Why do you need a business plan?
Most people in business will know that if you are trying to apply for finance or attract an investor then you will need a solid business plan to show them. However, if you don’t need any external funding, do you still need a business plan?
The answer is without a doubt, YES!
Every business, large or small, needs a business plan if they want their business to be successful. Here are some of the many reasons why you should have a business plan for your business:
- Objectives – The concept of a successful business varies from person to person. For some it is about growth and making lots of money, some will focus on an exit strategy, some just want to pay the bills or have a second income for holidays etc. and for some it is a hobby that they enjoy but get paid for. One of the most important things your business plan will establish is what you want to achieve with your business because only then can you look at how you are going to achieve it.
- Focus – Without a plan your business will effectively just be drifting. Not having set goals and objectives means that you will have nothing to focus on or work towards. It can be very easy to just do the same thing day in, day out. If you employ staff, this can reflect on them. How can you offer them career advancement or help them achieve their personal goals if you have no idea of where the company is heading? A business plan can give focus and direction throughout the whole business including your staff.
- Review/research – The first step of a business plan is to review your business and market place so you need to look both internally and externally. Market research is especially important for a start-up or if you are launching a new product but an established business can easily fall into the trap of continuing to do the same thing purely because it is what they’ve always done. This is a good opportunity to take a good look at your business and ask questions. Sometimes this can be done more easily by an external person as a fresh pair of eyes can often bring a whole new perspective to things.
- Feasibility – We have all heard the statistics about how many businesses fail in their first year and most people assume this is because business is a difficult and complicated thing. In some very rare cases, a business failing can just be down to bad luck but more often than not, it is down to bad planning or other common mistakes. Give your business the best chance of success by making sure that your business model is feasible. Don’t skip your market research. Make sure you know who will want your product/service, why they will want it and why they will buy it from you. Make sure that the figures stack up and keep on top of your overheads. It is a simple fact that most businesses fail because they spend too much and don’t bring enough money in. It sounds simple when you put it like that but it really is that straight forward!
- Understanding – Your business plan is your chance to really get to know your business. It is much more than just knowing what you sell. You need to really understand the essence behind your business, what you stand for, your market position, how you want to be perceived (i.e. your brand). If you follow the business planning process through correctly, you will come out of the other side with a thorough understanding of every inch of your business.
- Strategy – By this point, you should know your starting position and you should also know where you want to end up. You now need a strategy to take you from point A to point B. This will incorporate all marketing, financial and operational aspects of your business.
- Accountability – OK, so you no longer have a boss cracking the whip, chasing you for reports and looking at progress against your targets but that doesn’t mean that those things should stop. The only difference is that the buck now stops with you. If you are going to achieve your objectives, it is really important that you monitor your progress. The best way to do this is to set targets and keep a record of your progress against them throughout the year. One of the biggest mistakes people make with business plans is ignoring them. A business plan should be used throughout the year and reviewed regularly, not just filed away until next year.
- Budget – This doesn’t need to be over-complicated but it is important to have a financial plan for your business. Set out your overheads for each month, allowing for any proposed changes such as a new member of staff you are planning to employ in the next 6 months. Don’t forget to include a marketing budget. Make sure you can afford your proposed overheads and then STICK TO THEM! Work out realistic sales targets and then projected profit. One last thing, don’t forget to include paying yourself. It sounds obvious but I have had lots of people in the past that have left this off of their financial plan with the view of ‘I will just start to take some money out when there is some spare’. Even if you are not planning to take money out for the first few months, include it in your plan from month 4 for example so you know what you are working towards.
In summary, don’t let your business drift. Allow yourself to enjoy the business planning process, let your passion be ignited and then go for it and achieve your dreams!
If you need help with any aspect of business planning, Spartan Consultants will be happy to have a chat about how we can help you.