Do you have a current business plan, or is it one of those things you don’t think you need? Maybe you've heard you should create a plan, but your days are so busy it seems impossible to take the time out for a task that just doesn't seem all that necessary.
While a business planning session needs you to step back from the actual day-to-day running of your business for a few hours, it should be something you're doing regularly. Previous research consistently shows that planning is beneficial for most businesses. A study published in the Strategic Management Journal showed that business planning makes failure less likely, and speeds up product development. Another study has shown that strategic planning is positively correlated with profitability of the business.
So the short answer? Yep, you need one. While it might not be a guarantee of success, if you want your business to flourish, it’s a really good place to start. A business plan has a raft of positive outcomes, but there are five main ways your business will benefit.
1. Inspires confidence in your business
Banks and other lenders require a business plan before they’ll even look at a loan request. Potential investors want to see facts, figures and proof that you’ve done the hard yards already and researched the market.
It’s the same if you need a business partner – they’ll want to see exactly what they’re getting themselves into. Hand over your business plan with a clear pitch, backed with concrete information, and you’ll be much more likely to get what you need.
2. Decision making becomes easier
If you know where you’re headed, it becomes a lot easier to make decisions around your business. You can simply ask yourself: is this decision taking me closer to my goal, or leading me off track? When you’ve got a black and white target to aim, suddenly tough decisions become easy.
Even while you’re writing the plan, you’ll stumble onto areas of the business where you’re sitting on the fence. Making decisions about those things helps steer your business in the direction you need to go, too.
If you have multiple directors, writing a business plan helps to make sure everyone is on the same page – it creates common goals, and if you have a board, it’ll make meetings a lot easier, too.
3. Delivers a dose of sanity
You have grand plans of making a million dollars in the first year of operation. That’s great, but is it actually possible? Sitting down and going through the numbers may highlight some issues – perhaps your business model is flawed or the market is smaller than you thought.
You also have an opportunity to test your ideas. If your market isn’t who, what or where you thought it was, you can dig a bit deeper and steer the business in a more profitable direction.
Understanding that your business model is flawed may take the wind out of your sales at first, but it gives you a chance to find gaps in your plan, and fix them. It might feel like a tango, two steps back before going forward, but it’s more of a waltz – two small steps before you can take a big step forward. Fix those problems before you even open your (literal or figurative) doors.
4. Gives you new ideas
While you’re deep in writing your business plan, you’ll be researching, talking to others, and probably chatting to other professionals in your industry, and your accountant or lawyer. These people and resources will give you valuable ideas and might take you in a direction you haven’t thought about.
You’ll also gain a fresh perspective; approaching your business from a different angle can spark new ideas.
5. Gives you a clear plan of attack
Once you’ve written up your business plan, you’ll have a very clear sense of direction – and an idea of the small steps you’ll need to take in order for the big plan to happen. A business plan should set realistic and measurable goals and outline a clear path to how you’ll get there.
A great business plan should identify your goals, prioritise them and create strategies to achieve them. You’ll figure out what you need (more funding? New assets? New staff?) and when you need it. This accountability is vital to keep the business moving forward.
Start planning today
If you’re serious about success, start preparing now. Set aside the time to have a business planning session. Consider having a facilitator, like your accountant, to help you plan. They’ll use their experience to help you sensibly identify financial targets and key performance indicators.
They should also recognise opportunities you can explore, and weaknesses you need to manage. They’ll help you to agree on an action plan – and this is important to get everyone in agreement.