Like many facets of business, writing a business plan is one area that has probably been overemphasised but yet fails to deliver on its intrinsic value. You will learn how to write a business plan that works.
If you are reading this article, it is because you know the importance of a business plan. To add to what you know, think of a business plan as a map between two points, one point being where you currently are and the other where you want to go.
As with many maps, there is more than one route between two destinations. Not every business plan works. You will learn why a particular business plan works.
Reasons For Writing A Business Plan.
I have learned from experience that there are two reasons why people write business plans. One reason is more popular than the other. The audience you write the business plan for ultimately influences the inputs of the plan.
Investors, Pitches, Competitions And Loans
About 80% of entrepreneurs who know the importance of business plans never write one except when compelled to. Pitch events, investor engagements, and funding requirements from financial institutions are the reasons many entrepreneurs write business plans.
The entrepreneur approaches writing the plan like a hurdle that has to be crossed or something that has to be checked off a list. A lot of inputs into the plan are doctored and more importance is placed on meeting the investor or funding requirement than on what’s actually achievable by the business.
Usual suspects are sales being overstated, expenses understated or completely left out and the impression of high net margins and a growing balance sheet.
Writing a business plan for you as an entrepreneur is good thinking. The document is for you and is a realistic assessment of the potential of the business. You are not trying to look good to anyone, you simply want at every time to be able to predict how well or otherwise your business is doing if it is on course or needs realignment.
The ideal scenario is for you to have one plan which works for you and your investors or your funding requirements. The plan will come back to haunt you if you have “gamed” your numbers and you don’t meet your numbers.
Developing The Business Plan
Business plans used to be lengthy 30-page documents (and maybe there is still a use for those types of documents) not many people can go through a 30-page document. There are easier techniques to achieve the same objectives.
Those kinds of business plans does not work anymore, that’s why we are focusing on business plans that work.
At a high level, the business can be assessed through a tool called the business model canvas. Your BMC looks at the model of your business, its key assumptions, and key stakeholders and how you aim to deliver value to the customer.
You could also have a business plan that only looks at the business through numbers only. While not a complete plan, it allows you to dive in and create a working plan that can hold you accountable through the numbers that drive your business.
The more complete business plan format takes everything about your business into account.
It looks at your sales assumptions and figures, all your expenses, direct selling expenses and other overheads, your human resource plan, hiring timelines and budgets, your marketing plan and budget, your operational plan and overall business strategy, your management team, and funding plan.
You also have websites like score.org and liveplan.com that help you build your business plan and there are tons of resources available online that help with all facets of the business planning process. The idea is to keep it simple. It is your business and the plan must make sense to you.
Common Mistakes With Business Plan
Wrong Financial Projections
Most entrepreneurs are overly optimistic and believe they will sell a lot of their products or service. They overstate revenue and understate expenses.
Limited Market Research
Many entrepreneurs do not research the market enough to get information on the competition and the industry they intend to play with. Some even assume their product and service offerings are new and they have no competition.
You will need to spend smartly on marketing. There are a lot of options that will appeal to you, but the general rule is 20% of your marketing efforts will bring 80% of your results and the task is for you to find the 20%.
Priorities And Milestones
Every plan should have milestones. What do you want to achieve and when? Your plan should be broken down into measurable priorities. You should have specifics that you are focusing on per time.
Done And Dusted
Many entrepreneurs write business plans and that is it. They keep the plan under a table somewhere and forget they ever wrote a plan. A business plan is a living document used to assess the health of the business on a daily basis. A business plan should also be amended routinely to align with the current realities of the business.
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