How and Why to Complete Your Business Plan

Are you a planner or a fly by the seat of your pants type of person?  Me?  I’m a planner, I like to know where I’m going, how I’m going to get there, what time I need to leave, what time I’ll be arriving, everything.  I live and die by my diary and routine as it gives me comfort knowing where I need to be and when.

My brother however is a fly by the seat of your pants type of person.  He’s really good at flying into a new country with only the first two nights of hotel booked and working out where to go from there.  How he finds it relaxing I don’t know, for me, just the thought makes me feel sick.

You may be asking yourself where on earth I’m going with this.  Well, successful businesses will be running to a plan.  You will find the plan will be written and down and updated regularly.  The plan will have two facets, a detailed 12 month plan (generally reviewed quarterly and updated annually) and a longer term 5 year plan.  Strategies are then developed in order to achieve the plan and this guides the business in it’s day-to-day operations.

A less successful business will not have a plan.  It is likely to be poorly run, systems and processes are likely to be shambolic, it might be making money, but it will likely be chaotic.  Quite possibly the staffing level won’t be quite right, there won’t be a central place or any thought given to the ordering of documentation.  Management won’t have a clue what’s going on or the direction the business is headed in and quite possibly, neither will the owner.

The business owners will likely profess they have the plan in their heads but here’s the thing.  Unless it’s on paper and shared, it’s not really a plan, it’s more of an idea.  And idea’s are hard to sell to a team.  Ideas can morph, they can be forgotten, changed on a whim with little or no thought to the consequences.  It’s little wonder that a business without a formal plan is chaotic and unlikely to succeed in the long run.

So where do you and your business sit? 

And what do I mean when I talk about a plan?

There are several different plans a business can have, but the most typical would be a business plan.  It should incorporate the following:  a description of your business; an analysis of the market you operate in; the management and organisation of your business; the products and services you offer or intend to offer; an analysis of your customer segmentation; a marketing plan; a review of your logistics and how your operations will run; and a financial plan.

It should outline who your key competitors are and what you consider the risks and threats from them to be.  Giving credence to you competition shows you are not dazzled by shiny lights, but that you take a balanced, considered approach to running your business.  And this is why it will change and morph over time as your goals change, the focus of the business changes, it grows and so-on.

It’s an incredibly useful document and when going for finance or trying to raise capital it will play a pivotal role in telling your story.  So it’s important you get it right.  Lenders will judge you on your professionalism, the thought and detail the plan goes into, the extent to which you have analysed your risks and threats.  And its not just lenders who look at it, I’ve known the ATO to ask for a copy of a client’s business plan.

When is the best time to write one?

Ideally you would make sure you have a business plan at the outset.  It is not a document intended to be set in stone it is intended to be looked at, reviewed, updated for changes etc etc.  We recommend reviewing it and updating key information at least annually as you develop your strategy and reach your goals.  But its never too late to write one, so if you haven’t already, now is as good a time as any.

In Venta, I will confess, I neglected our business plan for many years.  I did one at the beginning, but was so focussed on growing the business and making sure we had happy clients with strong systems and processes, I completely neglected it.  Wind forward a number of years, and whilst I was taking a long hard look at the business figuring out how I had managed to create a cashflow problem, I picked it back up again and realised how much had changed. 

So now, we update it annually.  We have strategic goals for each 12 month period driven by the longer-term 5 year plan which sits in the business plan.  Each quarter when we do our BAS, I have a look and see how we are tracking towards our short-term goals, and then in around May/June each year, I pull out the business plan to see how we are going and set up the goals and strategies for the next 12 months.  I also share it with our team.  I have an open style of management and I like my team to know exactly where we are headed and how I envision us getting there.  I find it makes them take more ownership of the process and feel involved.  It also gives them the opportunity to come to me with ideas on how they think we might be able to better achieve the overall strategy.

Who writes the business plan?  Well, this comes down to personal preference.  We have many, many clients who write it themselves…or should I say, they tell me they are going to write it themselves!  I find when I ask them about it later, they have never found the time to do the document justice (if they’ve even tackled it at all) and in the next breath they are confused as to why they aren’t where they though they should be.  Or you can pay for a consultant to write it for you – but remember, nobody knows your business like you do so you will need to provide guidance for them to be able to really “nail it”.

Bottom-line, it comes down to the importance you place on it and how focussed you are on achieved your goals.  It’s a cornerstone piece of kit in your armoury and without it, success becomes that much harder.

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