A Business Plan is the document that describes the nature of a business, its sales and marketing strategy, and its financial background. It contains the projected profit and loss statement of the business, and explains how the business intends to achieve its set goals.
What is the purpose of a business plan? There are the obvious reasons, like planning a start-up and/or raising funds for a new or existing business. However, every Small Business Owner will do well to know the less than obvious reasons for a business plan.
Here are six ways a Small Business Owner can use a business plan as a management tool for achieving the commercial goals of the enterprise:
1. Start A Business: The most popular use of a business plan is to outline the steps that are essential to starting a business. Concerns about financing the business begin with the cost of the start-up, and continue with growing the business and introducing new products or services.
Where external funding is required, the plan provides information for investors in deciding whether to invest. Investors want to see the plan for running the business, especially its expense and revenue projections. They need reasonable assurance that the plans for the future of the business are realistic and attainable. A business plan addresses these issues, by detailing what would be done, by who, at what times, the resources needed and the outcomes to be expected.
2. Grow Or Scale An Existing Business:A business plan helps to clarify the strategic priority of the business, and enables it to allocate its resources accordingly. By aligning the objectives of the business with the deliverables of its work force, a business plan helps to identify the strategies that are working, those that need to refined, and those that must be abandoned. More important, a business plan provides a potent tool for uniting the units of the business in pursuit of a common vision.
3. Focus Managers And Staff On Specific Goals: A business plan is the roadmap for the business. It shows where the business is going, and how it intends to get there. It helps the managers of the business to be strategic in managing it, by helping them to establish what is expected to happen. It follows that the search for excellence in management must begin and end with setting specific objectives for managers, and tracking and following up on them.
A business plan, by establishing a vision for the business, must be used to develop a performance management programme. This ensures that the managers of the business, and their direct reports, down to the lowest staff cadre, are working towards the shared goals of the business, and embrace the same core values.
By so doing, the plan will state exactly what must be achieved, how it will be achieved, who should achieve it and when it should be achieved. Heads of departments and individuals will have set goals, with agreed work plans that reflect the priority objectives. The goals must be clearly defined, and specific and measurable targets must be clear to those expected to achieve them.
4. Share Business Objectives With New Employees: A growing business must add employees to its team, to help it move in the right direction. A new executive is expected to boost the revenue base of the business. However, before that happens, a new hire is a fixed cost that increases the expenses of the business. Hence it is important to figure out how such employee can help the business grow and prosper, to know what he or she is supposed to do for the business.
While the business plan rationalises the hiring of the new employee, it is important to make excerpts of the plan a component of the training of new employees, as they relate to their functions and responsibilities. This will equip fresh executive talent in buying into the vision of the business, and determining how to make meaningful contributions towards achieving its goals.
5. Sale Of The Business:The business plan is an important document in the sale of the business. As a means of valuation, it can help to establish the value of the business. It will help potential buyers to understand the condition of the business, what it is worth and why buyers should want to own it. The plan tells what the business is doing, how much it costs and how much it produces.
6. Support Of Business Loan Application.In the same way that investors want to see the business plan, lenders also want to see it. They expect the plan to cover the key elements, particularly the income and expense sides that point to cash flow of the business and its capacity to repay the loan. This is why lenders almost always request a business plan, sometimes called feasibility study, as part of a loan application package.
In essence, a thoroughly-considered and clearly-written business plan is a necessary vehicle, in pursuing a start-up, growing an existing business or seeking external help to scale a going concern.
Contact Us or drop us a line at email@example.com if you need help in preparing a business plan to start, grow or scale your small business.