Most people associate planning with new, budding businesses while overlooking its significance in large firms. However, having a business plan is essential for any organization whether big or small. Companies including Apple and Tesla thrive on their strategic business plans.
While planning, the primary objective is to make well-informed business decisions in the present based on our predictions for the future. Simultaneously, a business plan also minimizes the risks by utilizing information to assist in making better decisions that would directly affect the future of the firm.
Your business plan is a document that will be used to plan specific business details. Depending on its purpose, it can be just a few sentences to a hundred pages divided into formal sections, title page and a table of content. An average business plan will be from 15 to 20 pages. However, a simple but clear and specific one-page business plan could be just as useful as a comprehensive and lengthy detailed plan that never gets used because people lose focus.
Importance and advantages
Here are just a few of the reasons why you should have a business plan for your organization.
The fundamental purpose of having a business plan is to gain to clarity around where your business is headed and why you exist. Defining the goals of your organization enables understanding of how to move forward.
To move forward and gain clarity, ask: “What are we building?”, “Why does this business exist?”, “What will we measure?”, “How will we grow and improve?”, and “What is the work to be done?”
Vision for the Future
Adapting is key to survival and for a corporation to survive you need to plan ahead. As your business evolves, grows and changes, your business plan should incorporate the direction your company is headed towards as well as the growth factor. This can be an efficacious way to plan ahead of time for evolving or dwindling trends, changes in the market and the latest innovations. Having a vision for the future enables you to design goals to look forward to.
A good business plan can help define long term financial strategies. Creating a clear, understandable, consistent, and disciplined financial plan can help your organization improve opportunities to attract investors that will facilitate the capital required for the ideal start.
Attracts Team Players
Your business plan can act like your sales pitch to attract new partners, executive employees and gain supplier accounts for your venture. Business plans add excellent value to your firm and can help you win the interests of executive candidates or partners.
A well-written business plan serves as your textual proof that your business has great potential and could be used as a persuasion tool.
Your Management Tool
The business plan is there for so many purposes and laying out your organizational structure is one of them. The plan conveys the foundation of your corporate structure and includes titles of your officers or directors and their responsibilities. Hence, your business plan can be your management tool to keep your business track in check and to ensure that it is meeting the operational milestones, sales target, and goals.
Cash Flow Management
To create a sustainable business, cash flow management is essential. In the beginning, expenses and the stage cost will usually exceed the revenue for a couple of months until it breaks even. Therefore, you need to ensure that you have enough credit to stay safe from becoming insolvent.
To safeguard the company’s cash flow, having a business and cash flow forecasts can help your firm understand the effect of sales on credit (also the time required to collect it). Being unable to make payments at the right time, can create major problems for you mainly if you are selling on credit and have liquid assets.
Safety from External Threats
As the economy becomes more and more globalized, external factors can affect the firm’s performance. An effective business plan can save your company from such risks by identifying and minimizing the threat factor. Risks such as exchange rate fluctuations is a good example or such external threats.
A healthy business plan can help you manage costs from critical suppliers. If you rely on supply from others to produce your product, you are open to price inflation. To have an ideal cost for your final product, you need to make sure the input prices are perfect.
Supply Chain Management
Relying on one supplier could be your businesses’ undoing – problems might happen if they increase prices or if the supply disrupts. Having alternative suppliers can make it easier to negotiate your terms and also mitigate hindrances if there are disruptions. Your business plan will include credible alternatives for you.
To make effective business plans, we include SMART goals that specify milestones and the team members responsible for it. Once the plans are executed, you can analyze variance by plotting actual values after execution to planned figures. The differences could then later be discussed contextually to reveal causes and potential solutions that can safeguard the company’s objectives and get you back on track.
Your business plan is going to help you design and execute processes by having goals along with the team member responsible for carrying it out.
Making Strategic Decisions and Allocating Resources
Deployment of resources relies on your company’s primary goal. Allocation of resources is a very crucial decision as this ensures maximization of returns for your company. When planning out your business plan, all your resources should be aligned with your objectives.
If your company has several strategic options, a plan should be integrated to ensure that your business pursues the track that will most likely result in high returns.
Planning a Contingency Plan and Analyzing Scenario
In recent years, unpredictable catastrophes, e.g., 9/11, swine flu, Ebola with high impact have become increasingly abundant. Due to this, corporations are taking ‘what if’ scenarios very seriously safeguard their company’s interests to function in unfavorable conditions and unpredictable disruptions.
Business planning in its multiple manifestations takes many shapes and forms, and you should never underestimate its significance whether you are a Fortune 500 company or a new start-up.
Steps to Make an Amazing Business Plan
To make an optimal level blueprint, it’s important to know what you need to include in it. Sometimes, people mix up marketing plans with business plans however they are not the same. Your business plan is like the DNA of your company. It defines and identifies who you are and highlights your potential. A good business plan attracts and convinces customers to trust you and candidates to get hired by you.
Your plan is the blueprint, it enables you to make your values and vision crystal clear to everyone. It explains precisely what you are selling and how you are the best option in the market for the customers.
What should you include?
Now that you understand the crux of what business planning is and how important it is, you need to begin asking what you are going to add to it. Ask yourself these critical questions while brainstorming:
• What makes your company relevant? What are the needs of the customers that are being addressed?
• How is the market that your product is associated with?
• What’s trending?
• What makes your product or service unique? Why should the customer buy it?
• Who is your target market? Who are you trying to sell the product to? Explain in detail.
• Who is your competition? What are their strengths and weaknesses?
• Which competitors do you aim to displace and why?
All businesses require a written plan to provide direction, attract investors. Here’s a step by step process to make a stellar business plan:
Step 1: Research
You should research and analyze your objective, your product, and your market. Researching and evaluating is the most crucial part that needs to be given twice as much time than writing the actual business plan.
To be able to write it you need to know about everything including your company, product and competition you are dealing with and the market. It is your responsibility to know about your business and the industry that you are stepping into. Read carefully about your niche industry.
Step 2: Determine the Plan’s Purpose
Your business plan should have a purpose designed and tailored to your own needs. What a business plan means to the company varies from one firm to another. Your business plan can have many purposes for you. Your business plan is your roadmap that gives directions so that you can create a vision for its future and save yourself from potholes and bumps on the road.
If you want to attract customers, your plan will serve you for much more than a roadmap. It will be your proposal. Therefore, you’ll need to write it differently altogether by targeting customers with clear and precise language.
Step 3: Make a Company Profile
Your company needs to have its own portfolio which includes:
• Your business history
• The products and services offered by you,
• Your resources,
• Who your target market and audience is,
• The solution of any problem you face,
• Reasons for why your company is unique
You can even use this on your website ‘About Us Page.’ Your company’s profile on the site or lack of it can attract or detract a potential buyer, partner or talent. Not only is this an essential part of your plan but also a part of your marketing pitch. Once you have written your business profile, the rest of the process will become a lot easier.
Step 4: Documenting Your Business
Take account of everything that is and happens in your company. Investors want assurance that your company will make them money. Due to this, investors will want to know everything about your organization. To make this easier, make sure you document anything and everything including industry projections, cash flow, and expenses. Also, let’s not forget small details like your licensing agreements and location strategy.
Step 5: Set a Strategic Marketing Plan
The two are not the same yet are hugely correlated. A strong business plan always includes an aggressive and strategic marketing plan. This covers marketing objectives like:
• Extending or regaining market for the existing product
• Introducing new products
• Taking the company to new territories
• Boosting sales for a specific product and within a particular price range or market. What’s going to be the source of the business?
To make your business marketing plan work, you should:
• Be specific.
• Create a content marketing strategy
• Refine your product
• Increase prices without having to cut sales
• Bundle one product with another
• Enhance product delivery and manufacturing
In the objectives section, you should focus on the ‘what’ and ‘why’ for the marketing goals ahead.
In implement, you should concentrate on execution: this includes who, how, when and where. Your marketing strategy should also cover ‘costs’ where you must allocate budgets for each activity planned. It would help you to make separate budgets for staff time, i.e., internal hours and out-of-pocket expense, i.e., the external costs.
Step 6: Create an adaptable plan
Readers of a business plan vary from bankers to employees to investors, and each of them has their own interests. To sell your idea or product to a stakeholder, you need to know and understand them.
For example, investors seek to look at the underlying business idea and your management staff while bankers would be more into cash flow statements and balance sheets. The potential manager of your company would be focusing on the objectives. So, you need to make sure your plan is presented keeping your reader type in mind while making sure the facts and data remain the same.
Step 7: Show Passion for What You Care
Be passionate about what you present. Whether you are presenting it to an investor, customer or team member, you have to show you believe in what you are selling to make others trust and understand it.
Discuss mistakes if you’ve made them and share what you’ve learned from them, problems that you hope to solve, list values and when you stood out. Admitting to mistakes proves you are sincere and learning from them shows your dedication. Listing your achievements, on the other hand, demonstrates your excellence.