Why having a business plan is important for your business?
Having a business plan is probably the most important thing to do for your business whether is a start up or a multi-billion dollar public company. A plan is needed whether your launching a new project/service, expanding to a new geographical area or trying to beat your competition. The reasons for having a solid business plan are quite simple, a business plan is a road map that addresses two overall objectives:
How are you going to grow the business?
This addresses your entire marketing strategy for your business (customer, product/pricing, advertising and competition)
Does the business model make financial sense or not? What is the revenue plan and how long before you achieve your goals? What are the capital requirements?
The important aspect of the plan is to actually have a strategic discussion and set the overall direction for the company. It is not to have a pretty bound binder full of spreadsheets. To address the above points, every company should set aside some time either at the beginning of each year or every two years depending on your industry. Some companies that are in a very competitive industries such as app development can probably benefit from annual strategic discussions if not 2 times a year since things change so quickly with this type of technology. Heavy manufacturing such as companies that build planes can probably do a strategic plan with a much longer time horizon.
When it comes to financial projects the typical thing to do is to extrapolate figures out 3 to 5 years. My view is that unless there is some intelligence behind these types of extrapolations, they are meaningless. Having expenses grow 3% to 5% a year is a good baseline assumption, but it really doesn’t help the decision maker to evaluate the business out more than the first year unless there are some specific assumptions.
At a minimum, the strategic discussion surrounding a solid business plan should also address these topics:
Ability to adapt to change
If the plan calls for significant changes in the way your company does business today, do you have a good plan to move the organization into a new process or a new way to do business? Change management is all about motivating people and less about having the CEO pound his/her desk and saying “we must change”.
Communicate – Communicate
Pretty binders that sit in the corner are a waste of money, in fact, a plan that has been communicated and embraced across all levels of the organization is better than any printed material. How successful do you think a plan would be if 100% of the employees can describe the top 3 initiatives of the company!
Stick to the ideas until they are completed.
In other words don’t come up with the flavor of the month type of managerial approach. Too many CEO set up the annual agenda and by the time June comes around those initiatives are half way done or half way dead because all of the sudden there are new ideas on the table.
RLowe Consulting focuses on helping clients start new businesses and on developing growth strategies. Specifically, we assist companies with business plans, business strategies, process improvements and cash management.