It is essential that new entrepreneurs analyse and think through every conceivable aspect of their proposed business idea.
Doing a Business plan has a number of distinct advantages:
- You will develop a holistic understanding of how the business operates;
- You will clearly understand what viability, profitability, break-even, customer satisfaction and cost improvement means,
- The compilation of a Business Plan will develop your conceptual, creative, analytical, problem solving and decision making skills.
- Lack of planning is the one “management failure” singled out by Business development corporations and experts worldwide.
- Drawing up a Business Plan (giving due thought to the process) is a tool just as a pilot will use a pre-flight inspection checklist or as PR professionals will use conference checklists.
- Compiling a Business Plan is an exercise that will necessitate getting involved in all aspects of the Business.
- As an employee the business planning process will help you develop, because it will give you practice in thinking about competitive conditions, and how you will market the business.
Putting your plans on paper will involve many processes.This is very important for the following reasons:
- It forces you to research every conceivable area in your business
- It forces you to arrange your thoughts in a logical order
- It forces you to think through every eventuality before it occurs
- It will become your guiding action plan in running your business or implementing your idea
- It provides a platform through which you can sell your ideas to others.
To draw up a Business Plan is not that complicated, all it will require is time, patience and effort.
By doing the research yourself you will learn a lot of interesting things about yourself, your company and the proposed plans. But the knowledge and skills gained will pay off in the long run.
Whilst compiling your plan please bear in mind that anything you leave out of the picture will create an additional cost, or drain on your money, when it crops up later on. If you leave out or ignore certain items, your business is headed for disaster. It is simple – Be thorough. It is in your own interest.
During the 80’s and early 90’s I was a Senior Business Adviser and training specialist working for the then Small Business Development Corporation. The following list of tips is what I used to share with course delegates. It is based on my experience in analysing 1000’s of business plans.
SOME HINTS TO REMEMBER WHEN COMPILING A BUSINESS PLAN
- Always write with the proposed writer/evaluator in mind – Minimise industry specific language and jargon. Avoid highly technical descriptions of your products, processes, and operations. Use layman’s terms.
- Always ensure that your Business Plan is of a good appearance – First impressions are often lasting impressions.
- Base your Business Plan on irrefutable facts or evidence as far as possible.
- Some form of practical, do it yourself research is always better than just relying on old information.
- (See No.3 above). Spend plenty of time on market analysis. There is a school of thought that says: First get clients, then design the business around them.
- Spend time doing the financials, especially cash flow planning. At the end of the day it is cash that pays accounts, not profits which could be on paper. The need to forecast cash flow requirements is to set targets, encourage you to correctly estimate your working capital requirements (Many businesses fail due to running out of cash) and enable you to arrange financial assistance well in advance (Bankers are people that will lend you money only when you don’t need it – So show them you are organised).
- Test your ideas by asking a neutral outsider to for his/her opinion.
- Spend more time planning than regretting it later on.
- Outline every conceivable aspect of your proposed idea or venture. Remember it is often the small things that make a difference. “ You can sit on top of a mountain, but not a pin”.
- Design your business and plan from your customer’s viewpoint. This will ensure a customer service approach from the start.
- Substantiate. Substantiate. Beware assumptions.
- Always use supporting documentation such as media cuttings, letters of commendation to show the evaluator that your plan has merit.
- A business plan is a “living” document. It is not set in concrete.
- Update it as your knowledge grows and whenever your strategies become more concrete.
- Be realistic–base your projections on the results gathered from your analysis. Be honest about positive and negative findings.
- You may have two sets of business plans–one internal, one external. To be an effective management tool internal business plans usually are more detailed than those presented externally.
- After completing your plan, ask yourself the question “Will I be prepared to lend finance or effort based on this proposal”?