Thought that would get your attention – but for “reasons” substitute “barriers to overcome” (not good English, but I’m sure you get my drift).
First, a few quotes
The Entrepreneurs’ view
Members of the Young Entrepreneur Council in the US were asked “What is one good reason to write a business plan even if you’re not going for a bank loan or venture capital?” – here are some of the best replies (in my humble opinion!)
Clarity – “… allows you to think more clearly about what you’re doing and where you are going. Key point to remember though is that the minute that your business plan hits the printer it is already out of date, so don’t depend on it as your to-do list. Think of it as a roadmap.”
Organization – “The biggest reason ….is that it can help you stay organized and remain on track. Businesses without a plan can easily get off-target, and revenues will suffer as a result. Creating a plan with expense projections, revenue forecasts, and more can help a small business remain committed to its long-term goals.”
Confirm the Maths – “A lot of ideas sound great on paper and even in discussions. However, simple maths can make or break an idea. ….You can save a lot of time and frustration thinking through the numbers, and making sure it’s possible to hit your revenue and profit goals.”
Iron Out Possible Kinks – “….allows you to really think things through. Your plan should question the validity of your ideas, the product/service target markets and so on. It should force you to do your own proper due diligence.”
Foster Alignment – “….ideal way to make sure that everyone on your team is aligned with the current and future plans for the business. In the early stages of a company, it’s imperative for founding team members to be on the same page as to how they’ll work together on moving the business forward to great success. Avoid any miscommunications by getting it all on paper early.”
Establish Benchmarks – “a valuable, iterative, document that can serve as a successful benchmarking tool. Where did your business exceed expectations? In what areas did your strategy maybe fall short? While it’s fine to “pivot” your company based on what you’ve seen in the market, having something in writing puts the onus on you to be honest about your company’s performance. “
So, a business plan gives a business direction without which it is drifting, or even worse taking decisions which are driven by short term events rather than by strategic goals.
So why don’t business owners prepare one?
Most of a business owner’s time is spent dealing with day to day issues, and it is difficult to find time to really think about strategic direction. The reasons for not preparing a business plan vary, but let’s debunk the standard ones:
- Too busy – don’t have time.
“Fail to prepare and you prepare to fail”.
A business plan can take a great deal of time to prepare – and certainly if you are looking to raise funds that investment of time is essential. But at its most basic it can be two or three sheets of paper summarising where you want the business to be in a few years’ time, and how you intend to get there; this can be the result of as little as a few hours concentrated thought. That is not a great deal of time, but it will help you to avoid making decisions on the spur of the moment and to confront tactical issues within an overall strategic framework.
The business plan need not even contain many numbers! – having said that, it is more difficult to measure success in the absence of an evaluation of the decisions you made in the first place.
So time is not an excuse – but to be honest, the more work you put into this process the more your business is likely to benefit.
2.They’re just a load of numbers!.
The numbers stem from the planned activity, they are not the totality of the plans.
It is a common misconception that business planning is the preserve of the accountant – true, in a larger business the Finance Director is most likely to drive the process and will probably play a large part in producing the final document, not least because his is the last input into the process.
But as I said above, the plan is about where you want to take your business – where, how and who – and numbers are not the main concentration, they are a measurement of the commercial activity planned to achieve the aims. That evaluation is hugely important – you may realise that your proposed activities do not make sufficient profit, in which case they could be refined in order to achieve a satisfactory outcome – but it is the planned activities which will be refined, and that results in a change in the numbers.
3.I’d just be guessing – what’s the point?
“the only thing that you can guarantee about a forecast is that it will be wrong”.
That does not prevent it from being an extremely valuable exercise. Even if you get your assumptions and forecast only 80% right, you will still be in a better position than if you hadn’t done the exercise at all. You will have:
· thought through the issues facing your business and the marketplace in which it operates,
· decided what recruitment might be necessary,
· looked at the possibility of needing more funds to achieve your desired goals,
· given thought (I hope!) to pricing, marketing and sourcing issues,
· and provided a set of objectives (usually but not exclusively represented in financial terms) against which you can measure the business’s actual achievements.
How do you judge what is a satisfactory result if you have no plan?
4.Don’t need it – not trying to raise money.
I think I’ve probably answered this already, but at the risk of boring you, lets restate the obvious – it will help you to run your business better and more profitably – and will demonstrate whether or not you actually do need to start a fund raising round.
So what’s in a business plan?
Another time!
