Issue 0028 Business Plans Are Important For All Businesses
Business plans are like ‘maps for tourists’. If you don’t know where you’re going to go, how are you going to know when you get there? Virtually every business, large or small, requires a business plan, including sporting organisations, councils, charities and churches. Within the small/medium enterprise, the CEO, directors (if any) and the management team should be utilising a business plan to help them direct the business towards achieving its overall objectives. Other people are also interested in business plans as a means of determining whether they’re prepared to be involved in the business in some way.
These organisations include:
- Banks – for determining whether to make financial facilities available to the business.
- Other lenders including debtors discounting and factoring organisations.
- Government departments may require a business plan if the small/medium enterprise is seeking a government grant or assistance.
- Investors, whether they are business angels or venture capitalists, require business plans to be prepared, so they can understand the business owner’s vision for the business.
The business plan shouldn’t just be prepared and then filed away and forgotten until a bank, lender or a potential investor asks to see the organisation’s business plan. A business plan should be a ‘living’ document that is adjusted regularly to reflect the changing circumstances within the business. The key factor is to ensure all stakeholders and team members in the business have a say in the preparation of the business plan. The task of the business plan's author is then to ensure the plan is drafted to reflect the general goals of all the stakeholders. In the planning process, individual team members and stakeholders should be honest in their statements on the current status of the business and their aspirations for the business in the future. It’s important to try to align the various views. One of the key requirements for the business plan authors is to try to align the various inputs from stakeholders. All team members should be involved in the preparation of the business plan. It shouldn’t be a plan that is developed by the owners or the CEO and then pushed down to the team members. Team members should be encouraged to have their say, especially in the preparation of the SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis for the business. It’s a good idea to start with a think tank meeting, where the team members involved in a business unit are encouraged to express their opinion on the current state of the business. Questions such as:
- What services are being supplied that please customers?
- What services are lacking?
- Can the team members honestly answer the question: “Why should I buy from you?” There needs to be a clear and powerful answer to that question which has been developed by management.
Team members should be able to proudly state why a prospective customer should buy from their business. If the question is asked, “Why shouldn’t I buy from somewhere else?” team members need to be able to give an answer with conviction to that question. Part of the planning process is to ensure team members are able to give a hard, fast and powerful answer to that question.
Benchmarking is very important for business operations throughout the year. It’s a very important part of the business planning process. It’s essential that businesses are able to compare their performance to other businesses operating in similar markets and industries, just like sport persons and sporting teams do all the time. They know their personal best. They know what their competitors are doing. Business is just the same. The benchmarking analysis will probably reveal statistics, which indicate that the business is behind their competitors. That can be a great start to develop strategies to overcome those problems. The business planning process needs to develop a clear description of what the business is.
- Who are the people in the business?
- What do they do?
- Why do they do it?
- What is the end game or the vision for the business?
- What do the stakeholders expect the business to look like in 12 months, two years and three years’ time?
The business plan should set measurable objectives to be achieved along the way. It’s no use setting objectives that cannot be measured on a month-by-month basis, because, if they cannot be measured, they cannot be managed and, invariably, they will not be achieved. The business needs key directions for where it’s headed.
- What types of products are going to be offered?
- What types of customers are being targeted?
- Preferred locations for the business to operate?
- What are the key strategies the business has established? This can relate to development of its team members, its people, its technology, its intellectual property and its market at present.
One of the key components of a business plan is the action plan.
- Who is responsible for the various tasks that are going to be listed in the business plan?
- Who owns the responsibility for ensuring the work is completed?
- What is the timetable for by when various tasks are to be completed?
It’s no use just preparing a business plan, putting it in a ‘nice cover’ and sending copies to the banks and other organisations to which you need to supply copies. Business plans need to be made a ‘living’ document. This involves a month-by-month review to see how the business is travelling as compared to the targets that were set in the business plan. To do this properly, the business will probably need to set aside, at least, two hours a month to review:
- What has been achieved?
- What is the current position?
- What was the targeted position?
- Is the business in front or behind the target? If behind, what can be done to catch up?
- Are there any changes that are needed to the business plan, to adapt to current conditions?
The development of business plans is a logical way for an accountancy business to assist a small business client. ESS BIZTOOLS has developed detailed modules on business planning, which are available for the accountancy firms around Australia that are subscribers to ESS BIZTOOLS. If you would like a business plan prepared for your business, in the first instance, we suggest you approach your accountant to see whether they are able to prepare a business plan for you. If they aren’t able to do so, we are able to assist you by giving an introduction to an accountant within your area who can help. Please don’t hesitate to send an email to , with your location and postcode, and we will send you the names of accountants, within your area, who are able to provide you with this service. If you have any questions relative to business plans in general, please don’t hesitate to contact us. To give you an idea of the headings contained within the business plan, we believe there are at least 45 key headings and, within ESS BIZTOOLS, we’ve developed questionnaires for each of these 45 items. These are:
- Review of Business
- Financial Analysis – Where Is The Business Now
- Business Objectives Resources
- Uncontrollable Factors – Technology, Products/Services
- Industry and Market Analysis
- Experienced Customers/Clients
- Production Process
- Operating the Business
- Staff Development
- Staff Training
- Human Resources
- Work in Progress
- Inter-Firm Comparison/Benchmarking
- Budgets/Cashflow Forecasts
- Periodic Financial Accounts
- Budgets/Cashflow Forecasts Monitoring
- Bank Relationships
- Business Funding
- Organisational Matters
- Research and Development
- Quality Assurance
- Business Structures
- Board of Directors/Advice
- Public Relations
To give you an idea of the approach we take to the business planning process, you can utilise the attached article, ‘How Do You Start A Business Plan Assignment’.
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Episode S028 Business Plans Are Important For All Businesses
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