We’re too small to need a Business Plan!
Every bit of evidence indicates that for a business to thrive and grow, and to ensure that it is protected from uncertainty, it does need a plan; the plan shows that one has thought about the opportunities and threats, about the objectives and the targets, and that there is a system in place for measuring progress so that in the event that there is deviation one is able to take immediate corrective action.
Unfortunately, I hear all too often “we are too small to need a plan” or “we don’t have the time to spend on that sort of thing”. These are the words uttered by companies that later find themselves in deep financial difficulties because they failed to anticipate what could happen. I have worked with a number of such companies now, and unless one has a stockpile of cash and a very understanding bank, or an alternative source of funds like re-mortgaging the house, the line between survival and failure can be very thin.
Consider this. Is it better to invest your time in stabilising the business and growing the profitability, confident that you have the contingency plans in place to deal with most eventualities, or in fire-fighting and dealing with the issues as they arise, uncomfortable in the knowledge that one is waiting for the next crisis to happen?
The Business plan has three primary functions:
- To serve as an Action Plan
- To serve as a Road Map
- To serve as a Sales Tool
Action Plan. A business plan will help you to pull apart the pieces of the business and examine each piece by itself. So instead of one large problem, you have a sequence of smaller problems. And by solving the small problems, the large problem is automatically solved. So writing a business plan can help to move you to action by breaking down a seemingly insurmountable task like growing the business into many smaller, less intimidating tasks.
Road Map. With an existing company the business plan is an invaluable tool to help keep you on track and moving in the direction you want to go. In the hurley-burley of daily business, it is very easy to lose sight of your objectives and goals -- a business plan can help to keep you focused. A business plan can also serve to help others to understand your vision, including suppliers, customers, employees, friends, and family.
Sales Tool. Perhaps most importantly, a business plan can serve as a sales tool. The business plan indicates how much cash will be needed to fund future operations, it also provides the framework for the “what-if” analyses; what would happen if you were able to increase revenues by 25%, what would happen if you lost that major customer, what would happen if you were able to cut costs by 3%.
Included in the business plan are the Sales and Finance Plans. These document need not be exhaustive, but they do provide a valuable excuse to think about the future, and to spend time working ON the business rather than working IN the business. We all want our businesses to be working for us, and not as most commonly happens, for us to be working for the business.
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