What is a Business Plan?
Many business owners skip a very important step to ensure the success of their companies: writing a business plan, often because it's a lot of work, however, it's some of the most valuable work you can do when starting up a business, which is why everyone from banks to partner companies require a detailed business plan before they will even consider your business. Setting up business goals as time passes is also very important for you, although many think the best way to run your company is not one so easy to describe and to share with partners. The process of creating the plan and thinking things through has helped many business owners learn what it takes to be successful.
Start planning your business activity by creating a business plan, and continuing to pull it out, look at it and tweak it as your business grows. So, even if you don't need to raise capital or borrow money, a plan can help your business significantly. Keep in mind that a business plan is not just a write up you make for your future partners; it is a resource you often need to rely also. You'll have to make a lot of projections, assumptions and predictions about what will happen, and of course, your past business experience is a very important factor.
A formal business plan is just as important for an established business, irrespective of its size, as it is for a start up. It serves four critical functions as it helps management or an entrepreneur to clarify, focus and research their business or project's development and prospects. It also provides a considered and logical framework within which a business can develop and pursue business strategies over the next years.
Your business plan also serves as a basis for discussion with third parties such as shareholders, agencies, banks, investors etc. As no two businesses are alike, also not to plans are alike. As some issues in a plan will be more relevant to some businesses than to others, it is important to tailor a plan's contents to suit individual circumstances.
A business plan should be a realistic view of the expectations and long-term objectives for an established business or new venture. It provides the framework within which it must operate and, ultimately, succeed or fail. For management or entrepreneurs seeking external support, the plan is the most important sales document that they are ever likely to produce as it could be the key to raising finance etc. Preparation of a comprehensive plan will not guarantee success in raising funds or mobilizing support, but lack of a sound plan will, almost certainly, ensure failure. Even if no external support is needed, a business plan can play a vital role in helping to avoid mistakes or recognize hidden opportunities. It is much easier to fold a sheet of paper than a business.
A business plan splits in: Vision, Mission, Objectives, Values, Strategies, Goals and Programs.
The first step is to develop a realistic Vision for the business. This should be presented as a pen picture of the business in more years time in terms of its likely physical appearance, size, activities etc. It assumes many predictions, do it in a realistic manner, exactly as you planned the business for you initially. Some say they do not have a vision for their company, but that's non sense. Who would go ahead in business without a (successfully) plan?
The nature of a business is often expressed in terms of its Mission which indicates the purposes of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". A statement along these lines indicates what the business is about and is infinitely clearer than saying, for instance, "we're in electronics" or worse still, "we are in business to make money". Also, some people confuse mission statements with value statements the former should be very hard-nosed while the latter can deal with 'softer' issues surrounding the business.
The third key element is to explicitly state the business's Objectives in terms of the results it needs/wants to achieve in the medium/long term. Aside from presumably indicating a necessity to achieve regular profits (expressed as return on shareholders' funds), objectives should relate to the expectations and requirements of all the major stakeholders, including employees, and should reflect the underlying reasons for running the business.
The next element is to address the Values governing the operation of the business and its conduct or relationships with society, customers, employees etc.
Next are the Strategies - the rules and guidelines by which the mission, objectives etc. may be achieved. They can cover the business as a whole including such matters as diversification, organic growth, or acquisition plans, or they can relate to primary matters in key functional areas, for example: the company's internal cash flow will fund all future growth or the new products will progressively replace existing ones over the next 3 years.
Next are Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company's objectives, for example, to achieve sales of $1,000,000 in three years time.
The final elements are the Programs which set out the implementation plans for the key strategies.
It goes without saying that the mission, objectives, values, strategies and goals must be inter-linked and consistent with each other. This is much easier said than done because many businesses which are set up with the clear objective of making their owners wealthy often lack strategies, realistic goals or concise missions.
