The business plan is a road map to success for every organisation large or small. It is a practical guide in how to get from where you are now to your ideal level of success. It is also a guide to help you determine whether you are on course, on track, and on schedule to achieve your business goals
I’ve listed 10 of the most prominent uses or purposes for the business plan whether you are just starting out in business or you are looking to grow your current business. It is more than just a rote exercise for pre-launch entrepreneurs – it is a living document which, if used properly, can be a big help in getting your company to the ideal level you had in mind.
Use #1: Focuses Your Ideas Into A Workable Plan:
It is human nature to tend toward thinking on things that we are comfortable with and not the difficult uncomfortable nitty gritty items.
However it is precisely these “nitty gritty” details that can make the difference between success and failure in business.
Putting together a well-constructed business plan forces us to think through the nuts and bolts and then to focus our ideas into a workable measurable plan.
Its good to go through these things up front in the planning stages rather than 6 months into the process where you are trying to maneuver a specific plan and direction all while trying to run the day-to-day business! However, it should be said that it is never too late to start a good habit. Even long-time business owners can discover something they hadn’t thought of and can then make the necessary adjustments and mitigate loss of time and other resources!
Use #2: To assess likely start-up and ongoing costs.
- Assess costs: How much money do I need to get this started? Do expand in this new area? To add staff?
- What is the gap?
- How do I get around it?
We will have free resources and templates made available soon that will help you work through your “personal survival budget” and a “budget cashflow worksheet” but suffice it to say, if you have the proper sections included in your business plan (see my article Top 10 Items to Include in Your Business Plan
Use #3: To Develop and Monitor an Action Plan:
You won’t know if this will work UNTIL you map it out in a business plan.
The Business Plan is a LIVING document and not simply a means to an end. It is this action plan that will provide you with day to day guidance in pressing forward toward your goals in business.
As good as this sounds – it is of no use unless it is put to paper and monitored. Simply put, once you have the plan in place, keep it close at hand and write it into your weekly action plan to go over it as a guide to stay on track.
Use #4: Examine Cashflow Potential And Mitigate Risk:
What is your expectation of the first year vs. reality? Working through a cashflow potential spreadsheet will help you decide.
Even current business owners can benefit from re-evaluating their cashflow picture. Where is the money going? Are you spending more in areas than you originally planned? Which of your offerings are making an acceptable trading margin, which ones aren’t?
- Forecasting cash flow isn’t an exact science but rather an educated what if” based on your knowledge and research of the market.
- Will it make the money you thought it would?
- When do I start?
- Get to the end of the plan & get an idea of starting financials: budget, cash flow, necessary incoming/survival numbers.
Use #5: To Establish How Much Working Capital is Needed:
This goes for start-ups and those businesses seeking additional capital for expansion and scaling.
- Do you have what it takes to turn the lights on and keep them on?
- Will there be additional staff to bring on-board?
- Have you factored in insurance and licensing?
- What new equipment will need to be purchased and/or maintained as you go along?
These questions will be answered by your well-constructed business plan.
Use #6: To Examine the Day-to-Day Realities of Your Potential Business Model:
Are you on track to achieve your 1 year goal? your 3 year goal? your 5 year goal?
Is your business model working? Should you pivot? Change your approach?
All are healthy questions to ask ourselves as we go along to be sure we are taking care of things properly.
Go back to the living document that is your business plan and see if you are abiding by the roadmap you laid out – if not, get back on track; if yes and it isn’t working, what can you change?
Use #7: To Test the Market for Demand of Your Product or Service:
The will be more key in niche markets if it’s a “new” product or service you are offering e.g. Steve Jobs and Steve Wozniak with the first Apple computer.
Seek to find out if customers really need this product or service. Or will they need it soon (market trends)?
How do you know?
Objectivity is critical to honestly assess your market but it can be difficult!
Use #8: To Know Your Competition and the State of Your Current Market:
It doesn’t matter how many competitors that you have but rather that you KNOW who they are and list them on your plan so you know who you are competing against.
- The business plan will serve to provide a target for you to pursue.
- This section of the plan will remind you of the weaknesses of your competition, the opportunities, and the threats posed by your competition.
- There is ALWAYS competition – sometimes indirect
- Financial organisations might be a bit reticent to extend a loan if the candidate feels that “no competition exists” as this can be a sign that there wasn’t much market research done prior to the application.
- Be prepared to get your idea out there despite the fear of copycats!
Many businesses fail due to failure to understand the competition. Your properly constructed business plan will you to avoid being one of those businesses!
Use #9: To Secure Funding From Institutions and Investors:
We absolutely positively MUST have a business plan if there is to be any possibility of future funding and/or investment. I hate to quote a cliche here but investors are keenly aware of the principle of planning: fail to plan – plan to fail.
Again – work through the business plan template that we will make available to you and pay especially close attention to the section which asks you to determine sources for funding.
If you are seeking start up business loans, the business plan functions as your CV to potential investors.
Use #10: To Provide Practical Steps from Surviving to Thriving:
The obvious function is to have a written living document which directs your steps:
- Establishing a product or service to sell
- Setting up an infrastructure to take care of customers when they come calling.
Now you are are ready to take your product to market.
- Market and sell your product
- Execute delivery of product and/or service
- Follow up and retain those clients through post-sale care
- Add to your customer base
- Grow your business
- Achieve your 1, 3, and 5 year goals
There are many other practical uses for the living document we call a “business plan” but hopefully my subjective “top” 10 uses will help to instill motivation to complete your plan or to go back and dust off your original plan to have another look.
If you are at a stage of putting your business plan together for the first time or looking to re-write the one you have. Take a look at my article Top 10 Items to Include in Your Business Plan.