How To Develop A Successful Business Plan

Make Sure You Have A Business Plan

The first point to keep in mind about business plans is… have a business plan! This may seem obvious but is overlooked. Many people start businesses without a plan; sometimes it can come from sheer bravado, thinking “I don’t need a plan”, or alternatively you might hear “It’s all inside my head, that’s my business plan”. The reality is no matter how much you work with things in your head, no matter how confident you may be and how much you think you already have a great vision for your business, there are so many great reasons why you should get it down on paper.

Most of all if you are seeking funding for your business, it will be absolutely crucial to go along and show someone an actual plan, because there will be very few people who will loan you money on the basis of what’s just in your head. So it’s pivotal to have a plan and be committed to preparing that document. If you are someone who shies away from planning, or you don’t like writing or preparing documents, nevertheless you are going to have to force yourself on this occasion. I say that because it is such a key document for the future success of your business, such a tool throughout its development to return and refer to.

Have An Overall Vision

When writing your business plan it is really important to have an overriding vision of what your business is going to do, what it is going to be, and what you want to achieve. Very often it is tempting to get straight into the technical details, the monetary concerns, financial matters, where you will be sourcing supplies, etc. Now all these things will be vital in your business plan, but it has to be held together by a coherent, broader vision.

Remember the proverbial expression ‘not seeing the wood for the trees’? You need to see the ‘wood’ first, then delve in and start examining the individual ‘trees’, meaning the individual items which you will be breaking down later. So a great point is to make sure that you have that overarching vision – and if you cannot find one, then maybe it is an indication that you are obsessing on a few technical aspects that do not necessarily make up a whole business as you had imagined it. A business that makes sense and is going to be sustainable in the future is one that has that clear vision within which all the smaller parts contribute to make it successful.

Contextualise Your Budget

Of course your budget will be extremely important. But sometimes people sort of pluck figures out of thin air, not giving it the context it needs in the business plan to make real concrete sense of how that budget is going to work.

So it is crucial that every time you mention financials in your business plan, to really give them the correct context. When I have worked with clients in developing business plans, there has been a budget or amount set aside for example to be spent on marketing, which has been decided a bit arbitrarily. I mean with no real research, no understanding of what that amount needs to be spent on, and what that budget will truly achieve. It seems to have been put there to fill the need to attribute a certain sum to marketing.

Make sure you are researching each point of your budget, make sure that you are giving it context and it makes proper sense within your overall plan.

Don’t Make Assumptions About Customers

To be an entrepreneur does require plenty of self-confidence, sometimes almost a bloody-minded determination to make your business work. But this confidence spilling over into thinking that you know what ‘the market’ wants can be dangerous, without checking that it’s true. You need to do your research that the market does ultimately want what you will be offering, whatever products or services you will be selling.

That is a great thing to make sure you have in your business plan, that your business will be built around those real customer wants. Do not make callous assumptions, or statements like “I know what people want”, “People are going to love this”, and so on. Have you done your research? Do you really know that the people you will be targeting want your product / service, and crucially do they want it AT THE PRICE that you will be offering it at? Whilst confidence in your plan is fantastic, you must make sure that it does not lead you down a blind alley along a path that is not desired by your target market.

Don’t assume what customers want, do your research and make sure that is clear from the start in your business plan.

Research Your Competitors (But Don’t Copy!)

Every business plan should focus a lot on the business’s potential competitors, because research and analysis of the competition effectively gives you plenty of useful information. It may guide you as to where you should be advertising and marketing, or certain strategies to use or ones to avoid because you see they have been used unsuccessfully by others.

I often see people split into two camps. On one hand those who almost ignore competitors in their business plan, because they do not want to think about the issue yet and feel so confident they have a great idea for the market regardless. But I recommend not being overconfident when it comes to competitors. They are still there for a reason, they are still around and in business for a reason, so view them with that in mind.

I teach that you should seek to learn from competitors; obviously never copy another business’s idea or what they are doing, but you can absolutely learn from their mistakes or see what they are doing and discover ways to improve it. All of that analysis belongs in your business plan: make sure you have your competitors under the microscope and make sure that is a solid chunk of your plan. That is some of the best research and information you will gather about what will make your business successful in future.

Be Prepared For Risks

It is a fact of life that any new business or enterprise has a degree of risk attached to it. Therefore it is important for your business plan to analyse and calculate that risk, showing how you will engage with it. There is no business plan out there that is risk-free, but very often where the risk is higher then the rewards will be as well.

What should come into your business plan is how you assess it, how you foresee anything occurring that could have an adverse impact and how you would deal with it in the right ways. If you are looking to obtain funding from a bank or people you know, it is essential to show what the risk factors are in the proposed business and how you plan to defend against them.

It could be, for example, the risk of a change in the economic environment – what are your contingency plans for that in terms of dealing with such a situation? There may be many other risks as well specific to your particular sphere of operation, but that ability to plan ahead for all scenarios makes for a robust business plan. When I have received business plans, the very best responses come from people who have looked at the risks and have an answer for every question. What you never want is to throw a scenario at your plan and have to answer “I don’t know what I would do in that situation”. You want to plan for every possible contingency, and certainly all the major risks to the ongoing success of your business.

Obtain Feedback On Your Plan

When writing a business plan you sometimes end up locking yourself away. You might have unique ideas which lead you to seek some isolation and secrecy, or if you are going to be a sole trader you may only have one person to consult namely yourself. But it is fantastic to try and get broader input on your business plan – whether from a professional, or simply from friends and family whom you trust. I say that because of course you need to be careful with commercially sensitive ideas, as you do not want to pass your plan on to someone in the pub who then starts your idea before you across the road.

But do not be too paranoid, make sure you are showing it to people you trust, whose feedback you welcome and can be genuinely useful in guiding how the plan takes shape. Very often when working as individuals we get very close to certain details and miss out a big thing that has slipped your mind. You can concentrate so much on essential financials and supply logistics, but overlook other issues like marketing or opening times. By showing the plan to someone you trust, they can have a look and see what might be missing or worth developing more. Getting that valuable second opinion on how robust your idea is will put you in a much better position to start and keep going successfully.

The Process of Creating a Business Plan Teaches You Many Things

An investor, banker or lender will demand a plan before they make any financial commitment. Besides being a prerequisite to getting finance for your business, a plan also is a blueprint for efficient management of your new business.

It can be argued that in a fast-changing market, a business plan may quickly become obsolete. However, the insight gained from the planning process can prove to be an invaluable experience and come in handy to deal with the various challenges your business throws up from time to time.

A Plan Creates Tactics and Objectives

A plan describes the long term vision of your venture and the objectives you aim to achieve during a given time frame. It will also detail the tactics and strategies deployed to reach those objectives. A well structured plan will provide the basis for operational budgets, business procedures and management controls.

It must be remembered that no two plans are exactly the same, ever. Every plan is tailored to meet the specific needs of a business situation and the industry it operates in. For instance, a business plan for a coffee shop will be vastly different from one for an internet café. An internet café business document will have more technical details about the equipment and the type of hardware and software used whereas a coffee shop plan will focus more of the operational part.

While there is a lot of emphasis on the presentation, the substance of a business plan is most crucial. The tactics and operational strategies discussed in the plan should be practical and justify how they will help in achieving the end objective. There are various reasons for creating a business proposal. For large organizations, it is an ongoing process to steer the business in the right direction and plan for the crucial cash flow during various stages of growth and development.

Why the Process of Creating a Plan is More important than the Plan Itself

For large companies, business planning is needed to launch a new product. In such cases, the focus of the plan will largely be on investment appraisal. It is commonly believed that business documents are used for setting up a new business and for raising funds from investors. However, those are not the only reasons why companies and entrepreneurs develop a plan. In most cases, more than the value of a plan, the process of creating one is rather critical.

Plans are useless but planning is indispensable – the famous words of former U. S. General and President, Dwight Eisenhower aptly capture the reason why business planning is extremely critical for the success of any business venture. Whether it’s a business plan for a coffee shop or for a technologically driven engineering firm, the planning process helps entrepreneurs and others involved with the business understand how the business will evolve and adapt in the changing markets.

Top 5 Ingredients of Successful Business Plans

Everyone has prepared a business plan. Well, should that read, everyone should have prepared a business plan? My thinking is that these tend only to be prepared when they are needed, rather than as a useful business tool for all senior management. My top five ingredients are:

1. Understand what a business plan is;

2. Understand what you intend to use it for;

3. Identify and implement the critical steps to achieving a successful business plan;

4. Understand what needs to be included in the plan;

5. Be aware of gaps or weaknesses in your plan.

What is a business plan?

A business plan sets out the method for running a specific activity over a specific future period.

Why are business plans needed?

Business plans are needed essentially for the four following reasons:

1. A formal, explicit document of the planning process;

2. A request for finances;

3. A framework for approval;

4. A tool for operational business management.

What are the critical steps needed to achieve a successful business plan?

This may come as a surprise to my fellow business consultants, but producing a successful business plan is not as difficult as people often think, so long as they follow a logical sequence. Here is my considered view as to the critical steps.

1. Understand what you are planning and why;

2. Define the activities of your organisation;

3. Outline the current position of the business;

4. Review and discuss the external market conditions, undertake and understand a competitive analysis, and define your market positioning;

5. Define your core objectives;

6. Prepare and articulate the strategy to attain and meet the objectives;

7. Identify and review risks and opportunities;

8. Prepare a strategy to deal with risks and exploit opportunities;

9. Refine the strategies into operational plans;

10. Prepare financial forecasts including revenues, costs, cash-flow, capital expenditure and assumptions adopted;

11. Finalise the plan;

12. Get it approved;

13. Use it;

14. Review it regularly and update as appropriate.

What should be included in the business plan?

Without being too prescriptive, there are certain necessary elements which need to be included. Such elements are:

· Preliminaries – such as contents, contacts and definitions;

· An executive summary;

· A description of the business;

· A review of the market, the competition and market positioning;

· The vision, mission and objectives;

· The corporate strategy;

· The plan for developing the products and services;

· Financial projections;

· An outline of the risks and opportunities;

· A conclusion.

Understand gaps and weaknesses within the plan.

Any casual viewer of the BBC programme, Dragons Den will be aware of how easy it is for weaknesses or gaps to be identified. Depending upon the purpose of the plan, this may, or may not, prove to be critical. It is often easier to recognise such weaknesses and gaps, and be prepared to deal with them, either by noting them in the plan itself, or having appropriate answers available should the need arise.

Who should prepare the plan?

As a business consultant, this may sound like heresy, but I believe that any plan should be produced by the senior management of the organisation. That is not to say that the consultant does not have a role to play in its preparation. He does. Senior management should prepare the plan as they will then be able to present and discuss it, demonstrating to their audience that they fully understand their business and market. I believe that the consultant’s role is to help facilitate the preparation of the plan, the consultant can help undertake the necessary research, and can cast a critical and impartial eye over the plan.