Planning lies at the very heart of small business success. Paul Tiffany and Steven Pearson in their book Business Plans for Dummies quote a study conducted in the late 1990s of almost 1000 small businesses which found that those with detailed, written plans had experienced 50% more revenue and profit growth than those without one. More recent research done at Cranfield University supported these findings after rigorously controlling for other factors that might explain the difference between business performance with and without a business plan. The academic research is practically unanimous in extolling the benefits of proper planning. Simply put, business planning puts more profit in your pocket as a small business owner.
Once we have accepted the benefits of business planning, the question then becomes not if we should write a business plan for your small business but what we should include in it. It's often said that in a good presentation, the author tells the reader what he has to tell them three times. So, in the spirit of that advice, I suggest a three-pronged approach to writing a business plan.
1. Write The Executive Summary - This is where you tell the reader what you are going to tell them.
2. Write The Main Body - This is where you tell it to them, section by section.
3. Write The Conclusion - Tell them what you told them.
When I write a business the plan, the first thing I take a stab at is the Executive Summary and the Conclusion. This then provides a focus for the writing of the main body. They are also the last thing that I write in light of everything that I have learned in the process of writing the business plan. For me, the difference between the original executive summary and conclusion and the final one is one of the clearest demonstrations of the value of the planning process. They always need revision but are often completely different at the end of the business planning process. The process of writing a plan always refines and polishes the business idea at the heart of the plan and if there were no other reasons to write a business plan other than this it would be a very worthwhile exercise. Having owned several small businesses myself, I'm a firm believer in making my biggest mistakes on paper. They are a lot less costly that way.
Beyond recommending the "tell them three times" approach to writing a plan, there are several other things that are essential to any plan that would need to be incorporated into its main body. These are covered under different headings in different business plan outlines but, whatever you call it, the following is the heart of any small business plan. If you do nothing else, make sure you have answered these questions about your actual or proposed business.
This is a description of the identity of the business and it is just as important for a one man band as it is for a multi-site multinational business. You need to express what you do well or differently or better than anyone else. You need to express your goals, both long term and short term, and why you believe you can achieve them. Just as important in communicating your identity is expressing what you are not. What don't or can't you do well?
Here we need to identify the people that will put their hands in their pockets and part with their hard-earned cash for your product or service. Ideally, you would have such a clear idea of who these people are that you would be able to provide their names and addresses on request. Once you have aggregated these people together, we would call it your target market. You'll find when you come to write your plan that it is difficult to separate who they are from how they will learn about who you are and what you do and how they'll find you and your service. The more focused you can be on a specific segment of the market, the more easily these targeted buyers will acknowledge a need for you and your product and service and adopt it. You want to be focusing your limited time and resources on those people that are most likely to get it.
What are your buyers paying you for? What need does your product or service fill? Are the benefits of what you do clear and compelling to the customer? Focus is just as important here as it was when addressing the question of who will buy. This is where you can narrow your offering to set yourself apart from other companies looking to serve the same markets. Differentiate yourself by ensuring that you occupy a unique market position. Resist the temptation to try to be all things to all people.
In addition to these fundamentals, there are a number of other things that every good business plan should incorporate.
Different plans might call this different thing like organisational structure or management team and responsibilities but it ultimately comes down to who specifically should be responsible for the various important roles and responsibilities within a business. It's important to define who is in charge and who is accountable for every crucial aspect of business performance. Done properly, this would include who does what when. It would include goals, milestones, dates, and deadlines. The more specific the plans, the greater traction the plan will have when implemented in the real world.
Now that we know who is doing what and when, the next question is how much will that cost and how will that be paid for? This is the part of the plan that encompasses budgets and forecasts. This is where specific metrics are applied to specific roles and responsibilities. A business will ultimately only survive and thrive whilst it still has money in the bank, so it is crucial to plan this aspect of your business carefully. More small businesses are killed by poor money management than by anything else. In order to properly understand and control the flow of money through your business, it is important to monitor the non-monetary metrics that drive progress (e.g. new customers, sales calls, sales presentations, customer complaints, etc). It's the ebb and flow of these numbers that will help you understand why there is or isn't any money in the bank.
Your bank manager might not insist on it and it may be omitted in many business plans that you have seen but, simply put, a plan that is not reviewed and adapted regularly is not worth the paper it is written on. You need to regularly track actual progress against planned progress and adapt the plan accordingly as well as coordinate the work of the team by reviewing milestones and the validity of the assumptions underlying much of what is in the plan. I would heartily recommend that this take place weekly.
These six points are the what, why, how, who and how much of the plan. This is the very essence of planning and these are the questions that every business faces regardless of size. In terms of the specific layout of your plan, it's important to remember the architectural maxim that form follows function. For a one man band, a detailed, formal plan may not be necessary until the need to raise finance creates that necessity. Your plan should be what you need to run your business. This might be as simple as a sales forecast and an elevator pitch. Those would be enough to answer the questions what, why, how, who and how much at a basic level. As the business evolves, the plan would evolve with it in terms of it's complexity. What Tim Berry calls a "business planning event" will force you to dress up your business plan so that it adheres to the audience expectation for that plan. Until that moment arrives, many feel that they do not need a business plan but there are enormous benefits for those people that keep up the discipline of asking the key questions for your business and then re-evaluating them on an ongoing basis.
Here at Continuous Business Planning, we can help you prepare for a "business planning event" or simply assist in the planning process for the success of your business. We can and will stand by your side as you make strides to move your business forward and we will even roll up our sleeves and get out hands dirty if that is what you need to do in order to help you with the implementation of that plan. The one thing that needs to be at the heart of every plan is a commitment to act. Without action, no plan, however perfect, will prevail. If you are feeling a little overwhelmed and need some advice or support, then contact us today. You'll be glad that you did.