No business can have a proper start without a Business Plan. Even if your plan started out on a scrappy piece of paper or on the back of an envelope, it is still a plan that needs proper drafting so you can steer your business in the right direction.
Why You Need A Business Plan
Think of your Business Plan as part of the design of your business, as you would design a home.
Business plans are usually used as communication tools to highlight strategy and direction within the business, to set goals for managers and drive the confidence and support of employees, shareholders, and customers.
Setting up a Business plan encourages owners, stakeholders, managers to review the current situation, reach a common understanding of the challenges, set direction and identify options for the future. The plan should be used to measure performance and progress. Larger organisations will normally use their Business plan to encourage engagement from employees and stakeholders to identify areas of growth and engage in the future direction of the business.
Although a Business Plan is there to give operational and commercial direction, it should not solely be targeting those who will implement it but should be a key communication document for external stakeholders and investors.
Importance Of A Business Plan For Start-ups
Start-ups, however, should ideally have a well-researched, solid plan. The plan should include all the fundamentals of a standard Business plan but should focus on areas like market entry strategy, costs, and information on existing competitive products or services. This way if the Start-up is seeking finance from banks or investors, the plan will demonstrate that the business has a realistic view of the current position and all future developments.
Business plans can be drawn up in many ways and there is not a ‘one-for-all’ fit, however, there are many templates that will give you guidance on how to set it up.
Here we supply a checklist, which is aimed at start-ups or smaller businesses looking for funding and outlines the key areas that should be covered in the plan.
What Is A Business Plan?
A business plan sets out the business, aims and objectives and the intent for future developments of the business. It is a process to guide you through the process of developing a business.
How To Start Writing An Effective Business Plan
The groundwork of a Business Plan requires:
- Detailed research and careful thought
- Analysing the market the business plans to operate in
- Producing projection for 3-5 years
- Setting short- and long-term objectives
- Establishing a framework and processes for achieving the objectives
- Clarity to avoid misunderstandings or possible conflict or confusion
- Identifying strengths, weaknesses, opportunities, and threats
Always write your plan from the reader’s point of view.
Plans should be measured, monitored and modified regularly, it should be a live document that drives the business.
What Should Your Business Plan Have
Your Business Plan should cover the following elements:
- Finance– minimum financial requirements, an assessment of fixed and variable costs. Your plan should include a detailed cash-flow and profit forecast.
- Operations– business processes, intellectual property, risk management issues, and Including supply of materials, key processes, resource, and technology requirements as well as production and delivery targets.
- Marketing– how market intelligence will be gathered to ensure the business strategy will meet the market needs and marketing objectives.
- Human Resources– recruitment, compensation, retention, business leadership and stakeholder relationship management.
The “Do’s” Of An Effective Business Plan
- Provide background information
- Define the objective
- Describe market opportunities
- Describe production and development plans (Operations plan)
- Describe your marketing strategy approach (Marketing plan)
- Clarify your current financial situation (Financial plan)
- Explain your Human Resource plan
- Cover problem, risks, and critical success factors
- Conclude with the key message
- Consider what should be included in the appendices
- End with an Executive summary
The “Dont’s” Of An Effective Business Plan
As with anything in life, there are also a few pitfalls that you should try to avoid, therefore:
- Do not skimp on research
- Do not include research that is not relevant
- Do not fail to explain the significance or meaning of your research
- Do not just focus on one aspect of the plan at the expense of others
- Do not make over-optimistic forecasts or unsubstantial claims
- Do not avoid to discuss problems or weaknesses
- Do not forget to check your figures
- Never frame your plan in a context that does not align with the culture of the business
Stats NZ have a good article on the tools and tips on writing a business plan which can be found here.
Another very interesting research paper published by the Harvard Business Review which discusses how a business plan can the be the difference between success and failure for start -ups.
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