A good business plan that establishes an SME’s goals and the steps needed to achieve them can be a great way to structure and monitor the company’s development.
“Whether you’re a sole trader or have thousands of employees, structured thinking about where you’re going and how you’ll get there is vital,” says consultant Andrew Ludlam. “It helps you keep focused, recognise if you’re on track, and identify whether new developments are progressing your business or wasting your time.”
What to consider when creating a business plan
Ludlam has advised hundreds of clients through his own company, The Business Plan Writer, but says whatever the nature of the business, the basic principles of planning are the same. “It’s about examining your end goal and how you’re going to get there.”
A plan designed to woo investors or raise finance from a lender will need to include a high level of detail – a description of the business, details of your product/service and why it’s different, an outline of the market and how the new business fits, potential client bases, an evaluation of competitors, how you’ll market it, assets you have and plan to acquire, staff numbers and sources of capital – and all that before you can start making financial forecasts.
And you need to get it right – you’ll likely only get one shot at impressing the investors. “A lot of people make similar mistakes,” says Ludlam. “The biggest one is wildly optimistic figures. You need to really drill down into those numbers; research and be realistic about how much things really cost, look for the hidden expenses – it’s amazing the number of people that overlook salaries. Then do the same with the income. My rule is always to overestimate the outgoings, and underestimate the income. It might make for uncomfortable reading but it gives you – and your backers – an honest assessment of what you can achieve.”
Even a plan written to raise funds isn’t just about finances. “So many business plans ignore marketing – people don’t think through routes to market,” says Ludlam. “Or they take a subjective approach to market research, ignoring the results they didn’t want. You can’t afford to be sentimental, so be objective. Tailor your plan around the facts, not what you want those facts to be. Being honest now avoids stress and heartache later.”
Making a business plan and staying focused
An internal plan to keep you focused can be completely different, says Amanda Cullen, owner of coaching service Business Made Simpler. “The term ‘business plan’ can strike horror into a small business, so I prefer to encourage people to think very simply in terms of longer-term strategy.
“You might decide you don’t need an executive summary and pages of figures. It should more encapsulate the scope of your ambition over, say, three or five years, whether that ambition is to make a million, or just create a lifestyle business that’s something you enjoy and pays you enough to have an occasional decent holiday. That’s where you start – think about the point of your business, then about its direction of travel. If you don’t know what you want to achieve, how do you know if you’re successful?”
And only then do you consider the detail, adds Cullen. “If it’s about doubling turnover, that’s when you break it down into smaller short-term steps of how you do that – it could be expanding your services, putting your prices up, attracting new business, – and then breaking those down into yet smaller steps that are quantifiable. Follow those ideas that fit your strategy, and discard those that don’t.”
“Whether you’re a sole trader or have thousands of employees, structured thinking about where you’re going and how you’ll get there is vital” Andrew Ludlam, founder and consultant, The Business Plan Writer
But the idea of one single ‘perfect’ business plan is a myth, says Stuart Hartley, director at business development specialists Incrementa. “Of course it’s about getting your business from A to B, but within that, everyone has different goals,” he says. “You need to ask yourself what you’re creating, how you’ll do that and how, why and where you’ll sell it, and with what backup. There are rules to follow but only you know the answers to those questions. What’s important is that you ask them.”
Revisiting your business action plan
Even the best-laid schemes can go awry – or, as Mike Tyson famously put it: “Everybody has a plan until they get punched in the mouth.”
It’s when your business gets blown off course that a plan really works, says Ludlam. “The unexpected will happen,” he says. “I advise clients to plan for three years, but expect things to change after six months. You have to decide whether setbacks are just bumps in the road, or whether you need a new plan. Either way, a business plan is not something to stick in a drawer. It should be a working document that you constantly refer to in good times and bad. And even if things are spot on, I’d still recommend looking at your objectives every 12 months.”
Hartley agrees. “No business plan survives its first contact with a customer,” he says. “It’s a good idea to plan for different scenarios and even if everything appears to be going smoothly, it’s prudent to review your plan regularly. You may find new markets, new technology, new competitors – you need your plan to be adaptable.”
And a planned approach prevents what Cullen calls a “kneejerk reaction” to crisis. “It helps you recognise a blip as a blip,” she says. “Just because a major client pulls out doesn’t mean your strategy’s wrong. It might need a slight tweak, or no change at all. It’s only if everyone pulls out that you need to go back to the drawing board. And particularly if you’re a very small business, setbacks can hit you emotionally. But don’t let it throw you off course – park that emotion and have confidence in your strategy.”
Just do it
“There are too many people who set up in business who have all the jargon and the buzzwords, and can talk the talk,” says Cullen, “but they can’t walk the walk. Those sorts of people are proud of their business plan but never look at it again, and as a result don’t follow the advice and guidance it gives them. Your strategy is there to help you.”
Here’s a simple business plan template with points to consider:
- executive summary
- company description
- your product/service
- market research and analysis
- competitor analysis
- how the business is managed
- marketing strategy
- sales strategy
- funding requirements
- financial projections
Article courtesy of NatWest
Original article
