What is a Business Plan?
A business plan is not just a document. It is a holistic analysis of your company, the environment it operates in, and a route map to achieving success based on the resources available. Unfortunately, the image most of us have is of a 30-page bound document.
While the business-planning process is in itself a very worthwhile pursuit, most business plansare produced for a specific purpose. For example, the business plan can be used as a means to convey an idea with a view to achieving a specific goal, e.g. securing funding. Hence it needs to be tailored with the audience in mind, and good knowledge of their unique requirements will help shape a winning plan. For example, the requirements a Venture Capitalist will have in assessing a plan seeking to secure a million-pound investment will differ considerably from those of a local bank manager who needs a plan to support a small-loan application. While the former will be primarily looking for capital growth, the latter will be more concerned with security.
Why do I need a business plan?
The following list represents some of the key reasons you need to produce a business plan:
1. To plan for an uncertain future
Business planning is vital to help you manage your business more effectively. By committing your thoughts to a plan, you can understand your business better and also chart specific courses of action that need to be taken to improve your businesses performance. A plan can also detail alternative future scenarios, set specific objectives and goals, and list the resources required to achieve these goals. In short, it can help ensure that you are prepared for all sorts of eventualities.
2. To help grow your business
In an ideal world, all businesses would be self-financing in exploiting business opportunities. In reality, few are afforded this luxury, and hence, many businesses will be required to secure external investment. The production and dissemination of a credible business plan is one of the primary means by which entrepreneurs access capital when they are seeking investment to grow.
3. To commit to a particular course of action
A business plan can help a company assess future opportunities, choose the optimal one, and then commit to this particular course of action. By committing to one opportunity, all other options are effectively marginalized and the company is aligned to focus on key deliverables which will help them achieve their goals.
4. To manage cash flow
Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple—many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due). Cash flow forecasting is an essential part of any business plan.
5. To ensure all bases are covered
When you start a new business, the temptation is to spend time on ‘the idea’ to the neglect of the rest of the business. Entrepreneurs that lack focus tend to react to events as they come up rather than focusing on what is most important. The very creation of a business plan ensures that you cover all the various bases you need to when taking an idea from conception through to launch, and to ensure you are focussing effort on the right areas.
As you’ll have garnered from the above, business planning is an essential activity, regardless of the stage of business you’re at. The very process of producing a business plan enables management to give due consideration to the various factors that mesh together to create the opportunity they are seeking to explore, as well as the resources required and the key drivers needed for success.
How to write a business plan
Having decided to produce a business plan, there are three main ways to write one:
1. Pay someone to write it.
2. Write it yourself using Microsoft® Word and Excel.
3. Write it using a task-specific software product such as Business Plan Pro UK Edition.
If you, like many entrepreneurs, are time rich and cash poor, option 1 quickly removes itself from the equation, given the cost of having someone write a plan for you. Aside from cost, it is difficult to truely own a plan that someone else has written.
You are then faced with the choice between using Business Plan Pro® and building everything yourself, from scratch, in Microsoft Word and Excel.