It’s time to dust off your business plan
Raising capital is obviously an essential function of any business plan, but a well-prepared plan can provide the business owner many other benefits. It can help her realistically assess her expectations and provide a framework for strategic decision-making and performance monitoring during implementation.
What is the best kind of business plan and what should it include?
I recommend a rolling three-year plan with yearly updates. Plan preparation requires both strategic and business planning processes and it is essential that the owner is intimately involved in both processes. The strategic planning process ensures that the business is competing in a market in which it can be viable. It includes analysis of factors both internal and external to the business.
The internal analysis considers the expectations of the business owner, her competencies and values, and the resources she has at her disposal. The external analysis considers customer needs and potential threats from competition or other environmental events. This strategic plan defines the business mission, the owner”s values, along with the industry and market the business will compete in. It also explores who will be its clients, which of their needs will be met and, very broadly, what it will have to do to meet them. It may also indicate that the owner must modify her expectations and/or develop new skills before start-up.
A strategic base to your business plan is the key to success!
The strategic plan is then developed into a business plan, which explains in detail how the business will capture the competitive advantage available to it within the defined market. It should contain strategies for marketing, operations, human resource management and financial management.
The marketing strategy will demonstrate how the business will keep its current customers and attract new business.
The operations strategy will explain the work of the business – what it will do to provide the products or services demanded by its clients – and the resources it will use to do so.
The human resource strategy will demonstrate how the business will attract, develop, motivate and retain people, including the owner.
The financial strategy will forecast income from sales and demonstrate how the cost of running the business will be financed e.g. by loans or profits.
Your business plan should also include indicators for monitoring performance at monthly or quarterly intervals. These will not be confined to indicators of the overall success of the business – by the time yearly indicators show poor performance, your business is already in serious trouble. Therefore, the inclusion of early warning indicators is critical – allowing corrective action to be taken before the business suffers.
Your business plan should be a living document, consulted each time you make a strategic decision and against which your performance is monitored.