Preparation of a workable business plan is one of the most important tasks facing both new and existing business owners. Whether the business is a start up or has been operating for some time, a comprehensive business plan sets out the short, medium and long-term goals and objectives of the business and describes a strategy for achieving them.
A major mistake many business owners make is to write a business plan for a specific purpose – to start up or to raise finance, for example – then file it away once it has served its purpose. However, the business plan should ideally be used as an ongoing management tool and should be regularly viewed and analysed to check how the business is performing against its defined goals and objectives.
This article provides an introduction to business planning. It examines why a business plan is important and describes what should be included.
Why write a business plan?
A business plan should be considered the base document for the running of a business. It sets out where the business is currently, determines what the business aims to achieve and provides a plan of how to realise these objectives. In addition, it can be used as an analytical tool to help you understand what has gone well or what has gone badly since the plan was created, and why.
However, it is important to be clear about what you want to achieve before starting the business planning process. For example, you may want to write a plan to help your business:
- Start up
- Raise finance
- Plan for growth
- Consolidate or hold at its current stage
- Merge with another business
- Acquire another business
- Attract new investors, partners or suppliers
Business plan can have a variety of internal and external audiences and it may be necessary to tailor the plan so it is appropriate for the requirements of each of the different groups involved.
A business plan that will be used to raise finance, for example, will need to provide certain financial details that a lender will consider most important, whereas a plan to communicate a new strategy to employees will have a very different focus.
What to include
There is a wealth of information, however, that should be included in a business plan no matter what the target audience.
- SWOT analysis
A SWOT analysis highlights the current strengths, weaknesses, opportunities and threats to a particular business. This analysis should be considered within the local and national market. Carrying out an effective SWOT analysis can be a useful activity in its own right as it can highlight new directions and opportunities for the business that you may have overlooked and flag up problem areas that need to be improved quite urgently.
- Goals and objectives
It is important to clearly and concisely set out the key goals and objectives that your business plans to achieve. This could range from entering new markets and improving profitability to preparing your business for sale. It is vital that these goals are measurable and achievable and that there is an equally clear plan as to how they can and will be achieved. To ensure ownership of the plan throughout the business, it is usually beneficial to include you employees in as many relevant components as possible. Many studies have shown that when people are included in the construction of goals and objectives they are much more likely to be motivated to find ways of achieving them.
- Financial information
Depending on the audience for the business plan, financial forecasts can be a vital component. Forecasts can include profit and loss, cashflow and balance sheets detailing financial implications over the next year to five years.
- Details of key staff
Profiles of key staff and managers are essential. If you are raising finance, for example, lenders will want to be reassured that they are investing in people who have solid experience and knowledge of the market sector.
- Operational planning
The operational plan should include details of the resources (equipment, staff and materials etc) and how these will be utilised to achieve the business objectives. The operational plan demonstrates that you understand what resources are required and how they will be used in the optimum way. There is a clear link between the quality of the management team and the clarity and logic of the operational plan – good management teams produce good plans.
- Executive summary
The executive summary is the section that is read first but that should be written last. A good executive summary should provide a clear outline of the whole plan. It should be interesting to read and provide a map of the plan to follow. Often decisions are made about the viability of the plan after reading this section. Therefore it is vital to keep it brief, informative and relevant to the intended audience.
Getting help to write the plan
Some business owners find it relatively straightforward to write their own business plans while others really struggle. There are clear benefits for every business owner or management team going through the business planning process and it can make no sense to hand over the business planning to a third party without involving them fully in the key aspects of the business.
However, sometimes an external and objective consultant can highlight unanswered questions that are difficult for the business owner or management team to spot due to their closeness to the business plan.
Ongoing process
Once your business plan is in place, it should be reviewed and regularly updated so that it becomes a key tool in the management and operation of your business. Rather than filing your business plan away when it has served its initial purpose, revisiting it regularly can help to identify new opportunities and can provide a blueprint for your business’ future.