Does this sound familiar? I know my business, why do I need a written plan, I have the plan in my head, my time is better spent running my business rather than writing about it, the plan will be obsolete the day after I write it. While business and strategic plans are used regularly in many Fortune 500 corporations, there are still those small businesses who have yet to embrace them. It is surprising, given that studies show that 85% of the small businesses that developed business plans were in business after 3 years. This is not bad when you consider that 7 out of 10 businesses fail in the first 3 years of operation.
Having a comprehensive business plan is one of the keys to a successful business. It not only helps a business owner crystallize their thoughts and ideas about a business venture, but it also helps them maintain a focus for their business today and in the future. This can actually save the business owner time in the long-term, as the business grows and becomes more complex. It is a useful document when communicating your business to: outside investors, business partners, existing and new employees, customers and suppliers. It helps to educate these partners on your company goals and objectives as well as your plan to achieve success. It also lets them know how they fit into your plan and what's in it for them. It's also not a bad idea if you are planning to buy or sell a business or obtain an SBA loan, the SBA requires them. Although many lenders don't require a formal plan, if you want to make that good first impression on the bank and effectively answer you lenders questions you will need to have prepared a business plan. In many cases, the business plan will help increase your chances of getting the financing you need for your business.
We have prepared over 50 and reviewed over 500 business plans, these plans can take many sizes and shapes depending on the size and complexity of the company.
However, in general, the document should be
a comprehensive plan that covers the next 3 - 5 years and includes all the aspects of running your business such as:
- Executive Summary
- Market Analysis
- Competitive Analysis
The business plan should be a cohesive document with all its components aligned. For example, the marketing and sales plan should be aligned with the revenue projections included in the financial plan. A business plan can usually be done in 20 to 40 pages. The executive summary included in the plan should be no more than two pages in length and should include the key information from the plan. This executive summary can be given to business partners and investors to introduce your business and give them enough information to determine if they should proceed further with you.
The business plan is a tool to help the business owner more effectively manage their business, so the business owner or management team should be actively engaged in the process of preparing it.
The knowledge gained by the business owner when preparing the plan is extremely valuable and can help them to refine their business strategy. Using outside advisors to help the business owner write the plan can be very helpful, especially if the business owner has never written a plan before and or the plan is going to be used with outside investors or business partners. These advisors can also save the business owner time be doing a lot of the research and writing of the business plan. A business owner that has been intimately involved in preparing their business plan will be much better prepared to communicate this plan to outside investors and partners.
Once the plan is complete, it should be used as a living document and kept up to date. It should be updated for changes in the business, at a minimum annually. It should also be reviewed on a regular basis (i.e. monthly or quarterly) to determine whether or not the business is heading in the right direction and meeting its goals and objectives. Most Fortune 500 corporations go through the strategic planning process in Q2 and Q3 of each year. This allows them adequate time to complete the plan before the new year.
Having a good business plan is one of the keys to a successful business. Studies have shown that businesses with business plans are much more likely to be successful than those without plans. So if you find yourself making those excuses for not having a plan, it's not too late, set aside some time to put your plan in place for 2014 and beyond. A good business plan will pay for itself many times over!
If you have any questions regarding business planning please give us a call.