Skeptics and supporters of the business plan agree that financing almost always requires a formal plan, writes Pat Sutton of O’Kelly Sutton.
Companies funded by friends and family may not need a plan. However, if you go to commercial banks, venture capitalists, government-sponsored lenders or most angel investors you must have a well thought-out plan.
Various research shows that entrepreneurs who use a business planning process can successfully start a business twice as often as those who do not. Some successful entrepreneurs can make you believe that they are doing things on the fly, and they do not need business plans. However, these people are only exceptions to the standard who were lucky. In any case, most of them plan, even if it is a punctual and unconventional approach.
Business planning process
One could argue that the business planning process is much more important than the final plan. This is an important management function that enables an organization to assess the market and industry status and adjust accordingly. The results of the business planning process trigger a number of changes that should be made to the business. If you do not perform periodic reviews, you may not be able to spot the warning signs of business issues and even end the business.
The planning process should examine the core of the business model, including:
Mission and values
Products and services
Target markets, marketing routes, marketing strategies
Operations, management, key resources and activities
Review of internal systems, processes and technologies
Evaluation of external forces
Financial analysis with detailed underlying assumptions on the basis of which financial data is generated
Risk Analysis – What happens to cash flow when revenue, margin, cost control, etc. are not fully considered?
If you cover all the above points in your business planning process, you should support the development of a new roadmap for success.
Tools for business planning
There are many useful tools and pro-forma plans that can simplify the process. Most of them are available online for free, for example on the AIB website: http://business.aib.ie/help. Over the years, we’ve found that the team’s plans – management and people – are always more powerful and successful than the ones the business owner created in isolation. The entire team has to adopt the plan with common goals and goals. Even if you are a man or a woman, invite family members, friends, or business associates and follow the process. There should be someone involved who asks the hard questions and gives advice. Here an experienced moderator will greatly enhance the process.
The planning process should aim to highlight your and your company’s capabilities, accelerate the growth of those activities, and assess which areas of your business offer value and potential opportunities. Too many companies are afraid of innovation or not bothering enough to look beyond the here and now. The business planning process should seek to identify and develop the company’s gold nuggets.
The business plan, which is needed for external purposes, must enable all the usual checkboxes, but the internal routing does not have to be a long, bulky document. Many international trading gurus such as Verne Harish and James T. Horan defend unilateral business plans in their books on the subject. Regardless of the length and content of the business plan, however, it applies only to its execution. I’ll repeat it, it’s as good as the execution. Many do not understand that. You must prioritize your goals and set implementation action plans – assign time, responsibilities, and resources. There should be a performance measurement system with monthly reviews to see where the action has taken place. Execution is hard work and many of those who fail are unwilling to go through it.