Developing a business plan that charts the predicted lifecycle of your company is key to its success. There is often a misconception that a business plan should be created at the start of a company and then put aside, to allow the entrepreneur to get on with the serious task of running their business.
The problem with this mentality is that it creates an environment where the business plan is dormant and is only updated if the firm requires additional funding or a grant from an outside investor. To see the real benefit of having a business plan, it needs to be a living document – keeping it up to date is vital to the smooth running of any small business, regardless of whether or not the firm requires funding.
Regular assessment of the company’s performance against a live business plan will enable the firm to more effectively monitor resources across the company and ensure that the business can respond and adapt to any changes in the marketplace or in customer demand. It also provides the firm with insights into the company’s cash flow and can help give your business a benchmark to gauge performance.
There are a host of areas that need to be considered in order to develop an effective business plan. Getting these right will help ensure that your business is well placed to grow and take advantage of any uplift in the economy.
1. Research your marketplace
Knowing your competition is key to determining the viability of your business idea. Market research is about understanding the area that your business will be entering, identifying a niche in the market and proving that there is a customer base for your product/ service.
2. Have realistic goals
Your business plan acts as a decision-making tool and therefore should be used to help shape the company. By being rational and understanding your marketplace and the wider economic issues, business owners should be best placed to prepare for future growth and decrease the chances of failing.
3. Understand your company’s cash flow
Cash flow is the lifeblood of any organisation, regardless of sector and size. Learn what is coming in and out of the business each month and when payments to your suppliers are due. It is crucial that small businesses comprehend how much money they are owed and when payments are due, so late payments do not occur, as this could be critical to the firm.
4. Forecast and plan the year ahead
By developing accurate forecasts for the year ahead you will be able to plan for the future and accurately predict costs, revenues and profits throughout the year. This will help the business plan for growth, but more importantly identify potential future peaks and troughs which may occur, for example staffing resources around Christmas.
5. Tackle one area at a time
Creating a business plan can be a daunting task for even the most business-savvy of entrepreneurs, as it requires in-depth analysis from every area of the business including finance, marketing, market research and HR. By dividing the business plan as the culmination of a number of smaller area plans, it is easier to manage and can be completed in smaller stages rather than all at one time.
Every business, regardless of size, needs to produce and use a comprehensive business plan, which will help to steer their firm towards growth and profitability. However, as the saying goes, you only get out what you put in. A business plan can only ever be as good as the information included within it and the time spent developing it and revising it.
Matthew Forrest is head of commercial marketing in Sage’s small business division.
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