What's in a Business Plan
Mention a business plan and it sends shivers down the spine of most business owners.
Many business owners don't identify with the benefits of having a business plan. The structure of a business plan is also seen as a mystery or simply a collection of statement with little structure or ability to describe how the business will progress.
This page will provide you with a basic understanding of a business plan structure, the processes involved and how to maintain your plan. Let me stay right now, unless you document a business plan you don't have one. Why?
- You can only share your business ideas and plans with others when they are written down.
- It ensures everyone is working from the same page and heading toward your goals. (Vision)
- It allows you to analyse what you do or don't know and what action you need to take to secure opportunities and reduce threats.
- It allows you to measure progress and if you are on track.
- It makes you look at your business in terms of your environments so that you can adapt quickly to change.
- Businesses that use a business plan succeed and become leaders.
Every business owner can easily describe the business in terms of current products, services, types of clients, supplies and internal business systems etc. This is the “NOW” in the following diagram.
This is called the "Vision" and is by far the most important factor to creating a successful business. If you can't visualise your business, smell it, feel it, see it or see how people will interact with it, then you don't have a vision right now and if you are about to start a new business, We suggest you stop right now until you have the vision clear in your head.
Think of the vision as an external statement. What would you like your clients to say about your business, products or service. Eg. "I like using the XYZ Fitness Centre as it's lots of fun and I feel better and happy." Part of your vision is in this message.
As this is such an important stage in building a business we have created a separate page on the Vision and Mission.
How & SWOT
Let's use a tool called the SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats). It's an analysis process of identifying elements of your business in terms of strengths and weaknesses. Or to identify what opportunities exist for your business or what threats (risk) may impact on your business.
To the left of SWOT table in our chart below, you will find listed what you may or may not know. This helps you identify how you can use your Knowledge, Skills or Resources to create Opportunities or reduce Threats as seen as Actions on the right of the SWOT table.
Knowledge, Skills or Resources
- What you know or don't know,
- Your in house skills or lack off,
- What resources you have or don't.
Validate and update your knowledge regularly and research what you need to know.
For example, do you know how many potential customers you have in your market location, what their disposable income is and how they buy your type of products? Do you need a phone app or setup stores? Etc.
Understanding your potential customers needs, what laws or licensing you may need, what your competitors are doing are all critical to creating and maintaining a business plan.
You will notice on the chart we have (E)xternal and (I)nternal items.
- External items you can't control but you need to know about them. This is why a business plan is never set in concrete. Your environment is constantly changing and your business needs to adapt with change.
- Internal items are ones that you have a large degree of control. A good business will always be looking at opportunities to improve processes or safety standards.
Once you have identified an Action you need to check that it's inline with the Vision. Sometime we identify Opportunities to Threats, but they don't fit our Vision so you need to reconsider these. Eg. If part of your Vision states that you make it easy for your clients and then you have an Action that makes it difficult for clients, then rethink it or remove it.
Actions are like little plans that include: (See also Smart Goals)
- Cost and time involved.
- Potential return or saving created. (ROI - Return on investment)
- Who is doing what, when, where and why.
- How is it going to happen.
- What stakeholders or resources you may need.
- How you will measure the level of success. (If you can't measure the outcome, then don't do it)
Last point on Actions, Don't go overboard and keep the number of Actions to a small number that can be achieved. Plan to succeed.
Action Plan & Budget
The Action Plan is simply scheduling the tasks contained in each Action with a start and end date.
Normally a Budget will show your expected Income, Cost Of Goods (Direct Cost), Operational Cost (Overheads) and Cash Flow Analysis.
To help you schedule and build a budget we have provided a link to a "Proactive Budget Worksheet" on the right side bar of this page. Instructions are provided within the spreadsheet and it allows you to enter your own time to complete each Action.
Sometimes you will find that your cash flow will restrict what you can do and when.
Fine Tune - Consider alternatives:-
- Can we reschedule.
- Can the Actions be changed or removed.
- Can the Action be performed over a longer period of time.
- Can the Action be broken up into small parts.
- Can we presell or raise income with early adopters or an early bird price.
Action, Measure, Review & Adjust
Now that you have created a Business Plan, Action, Measure, Review and Adjust.
Sit down with your team and / or an external consultant each month to check progress with the business plan and make changes as required.
To measure your business you will need your financials figures up to date so ensure your bookkeeping person sticks to a deadline in providing you with accurate and current information in terms of a Profit & Loss Report, Balance Sheet and Cash flow.