The research and analysis involved in writing a business plan can be more important than the final document, experts say.
While start-up enterprises need formal business plans to qualify for a loan or to attract investment, drawing up a business plan is also a good opportunity for existing enterprises to take stock of strategy, opportunities and priorities.
“A business plan really documents the analysis that’s done to write a business plan,” says Anthony Idle, of Balance Business Coaching. “Really it’s the analysis and the thinking that goes prior to the writing.
“I’m not really excited about having a business plan that sits on a shelf. What’s more important is that the analysis is done to say ‘hang on, no we shouldn’t be doing this, this is what we need to do’.”
Business plans designed for an SME’s internal use need not run to the 20 or so pages that a formal business plan does. Instead, they can be just four or five pages long and list the business’ objectives – where it is now and where the owners want it to be in the next year or two – and the steps needed to get there.
It should also contain cash flow forecasts, the business’ marketing strategy and a SWOT analysis, which examines a business’ Strengths, Weaknesses, Opportunities and Threats.
Llew Jury, managing director of advisory firm Reload Consulting, says business plans need to be dynamic and malleable documents that can be altered as the business grows.
“It needs to be something that doesn’t just sit in the top drawer and gather dust. It needs to be something that you can stick on your wall and put to use,” he says. “That allows you to make decision on the fly, but to have a firm guide of your vision and mission.”
Jury says the first questions a business owner should ask when drawing up a business plan are around lifestyle. Why are they in that business? Where is the business going? And what do they want out of the business, including their exit strategy?
“The second thing is the business needs to open up its DNA a little to find out what is its core DNA,” he says.
“What are the things that are going to make this company great and very different and be able to cut through competitors and static in the market that might be crowding it, especially if you’re going to come up with a marketing strategy?”
Once the aspirations and strategy are completed, business plans need to chart a course of action with a list of specific things the business owner can start on immediately. Otherwise all that planning will go to waste.
I’m not really excited about having a business plan that sits on a shelf.
“What happens is people come up with that plan, it’s a great picture, all the bits add up and they do a really good story, and then they sit down the next day to implement it and very quickly they’ll get into an overwhelmed state because it just seems there’s so much to be done,” says Kirrily Dear, of small business consultancy Eyes Wide Open.
“Getting the numbers to look good is easy, having the dream and aspiration is the easy bit. It’s then prioritising, looking at where you’re at now and the one, two or three top priorities for things that need to get done.”
Balance Coaching’s Idle says too many owners rely on inadequate research when drawing up a business plan.
“Sometimes I just don’t know where people pull numbers from,” he says. “When you’ve got grand assumptions you’ve got a really good chance of grand failure.”
Idle says there are several free sources of information that businesses can use as a starting point. Local council websites often have demographic information about the local area, showing household composition, income, age profiles and the number of families.
Google Insights is useful for planning internet marketing as it can be used to analyse popular key terms and searches in your industry. Idle also recommends signing up for ANZ Insights, which can hour by hour sales information about an industry in a local area, and also reveal where a business’ customers come from.