Business Planning

Ten Tips For Business Planning

Fail to plan… plan to fail!

Are you one of those business owners that does not do a business plan unless you need extra finance?

“Business planning for a small business or a large business is essential.”

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Or have you decided not to bother with a plan because this year will be much the same as last year? It may well be if you don’t plan to do anything differently – hopefully last year was at least a good year!

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Too many small and medium sized enterprises neglect essential business planning. Business planning is also very important for start-up businesses and business plans for a small business are important.

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A good business plan forms the basis for improving your own and your employees performance, helping you drive business growth and productivity. It is a key tool for monitoring whether you are on track in meeting your business targets.

A winning business plan should convince an investor to write you a cheque, if that is what you want, but it should also provide you and your staff with a shared sense of direction and purpose.

Here are out Ten Tips for effective business planning:

Revisions to your business strategy and business plan should follow an annual cycle, the business planning cycle, linked to the accountancy year end for your business.

Tip 1: The thinking and engagement processes that contribute to compiling a business plan are as important as the final document. The MD and the senior management team, at the very least, all need to be involved in developing the business plan – they must all sign up to and own the final document or it might as well be consigned to the bin from the start. Some believe all staff should be involved.

Tip 2: What happened last year is a good starting point but if the business planning process is to be of any real value to you it needs to address change – it needs to look at:

where internal change is desirable (e.g. more sales, greater profit margins, less staff turnover or whatever it might be)
where external change or outside influences may have an impact on the business that will be different from last year.

Tip 3: Before getting into the nuts and bolts check that you have a clear and relevant vision or mission statement and decide on a few simple objectives (or targets or goals or whatever you want to call them) for the coming year and the next three to five years depending on your type of business. A business plan for a small business needs goals that are relevant to its potential, so think about what you can realistically achieve – but do aim to stretch yourself.

Tip 4: Make your objectives SMART

Specific – say exactly what it is you have to do (not just ‘find out about’).
Measurable – you will know when you’ve got there or you have done it.
Achievable – easy enough to do in the time and with the resources allocated.
Realistic – they are things that you can do something about, not fantasy.
Time bounded – you have set a date to complete them.

Tip 5: One of the best tools for starting out is the SWOT analysis – a review of the company or business Strengths, Weaknesses, Opportunities and Threats. This type of review can be carried out in a workshop setting. You might want to do a separate SWOT on different parts of your business e.g.

People (skills, capacity, leadership)
Product (what are we selling?)
Process (how are we making/selling it?)
Customer (to whom are we selling it?)
Distribution (how does it reach them?)
Finance (what are the prices, costs and investments?)
Administration (how do we manage all this activity?)

Tip 6: You need a title page, a contents page, an executive summary (unless your business plan is very short) and an introduction before you get into the main sections.

Tip 7: The main non financial sections should include most of the following items and you will need to do some homework before you can write these parts.

1. Description of current state and brief history of

your existing business – type, size, track record, challenge
your capacity and resources – money, people, premises, tools, methods
your products and services

2. Markets and marketing:

your customers and customers
your routes to market, market definition – sector(s), segment(s) definitions etc.
market size (locations, people/users, etc) realistically for your business
characteristics of your markets – trends, legislation, seasonality, etc.
competitor analysis
sales/marketing plan (1 year min)

3. Your strategic aim and key targets (marketing campaigns, sales activities, etc)

Tip 8: Unless your are a start up your financial section should include both past performance and future projections – the historical perspective will provide a sound basis for future projections:

Profit and Loss statement for previous 3 year
Balance Sheet for previous 3 years
Fixed and variable cost projections
Sales projections for the next 3-5 years
Projected Cash Flow analysis for the next 3-5 years
Projected Profit and Loss statements for the next 3-5 years
Projected Balance Sheets for the next 3-5 years

Tip 9: Keep your plan as short and snappy as possible.

Tip 10: Use your plan as a guide and tool to monitor your progress and revise it if you are off track!

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