Why Write
a Business Plan
Research indicates
that about 50% of businesses that start up will fail
within 3 years - a majority of failures are due to being
ill prepared to meet the changes that influence the
course of a business - in other words, a lack of planning.
Many people think
that a business plan is just a case of producing some
financial projections. A few financial spreadsheets
do not constitute a business plan. They do not take
into account the Marketing, Personnel and Operational
aspects, which are required to support the figures.
Business planning
is not just for Start-ups and small existing businesses
are not exempt from the process either, even if done
on a smaller scale. Firstly, they are more likely to
be vulnerable to change and secondly, if they have aspirations
for growth, they will need a plan to achieve it.
The benefits of having
a business plan are, principally, that it empowers managers,
giving them a direction to follow, providing an on-going
analysis of the state of the business, the marketplace
and customers. Having a plan displays responsible leadership,
gives confidence to the workforce that your feet are
firmly on the ground and promotes a cohesive operating
structure on which to sustain your business. It provides
a benchmark by which performance can be measured and,
if necessary, adjustments to strategy made.
There are a number
of reasons why you should write a business plan:
• To provide
information about your intentions to you and others.
• To persuade a third party to provide resources
or assistance.
• To help strategic thinking so you know what
you are trying to achieve and how to achieve it.
• To set financial targets so you can forecast
sales & control costs
• To raise money to invest in the business
• To provide a background against which to assess
new ideas & changes
• To clarify & set goals
• To improve communications, efficiency &
team effort
• To analyse the existing state of the business
and what improvements might be achieved
How
can a business plan help your business?
A business plan is a strategy document that defines
where your business is going and how it intends to get
there. It is usually a long-term vision and normally
spans either 1, 3 or 5 years. A business plan is not
just useful at critical moments in time. It has a role
to play every day.
From a business owner’s
point of view, it is easy to get immersed in one subject
- usually your favourite - and ignore the ones you find
difficult or uninteresting. Therefore the business does
not develop in a balanced way and probably does not
realise its full potential in achieving results.
The process involved
in producing the plan is as valuable as the document
it creates. When you draw up a business plan, you are
forced to distil your ideas, rank your priorities and
clarify your objectives.
You have to analyse the resources you have available
- finance, people, facilities and premises - to see
whether you have enough to help you reach your end goal.
And if you don't, you have to work out how you will
make up the shortfall.
Also you have to
research the markets you compete in, to ensure that
customers will continue to want what you sell and keep
a check on competitive activity. In short, it makes
you focus on the future - and plan and be prepared for
it - rather than just flying blind.
Why
it is necessary to write it down
Even if you are the only person to ever see your business
plan, you should still commit it to paper.
• Firstly, it stops
you kidding yourself. If it’s down in print you
can't pretend, three months later, that it didn't exist.
If your plan didn't work out then it is important to
acknowledge it, assess what went wrong and see what
changes you need to make.
• Secondly, by going through the process of writing
it - you are forced to ask questions you could otherwise
ignore or fudge your way through.
• Thirdly, it gets you focused on the important
issues. It's easy to be distracted by new opportunities
that may come along. Having a pre-determined plan allows
you to compare any new ideas against your original objectives.
Will they really help you achieve your goals? If not,
you may want to adapt your strategy, focus on them later
or ignore them altogether.
• Lastly, if you are ever asked to produce a business
plan, having such a document immediately to hand will
make you and your business look more credible.
stepbystep business
plan software will help you write your plan - see demo
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