Many new entrepreneurs are required to prepare a business plan – mainly for the bank to secure funding for their new venture. When they then ask other successful business owners for advice on this they might be told that it’s a waste of time or they have never used or prepared it and they probably don’t need it. This may be true for some but there might be very good reasons for their success – they are very clear and determined about their goals and outcome, how and what they wanted to achieve and didn’t accept “NO” as an answer.
Others may say that business plans have very little value, were prepared a long time ago, and that they never looked at it again and now it just gathers dust on a shelf or is filed in a bottom drawer.
The following should be considered when preparing the business plan:
WHO is preparing the business plan? If the business owner delegates this there may be limited ownership or engagement with it, especially if this is prepared just to tick a box on an application form and not used as a decision making tool or to highlight crucial issues. There is a risk that a third party preparer may not have all the information available or have access to the bigger picture.
WHAT is the ultimate purpose of the venture: the goal/outcome and dream they want to achieve? What proof is there that the business can access and retain a viable market share for the foreseeable future and actually run at an acceptable profit?
HOW are they going to achieve their goals? How are they going to market their business? How are they planning on growing the business?
WHEN are certain actions or timeline achievements expected to happen. This involves the timing of the venture and a cash flow forecast that includes a number of scenarios. For example if terms are generally 30 days, what happens when the debtors don’t pay on time and the terms are stretched out to 60 or 90 days? What is the impact on the cash flow? It is vital to understand the level of initial cash needed to start up and keep the business afloat in the first couple of years.
WHY is a business plan being prepared? If it’s to acquire funding (from banks) the banks would like to see some “skin in the game” and often ask for security for their investment too. Or is it also prepared as a decision making tool, to assess the viability of a venture, assess the risks, likelihood, consequences, and action plans to mitigate risks?
A business plan is more useful if it is referred to often and updated with new relevant information. When last did you refer to and update your Business Plan? Maybe now is the time.