For a business plan to be truly useful, it needs to be a living, breathing part of the business. It needs to be updated as the business updates, it needs to be as useful as possible, and it needs to be embedded in the operational and management functions of the business, says Carl Reader
There are countless articles and guides out there about writing a formal business plan. In my opinion, these guides are great if you are looking to tick boxes and get funding approved from a bank manager; however for a business plan to be truly useful in your business, things have to be approached a little differently.
So, what is a business plan?
In the traditional sense, a business plan is roughly 20–30 pages long and is split between the words and the numbers. In the written section, business owners would typically include an executive summary, detail about their own experience, their team, their market, some competitor analysis, and an honest appraisal of their market positioning and ability to succeed. In short, it is effectively a brochure for the business designed to attract funding – which is not a million miles away from a ‘pitch deck’ that would be submitted to equity funders.
It would also include detailed financial projections, including forecasted profit and loss accounts, balance sheets, and cash flow forecasts. These, together with an analysis of the use of funds, will form the basis of the application for funding.
This is all well and good, and might ‘win’ funding, but is it truly a winning plan?
How to make a business plan useful
I grew up hearing the saying ‘failing to plan is planning to fail’, yet in business I saw it again and again. Business owners would produce a document which is solely designed to achieve funding, put it away in a drawer, and never refer back to it again.
In my humble opinion, this is not winning.
For a business plan to be truly useful, it needs to be a living, breathing part of the business. It needs to be updated as the business updates, it needs to be as useful as possible, and it needs to be embedded in both the operational and management functions of the business. In fact, if the business planning process is approached properly, a business never needs to worry about producing a business plan again – it grows alongside the business.
What kind of things are included in a winning business plan?
The things I’ve just mentioned form part and parcel of the business plan. Certainly when it comes to describing the business, many of the ‘words’ remain constant, and once the format of the ‘numbers’ is defined, they can be updated on a regular basis from management information.
The missing part from most formal business plans is the ‘how to’.
For a business plan to be truly winning, it needs to take the entrepreneurs dream and convert it into action. It fills the second step of the DREAM – PLAN – DO – REVIEW model, that I explore in my book BOSS IT. It takes the abstract and ambitious and converts it into achievable, actionable steps for the business.
How does this take shape in the real world? It becomes a step by step guide of what needs to be done. It includes things such as what needs to be done, how it should be done, who it should be done by, and when it should be done. It ties up with the big picture in the words and helps facilitate the results that have been predicted in the numbers. It includes an acknowledgement of dependencies. It is detailed and precise in the short term, and fluid in the medium to long term.
Perhaps most importantly – it is updated. As plans are delayed, the future steps are tweaked. If things are trickier than first envisaged, a new route is found. And as items are completed, the medium term becomes the short term, and a new level of granularity is added to the action plan.
Clearly, the form that this planning process takes might differ from business to business. A micro business might be able to make do with some notes and a checklist in the back of a notebook; whilst others might require specialised project management and tasking systems to ensure that the plans become a reality. Whatever form it takes, it adds a new dimension to the business plan – taking it from a static document to a working tool within the business.
This all might seem quite obvious, but in my experience of dealing with thousands of businesses, of all different shapes and sizes, there is a fundamental disconnect between business plans and the plans of the business. As I write those words, it only reinforces how strange that is. The day to day plans of a business don’t correlate to the year to year forecasts. The activities undertaken are slightly off course compared to the overall direction. And a small deviation at the outset can lead to the destination being a very different place.
Carl Reader, small business expert and author of BOSS IT, out 3 October 2020 published by Kogan Page and priced at £9.99.
