How to write a business plan you’ll actually use.
Business planning seems to be something of a chore for many small business owners. Something to be avoided until absolutely necessary (and then normally to satisfy someone else’s agenda) or left “until I have more time”. But it doesn’t have to be that way.
Over the years I have seen small business owners generally take one of two paths when it comes to business planning. One group will turn the process into a big deal, spending days writing pages and pages that no-one else will ever read again once the final version has been saved.
The second group might write a few numbers down on a piece of paper at the start of each year, and then hope that the direction they take in the next 12 months helps them achieve those vague goals.
Neither approach delivers the right outcome.
Why bother?
A business plan should be your roadmap, setting out your financial and non-financial goals. It helps you to clearly articulate what you need to start, stop or continue doing to achieve those goals, as well identifying the milestones that enable you to track your progress along the way.
For Start-ups: A well thought through business plan gives a start-up business the best chance of success. It helps you:
set your vision and the direction of your business,
work out who your target market is,
if you have a proposition that will appeal to that market,
what costs you need to prepare for and
the steps you need to take to be successful.
ABS data[1] indicates that some 65% of businesses fail on average within their first 4 years of operating. So giving a lot of thought to preparing your roadmap, and particularly to working out how much capital you are likely to need in the first few years, is critical if you want to give yourself the best possible chance of success.
In my experience, a key audience for the start-up business plan is your immediate family – particularly if you are leaving a steady income behind. Starting a business is a big step and having a clear roadmap can lessen the anxiety for loved ones who may also be relying financially on the success of the business.
Once you’re more established: Over time the planning process evolves to focus on the areas of the business that need to change to support your continued growth. It also helps you to identify which areas you need to tackle first or are the most critical to success.
A well thought through business plan means there can be no room for assumptions. You need to get really clear on your current (financial) position, so you know what you need to change to achieve your goals.
Not only does the business plan allow you to set goals and set priorities, but it also gives you the key milestones the business needs to achieve each stage of growth. This is useful as your team grows –everyone needs to be clear on what you are looking to achieve and how they help you get there.
Depending on the stage of your business, a well thought through plan is critical for obtaining funding or bringing in new business partners. Most investors or partners will want to understand the vision for your business and the opportunities that exist for them.
Five tips for writing a plan you will actually use
Before you put pen to paper, consider the following 5 tips:
Know your audience.
Work out who your audience is, as this will dictate the final structure and focus of the business plan.
Some questions to ask yourself before you start:
Am I writing this to determine if my start-up business has a chance of succeeding?
If you want to be in the 35% of small businesses still operating after four years, you need to really do your research to understand the potential for your product/service and how it compares to what’s already available. You also need to think about your marketing plans, how you will deliver your product/service and most importantly – how much cash you need to build the business and meet your personal commitments. This is a good time to work through all the steps to actually get started (think about types of insurance you require, branding, company structure, business bank accounts etc).
Do I need to share my vision with critical stakeholders (investors, new business partners, key employees)?
If your success depends on other people, make sure you share your plans with the team, and consider involving them in the process. Some of the best ideas and most ambitious plans come from those who work alongside you.
If you are looking for additional funding or an investor, you need to be super clear on the opportunity that exists for them, as well as for you.
Am I looking to revitalise the business or prepare it for sale?
If you are looking to sell the business, you will need a clear plan for an orderly transition to maximise the value of the asset you have created.
If you have been operating for a while and are feeling stale, you may want to use the process to review what’s really important and brings you joy – in some cases this might mean down-sizing operations to focus more on what you love doing, bringing on staff or outsourcing the parts of the business that don’t bring you joy.
2. Keep it concise – but don’t skip the important stuff.
A quick internet search will result in a huge selection of business plan templates, often tailored to the audience and/or stage of your business.
Don’t go overboard with a fancy layout – but do get specific on the important stuff:
Vision and Purpose - Regardless of your stage, it is important to understand what business you are in, and why you do what you do. Getting clear on this makes any subsequent decisions easier, as you can just check to see how those decisions relate to your vision and purpose.
Goals and Objectives – it is critical to include an objective snapshot of where the business is currently. Identifying the critical success factors that need to be regularly tracked will help you pick up on important trends over time, so you can correct your course as required.
Once you are clear on where you are right now, you can start to map out where you want to be in the future. If you need a refresher on how to set clear, tangible goals, plenty has been written about how to set SMART objectives.
I have found long term success means you need to consider your most important non-financial goals as well:
– Do you want to have more flexibility to spend time with loved ones or on yourself?
– Do you want to move out of the back bedroom and into a dedicated space, so you can differentiate work and home life more clearly?
– Do you want to be able to focus on the areas of the business that you love and that play to your strength, and to outsource the aspects that don’t?
Marketing (Brand & Clients) – it goes without saying that clients should be at the heart and soul of your business. You need to get clear on who they are and how you find, convert and retain them in a cost-effective way. Is your prospective client base evolving over and are you keeping up with what they are looking for? Or does your client base need to evolve as the business grows? Are you attracting the types of clients that will help you achieve your goals?
Operating strategy – When did you last review your products or services to see where improvements could be made? Is the business operating at maximum efficiency? Are you taking advantage of technology or investing in plant/equipment, that will provide a better customer experience, increase capacity or reduce cost? When did you last review your key suppliers?
People – often the forgotten element of a business plan, but critical to long term success. Do your people understand and share your vision? Do you have the right skill sets within the team to deliver on your goals? Do you need to expand/develop the team? Are they clear on their role in helping you achieve those goals, and are your remuneration systems structured in a way that supports them doing so? Are there areas of your own personal development you need to work on?
3. Know your numbers.
Whatever you do – don’t make assumptions! Do your research so you can make informed decisions – whether that be investigating and validating your internal metrics, or to better understand the external environment you’re operating in.
Setting financial goals helps you track results and manage cashflow – so you know if you need to correct your course and to identify when you have cause to celebrate!
4. Plan to review frequently.
There is no hard and fast rule about how often you should review your plan. My recommendation is to review and refresh your goals at least every 12 months. In a rapidly changing environment, you may want to do a quick review every quarter to ensure you’re still on track.
Keeping things concise will help keep the plan fresh – no-one wants to have review a lengthy document but updating key points on a one-page outline is less overwhelming and so more likely to be done.
Successful businesses I have worked with in the past have a one-page summary that is frequently visible, such as displayed in a prominent place in their office.
5. Look for assistance.
It can be easy to put off doing a business plan if you feel overwhelmed or unsure about where to start.
There are plenty of free resources available on the internet but having someone to act as an impartial sounding board – to ask the right questions at the right time – can take a lot of pain out of writing your plan.
So if you’d like help to get your business plan in place, reach out to us now to get started.
[1] https://www.abs.gov.au/statistics/economy/business-indicators/counts-australian-businesses-including-entries-and-exits