There is a heated debate regarding the merits of having a business plan. Traditionally, business plans have been lengthy and all-encompassing documents. Though there is a place for comprehensive business plans they are often a static representation of past history and future plans and not responsive to the modern business environment.
The real skill is not in writing pages of detail, but in developing the ability to get the real story across succinctly. A one-page outline of the business vision, values, objectives and how you will use your competitive advantage to achieve them will ensure you have the best tool to communicate the business plan.
What is killing the traditional business plan?
- Rapid change means the formal written business plan is often irrelevant the moment the ink is dry.
- A five-year business plan can restrict a business’ responsiveness to changing market conditions and blind business owners to new opportunities.
- More entrepreneurs are starting businesses to take advantage of a short-term opportunity and with an exit already in mind, which influences the way they plan.
- Many small and medium-sized businesses have never found business plans useful and increasingly are saying so.
What is replacing a traditional business plan?
- A one-page living document that is continually updated.
- Entrepreneurs with highly developed communication and presentation skills who are ‘walking articulators’ of the plan.
- Specific documents highly tailored towards meeting the needs of the business’ stakeholders, including banks, venture capitalists, suppliers and alliance partners.
While every business should have a business plan there are some instances when a solid business plan can provide additional benefit including when a business is: stagnant or failing; going through business simplification; introducing new product lines; being purchased by new owners; expanding; and/or experiencing cash flow problems.
According to RSM Bird Cameron’s thinkBIG 2011 research study, SME owners who plan their business are significantly more likely to experience revenue growth, with 80 percent who plan their business experiencing growth over the last two years compared with 60 percent who don’t plan.
Business planning disciplines can be weakest in newly established businesses because of time constraints. At a time when business owners should be examining the market they are trying to penetrate—including the competitors they are trying to defeat and the customers they are trying to capture—they are pushing those activities aside in favour of working in the business.
Implications of this approach for longer term growth include capital being more difficult to obtain due to a lack of a well documented plan for the lender and missing breakthrough strategies if the time is not invested in examining the market thoroughly and searching for real differentiation.
While dedicating time and energy to a business plan can be tedious and challenging, the effort is well spent. Businesses should spend at least 20 percent of their time working on their business, not in it.
Tips for developing the right kind of business plan
- A good business plan should be detailed yet succinct. Many invested entrepreneurs find it hard to break down their most precious concepts to a minimum. Business owners need to be able to write a business plan as a skeleton or outline for what they want the business to achieve and how it will do so.
- Solid business plans include a statement of business objectives and a financial, marketing, and operational plan.
- Business planning correlates with higher rates of growth. Examining the market, competitive positioning and the products and services your business offers is an essential prerequisite to systematically pursuing and capturing opportunities.
- When completed, a business plan should be reviewed frequently to ensure that actual business activities are in line with the plan. Be prepared to change your plan if there are major shifts in the industry, market or general economic conditions.
- The action of writing out a plan will give you an objective and more focused view on what you are intending to carry out and how. This in-depth analysis will help you foresee potential gaps or hiccups, and help to eliminate surprise hurdles and obstacles.
- Carrying out regular market research for your business plan will mean you will have in-depth and current knowledge of your industry, resources and markets, and will help you avoid mistakes made by competitors.
- Ensure you incorporate accountability into the business plan and be disciplined in implementing the actions that are required to move the business forward.
Business owners should be prepared to review, change and adjust the business plan to ensure the business goals continue to be attainable.
Ultimately a business plan should be considered a tool for driving business strategy, providing an objective overview of the business and a better means of communication.
