Some small business owners still seem a little confused about why business plans are important.
Well, our last two blogs discussed financial forecasting – in particular, how to get where you want to go and measure your progress along the way.
However, before you can start using them as a guide, there are two important things you need to know:
1. Where are you now?
2. Where do you want to be?
How do we answer these questions? We write a business plan.
How NOT to go about writing a business plan
Try Googling the term business plan. You'll get thousands of hits on hundreds of different templates for creating your own business plan.
It's easy to download one, fill it out, feel good about that, then stick it in the top drawer and never look at it again.
Worse still – you download one, feel it's taking too long to complete (or you're bored or don't like facing the truth about your business!) and stop. And you never to look at it again.
What a wasted opportunity!
Quitting so easily means that you probably haven't considered the question of why business plans are important in the first place.
The free templates tend to lack a very important ingredient – the input of an independent facilitator who can guide and challenge you, the business owner. Writing and implementing a successful business plan is a process that requires more than an owner spending half an hour filling in boxes.
How to start writing a business plan
Who is the best facilitator to help with your business plan?
It's usually your Chartered Accountant – the person who knows your numbers inside out and wants to help you achieve success and reach your goals.
The business plans that we help clients write are one-page documents that not only describe where the business is now, but establish your 12-month goals and 90-day goals, as well as the actions required to achieve those goals (amongst other essentials).
In short, your business plan needs to be action- and outcome-focused.
Additionally, a business plan should not be written just once. It needs to become a standard part of the annual business cycle: just like preparing your financial statements for the year just gone – but instead of focusing on what just happened, it looks at what you want to happen in the future.
Our most successful clients know that their updated business plans might raise cash flow issues that need to be addressed in the coming year, so it is often teamed with a budget or, even better, a three-way cash flow forecast.
This highlights the path they need to steer to get where they want to go - and where the potholes might be along the way. It therefore helps them prepare a plan to mitigate them or avoid them altogether.
That's why a business plan is important!