A business plan is a map that takes your new business forward. With the outlined goals and clear directions of a business plan, your business is more likely to be successful. Perhaps you want to check the feasibility of your idea or secure financing, either way, a business plan is necessary. In the words of Benjamin Franklin, ‘If you fail to plan, you are planning to fail!’. According to data, most businesses in the UK are concentrated in the real estate and the construction industry. There may be good opportunities in other industries too. An online leather jacket store selling vintage leather jackets needs a good business plan just like a construction company does.
Businesses need to overcome failure by focusing on the planning process. Being equipped with the skills and strategies necessary for success is made possible with a good strategy. On the other hand, a lack of direction resulting from no planning is detrimental for the business.
Here are a few steps that you can take to devise an effective business plan.
Understand the contents of the business plan
There are seven essential segments of a business plan. These segments will help business understand what is fundamentally needed to achieve business goals. The business plan time-frame is usually three to five years. Once you know what each segment entails, you will be in a better position to formulate a decent business plan.
- Executive summary: This segment is typically written at the last because it is a quick overview of the entire business plan. It should communicate the main points of the business plan effectively.
- General business description: This segment describes various factors of the business. Provided information includes the industry background, the legal structure of the company, the products offered, and the management.
- Market and clients: This segment identifies the target market and additional markets. Mentioning the client characteristics and projected sales here is a good idea.
- Competitive analysis: Here you determine the nature of competitors and analyze your position in the industry. Highlight strategies that are beneficial for your business here
- Design and development: Outline information related to the goals for the product development, market development, and organization development. This segment enables the formulation of a development budget.
- Operation and management plan: This segment highlights the responsibilities of the management, the tasks of each division and the resources needed by the business. Present the operating expenses, capital requirements and cost of goods sold here.
- Financial information: Include essential financial data at the end of the business plan. The inclusion of the cash flow statement, income statement, and the balance sheet are essential in this segment.
It is essential for the business plan to be both easy to understand and realistic. With a good grasp on the contents, you will be in a better position to move ahead.
Gather necessary information
Businesses need to prove that there is a demand for the products they offer in their business plan. Moreover, they also need to figure out the personnel requirement and capital requirement before the period ensues. Market research provides the necessary data to suffice for this purpose.
While gathering information for the business plan is a lengthy step, it is also a critical one. Back in the day finding data about the industry or competitors was more difficult than it is now. Technology has revolutionized the entire market research process making it easier to find relevant information now. Finding out about the industry or competitors isn’t too much of a hassle. Additionally, newspapers may also prove to be a good source of information.
While secondary information is useful, you can’t primarily rely on it. Primary research is also essential for the business plan. Small and new businesses should determine the information that they need for the business plan and prioritize finding it. You should scrutinize the research alternatives and take the best course of action.
If you’re gathering information for an existing business, you will already have a fair idea of where to look. Business plans for a new business require creativity in the research process. You need to understand the financial behavior of existing businesses that are like the new one to proceed. To secure financing from an investor, new businesses need to present projections in their business plan. The efficacy of the projections depends on the quality of the assumptions. The more thorough the research is, the more realistic the assumptions will be.
Create an integrated business plan
After the collection of necessary information, the formulation of an integrated business plan begins. It is best that the upper management is directly involved in the creation of the business plan. A cross-functional team can participate in the creation of this business plan with the top management. The plan should be comprehensive across different functions and should communicate the financial and operational requirements. Outline the business goals across different parameters like inventory, revenue, demand, profit, and margin.
While developing the business plan, it is important to take into account the changes in the market. The business should identify potential risks and address them with optimal strategies in the business plan. Furthermore, all the components of the business plan should work in synergy. The business will appear well-organized and competent if you get this comprehensive document right.
In general, the business plan should be logical and workable. All estimates, goals and should reflect the current position of the market. Financial information should be presented professionally using computerized charts. A consultant can further refine this comprehensive document if you desire to improve it. The plan should show the investors that they will eventually profit from the success of your business
Execute the plan and annually review performance
Once you begin execution of the business plan, some things will work out and some won’t. Be mindful of the plan and stick to it as much as possible. However, your business must maintain some flexibility so that it can adapt according to the circumstances. Problems that affect small businesses include labor quality issues and red-tapism. At the end of every working year, appraise the performance of the business.
For a relatively older business, reviewing the former business plan is essential. When a business identifies which parts of the older business plan didn’t work, the business can also figure out why. Perhaps the research was done too haphazardly, or the business goals were too unrealistic. Recognizing the deficiencies will help businesses overcome them in the future. Review business performance and compare it with a business plan before refining the business plan.
Refine the business plan
Refining the business plan is an essential iterative process that is vital for success. You might have to raise the prices or rejuvenate the marketing plan. Since the business plan uses future assumptions, it should be updated annually to reflect the changes in the marketplace. The goals should be broken down in achievable and actionable steps. Exposure to different information across the business year may lead to some changes in the plan.
In the early days of a business, the vision is usually too broad. With experience, the company may realize that it needs to eliminate specific goals. Annual refinement and revision are necessary for a business plan to be effective.
A business plan is a roadmap towards success that is prepared by the upper management. In general, successful businesses pay attention to the planning process. A firm needs to do thorough research to create a holistic and integrated business plan. A business plan may stretch out for five years, but refinement is needed annually.