One of the most important documents every business needs is a business plan.
These plans have a variety of uses:
- They can assist a company when raising investment or funding
- They can assist the management of a business with the direction of the business
- They can assist management by providing a tool to measure and monitor business performance
Every business plan should consist of these fundamental components:
- Objectives
- Description of current status
- How to achieve the objectives (strategy and tactics)
- Consideration of risks
- Budget
A business plan should contain details of the organisation’s objectives, and these objectives should follow the SMART (Specific, Measurable, Actionable, Realistic, Timed) framework, to ensure that the company is capable of realistically achieving them. For some organisations their objectives may be very straightforward such as growing revenue and profitability by X%. For others it may contain a multitude of elements.
By understanding the market and its internal capabilities, the company is able to conceive realistic business objectives for the management and team to achieve
A description of current status may be a lengthy exercise. Generally this would include a description of the current business objectives, operation, key personnel, skills gap, customer base, key suppliers and historic financial performance. Of course every business is different so the focus on a specific function will differ from one plan to another.
In determining how to achieve the company objectives, often the company will need to consider researching the market and understanding not only what is happening among its direct competition but more generally within the economy.
The research and analysis conducted may follow certain well known models such as a PESTLE analysis (Political, Economical, Social, Technological, Legal and Ecological) and a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). Other research and analysis may be less structured.
By understanding the market and its internal capabilities, the company is able to conceive realistic business objectives for the management and team to achieve.
With any plan there are risks and these must be considered at length. Such considerations may simply be:
- What happens if sales run at 75% of last year
- What happens if there is a delay with our ecommerce website
- What happens if a key member of staff leaves
- Or something more complex
The risk analysis will allow management to put in place contingency measures essential for both safeguarding the business’s prospects ensuring delivery of its objectives.
By setting a budget the management team is able to determine and control what financial resource is available to achieve its objectives. In some cases the business may need to seek additional working capital to forge ahead with its plans.
The process should not just be something that you feel you ought to do before the beginning of the financial year. It should be reviewed and updated throughout the year.
Companies that plan ahead, document their plans, communicate it to the team and constantly benchmark performance against the plan are most likely to succeed.
