I am a business advisor so I talk to a lot of business owners and it constantly astounds me how many do little or no planning. In the UK business plans are still not considered core tools for running a sound business. Without a plan, or at the very least an income, expenditure and cash flow forecast, it is very difficult to know how well your business is currently performing, let alone where it is headed.
Writing a business plan need not be a huge chore, there are plenty of good software programmes around, which usually include ready made business plans, to give you a head start. There are also plenty of professional business plan writers eager to assist. So why is it that the following five truths still prevail?
1. Many UK companies simply do not have a business plan
Not having a plan is like walking around in the dark without a torch. You may get where you are going but it will take longer and you will probably trip over several times on route.
I recently helped a business move from being loss making to making a good profit. All I had to do was forecast income and expenditure figures. It immediately became blindingly obvious that, unless my client put up his prices, he would continue to fail. A small price increase, against existing client accounts, soon sorted out his problem.
If he had an active, simple financial plan, which he could easily have put together using a good business planning software programme, he would not have got into difficulty in the first place and would have saved money by not needing my services.
2. Start-up businesses are often too optimistic in their income forecasts
We all tend to be over optimistic. There are plenty of high profile, high value projects that ended up with a price tag many time greater than the initial budget forecast - the building of the Channel Tunnel or the Millennium Dome (now the O2 Arena in Greenwich) are just two examples. Getting input from professional business plan writers is one way to deal with this problem.
Having an active plan also means that you can monitor actual performance against your plan and take action if you see that things are going off course.
3. Business owners do not know what is in their business plans
This can happen when professional business plan writers are brought in. The plan they create is fabulous, it secures the funds the business needs, but all too often the business owner never really understood what was in their plan, so it is of little ongoing use and their business risks going off track. If you hire in professional business plan writers ensure you understand what they have said about your business and that you know how to monitor your performance against your plan.
4. Start-up companies do a bad job of identifying their target markets
Perhaps one of the most tricky elements is identifying your target markets. It is not necessary to do lots of research but it is important to think deeply about what you know about the people who will buy your products and services. Who are they? How old are they? How wealthy are they? Where do they live? What do they like and dislike? Where and how to they currently buy similar services and products to those you will be providing?
If you have worked through the above questions and based your marketing strategy and sales forecasts on what you discovered, your plan will be stronger. If you also devise mechanisms for monitoring performance, based on the knowledge and assumptions behind your forecasts, you will have a much greater chance of improving your sales forecasts and marketing strategies, as your business develops.
5. Once UK business plans are written they just collect dust somewhere
Too many UK plans are filed on the 'don't bother to read this ever again' shelf. A business plan is a tool for managing your business performance. It needs to be kept up to date and used as a monitoring tool. If you took the wise decision of investing in good software to write your plan, you will have built in monitoring tools as part of the package. This makes it easy to monitor actual income, expenditure and cash flows against your plan, which is essential if you want to avoid unwelcome surprises or even failure.
In the current economic climate it is essential for all businesses to have plans and all UK business plans should be live documents. Time invested in developing your plan is only of value if you use your plan as a monitoring tool to help you manage your business. This is even more important in the current challenging economic climate.