made some notes about your business and what you want to achieve. Well, that’s the beginning of a business plan! A business plan is ultimately a plan for how your business will work and how you will achieve success. It is the pathway to success which is another missing piece to the planning process.

Obviously your business plan needs to be longer than a few notes but it can be practical to have it relatively short with a focus on strategy, how to track your milestones, and deadlines for responsibilities and tasks. You will also need to highlight financial issues such as cash flow and budgeting. In getting the information right you need to explore your assumptions of the environment in which your business operates and be able to assess different scenarios to avoid the risks and failures that most businesses face.

Your business plan will be constantly evolving and should be shared with others. The printed version of your plan needs to offer a picture of your business. It needs to succinctly communicate to your team, investors and other stakeholders exactly what your business is about, how you serve your customers and where your business is headed.

In some instances, and only on request, you will need a more formal business plan. In this case, you will need an executive summary, company overview, general information about your business including the products and services you offer, information about the management team and detailed financials. These types of plans are often use to raise funds or for debt financing and are detailed to prove a new business concept or project. However, times are changing and the traditional method may not be your only option. The clarity of your pathway to success is a much more compelling message that can have investors and bankers lined up to invest in your business.

Regardless of how formal your business plan is, it’s critical to have a review schedule. This is where your achievements and results will be discussed and revised if necessary. Regular review sessions are an important part of helping the business plan evolve and grow with current market trends. In order to do a review effectively, you need to have a set of key metrics, you’ll need to know what measures drive your business objectives. If you can’t measure it, it’s likely you’re spending money and time on the wrong things.

Every business plan, no matter what stage the business is at, should also incorporate these elements:

  1. Description of your business
  2. Short and long term goals
  3. Set budgets and targets

More advanced planning will deliver these elements in a sophisticated way and help you:

  1. Define your business model
  2. Understand your customer and market and the critical assessment of your ability to compete
  3. Set strategic goals that have been tested against different scenarios
  4. Define your pathway to success which gives the road map to reduce your business risks, outline key milestones, and formulates your strategy delivery
  5. Form a dynamic set of metrics that help you know exactly where to put your time when things aren’t going to plan
  6. Determine resource allocation that outlines how to man up your growth projects and where to reallocate existing resources or divest

If you want to learn how to create a sophisticated business plan in under a day, join us at our one day seminar this November. Email us to register your interest now at info@StrategicPlans.net.au.