Friday, May 04, 2012

Business Plans Are Not Just For Start-Ups


This week I want to discuss something vital to businesses at every stage of their life cycle – Business Plans.

Most people recognize the importance of business plans for start-up companies.  However, business plans are equally important for established businesses operating in high growth, mature or declining industries.  Studies show that business plans increase the odds of business growth and raising capital.  Without a business plan the chances of success are greatly diminished and the likelihood of a catastrophic failure is increased.

Here are 6 reasons why all companies should have a business plan:
  1. Raising capital - dealing with the concerns of lenders and outside investors (e.g. how much money is required, how it will be used, how it will help achieve the company’s goals, how much risk is associated with investing in or lending to this business, etc.)
  2. Increasing the likelihood of success – studies show that failure rates for start-ups is between 30% and 50% within the first few years - a major reason why start-ups (and established companies) fail is lack of adequate planning
  3. Measuring success – the business plan defines what success means to an organization by setting out the company’s goals and objectives (financial and non-financial) – actual performance can be compared to the plan and achievements can be celebrated
  4. Providing direction for management – a successful business requires a cohesive management team where each member knows his/her role and responsibilities, understands how that fits in with the overall goals of the organization and is accountable to each other for achieving those goals
  5. Decision making – better quality information leads to better business decisions. A thoroughly written and well researched business plan will arm the owners and management with the knowledge to make better decisions
  6. Documenting forecast achievement – proving to future lenders, investors and potential purchasers that management has the skill and ability to plan, implement and achieve a growth plan – this lowers a company’s risk profile and increases its value  
The business plan is a comprehensive and dynamic document that should be revisited annually and include the following sections:
  1. Executive summary
  2. Business overview (including vision, objectives, ownership structure)
  3. SWOT analysis (strengths, weaknesses, opportunities and threats)
  4. Products and/or services (including any proprietary technology)
  5. Economic and industry review (including market research)
  6. Operational plan (including management team and human resources)
  7. Marketing strategy
  8. Financial plan (start-up costs, capital needs, financial projections)
  9. Exit strategy
Revisiting and revising the business plan annually is necessary for dealing with changes in the company’s direction, strategy, market and ownership.  An exit strategy for the existing shareholders should be incorporated into the business plan, particularly for established businesses.

Join me next week as I begin a series of entries dedicated to the various issues surrounding the development of an effective exit strategy for business owners.

3 comments:

  1. Without proper planning it is impossible to succeed no matter how much capital you have. On the other hand, if you have a fool-proof plan you can make a lot of money in a very short amount of time.
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  2. My own experience is that the process of thinking out my business plans has been every much as educational as the plan itself. In my pragmatic way the thinking process has resulted in an organised to do list rather than a detailed written plan.
    Business Plan Startups

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  3. As far as i know a sample business plan can do many things but it cannot give you good ideas! Don’t start looking for sample business plans,, books on business planning, business plan templates or anything else until you have a solid idea.
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