At its heart, business planning is simply what you intend to achieve – but with relevant reasoning behind your estimates. There is no point producing an overly-ambitious business plan based on sketchy numbers.
Honesty plays a key role in effective business planning, as you need to be truthful with yourself and any commercial partners about how much can be achieved over a given period of time. Producing an accurate figure for each area of your business plan is one of the major challenges of leading your own firm – so many factors can affect the outcome that it can be intimidating to think about at first.
If you are having to get additional funding for your business, then the lender will tend to want to see your business plan before it will give you a cheque, but don’t produce a plan just to please the bankers; let it be a concise guide for how you want to progress in the coming years. It may be that your expectations change over time, but it can be immensely helpful to have a document to refer back to when you are not sure how well your firm is performing.
For those getting into a franchise, there will be help and insight available from the franchisor, but the individual business plan is very much the domain of the franchisee.
So what do you need to plan? This will naturally depend on the industry you are working in, but there are a number of core areas that crop up all the time. Essentially, you want to set out goals which you can measure yourself against.
The first one relates to money. Not just how much it will cost for you to set yourself up with the basic equipment (stock, rent, utilities, etc.) you need and the amount of cash you hope to be paid; go deeper by considering monthly cashflow. You must have the money to pay people that do services for you, so expecting great sales later in the year will not help meet bills at the start, unless you have planned for it.
As well as money, you need to think realistically about what you are able to do with the resources you have. This could mean working out how many products your team can create, or establishing how much you can achieve as the sole employee in a normal working day. In a related point, you must bear in mind that your offices and equipment may require maintenance, which could be a factor in your proposed output.
Another crucial area is your relationship with other people; both clients and suppliers. For the former, you must think about the sales and marketing side of things – how are you going to engage with potential customers? For the latter, it is a question of establishing a relationship with a supplier that will reliably deliver the raw materials you need.
Statistics and evidence
For all the points mentioned, the only thing you can do to predict the future is to use past evidence. So even though, you cannot name exactly how many sales you will make in the first year, you can look at the experiences of similar businesses in other areas and amend this according to variable factors. You will need to research your trading territory, the industry as a whole and your target market thoroughly.
When it comes to finance, making a revenue forecast is not easy; if you are starting a new business or greenfield franchise, then you may have very little or no information to go on, so use any relevant figures you can obtain, combined with research on the potential market in the area – and finally factor in the limitations of how much you/your team can achieve in the working day.
Any businessperson in the world will tell you that you should never overestimate positives (sales) or underestimate negatives (expenses) in a business plan, as you will end up in trouble. Instead, be realistic and take on board all the real-world advice you can find for your organisation. A recommended plan of action is to create a number of different forecasts; for best case scenarios, worst case scenarios and your realistic estimate, for example.
Getting things done
It is one thing to have a plan but quite another to carry it through, so be ready to adjust your strategy to fit your situation. For example, you may have placed great emphasis on your marketing campaign based on an impending commercial development, but if that falls through then you must be able to adapt. Equally, analysis of your own approach could tell you that you are going down a worrying path.
An important part of getting things done can often relate to your ability to delegate to others or time-manage effectively – with a plan in place you have a direction to aim at; however, sometimes issues can occur in the delivery. For this reason, it is vital to be thorough when hiring staff and organising your own workload. With the right plan and the right team, you should be well on your way to success.