There
is a common saying which goes failing to
plan is planning to fail. And yet it is common to find businesses nowadays
operating without a clear plan. A plan in its
simplest form is a blue print, a written step by step document showing
how to get to some place, or how to achieve certain objectives. A business
needs a plan, to clearly identify the goals it has achieve. Think of it like a
map showing you where you are going and how to get there. Planning is a
processes and it involves setting objectives, deciding when to achieve them and
allocating resources for the achievement of the objectives. They are many types
of planning but here we are going to discuss business planning and why it is
important. We are going to define a business plan, and highlight how the
planning process can help the owner of the business. It is important to note
that, what we usually say in our everyday language that I have a plan is not in any way what we mean here when we talk
about planning. What we mean is that the all process to be relevant, a written
document has to be produced. This document is what we call a business plan.
We
have so far seen that planning is relevant, and the process of planning has to
produce a written document. In a business sense however, planning results in a
business plan. According to Dollinger, a Professor of Management and
Entrepreneurship, “a business plan is a formal, written document which
describes the nature of the business, operations and strategies for the
business”. In the discussion that follows, we are going to shed more light on a
business plan as we try to understand what it is.
A
business plan describes the nature of the business, this means that it is a
written document that will show your management and prospective funders that
you understand where your business belongs to in terms of the market, and what you do.
The markets/industries are many ranging from services to goods and are
different depending on the idea of the business. Within the industry, your
business plan will specify what you do. This implies that you have to clearly
define your vision, mission and goals. A vision is something that has to be
impersonal, that will show the value that your business will bring to the world,
it is a futuristic statement. Your mission has to do with something that you
want to achieve in terms of a broad business goal that cannot be achieved in a short
period of time. A mission is the broad statement that shows what you will do to
achieve the vision. And finally your goals are what you will achieve within a
short period to accomplish your mission.
Knowing
the market where the business is operating will help the entrepreneur come up
with better strategies to win a share of the market. The business plan has to
define clearly the nature of the business so that the owners are familiar with
the trends and technologies in the market. To do this, a passionate business
owner will have to research the competition in the market. The owner has to
read articles, news, books and magazines about the industry so that the
patterns of the trends will start showing.
A
business plan describes operations of the business. It describes your financial
system, from how you will capture your financial information to how you will
record them. It will describe how you will handle your sales and marketing,
your supplies, your inventories and so on. This will depend on the nature of
your business you are in. For instance if you are going to venture into a
retail business, the business plan has to describe your location, how you will
be bringing goods in the store, how you will handle your inventory, your sales,
your bookkeeping and all other operations that will make your business
complete.
A
business plan must describe the strategies. It must tell the prospective funder
how you intend to do the business. How you intend to find your clients, how you
will win a share of the market. This is important for a business because it
will show anyone you can approach to ask for funding that you truly know how to
get the results. The strategies will also show your partners that a business is
a proven model and therefore, worth of their time and money.
So
far we have focused on what a business plan is and have discussed that it is a
written document that will show your nature of the business, how you will
handle your operations and strategies of your business. However, it is
important to stress that this is not the only aspect of the business plan.
Writing a business plan according Burns, “underlies
the opportunities of the venture”. It causes someone to further investigate
the business and thus realize opportunities that when exploited will bring
money to your venture. In addition, “The
business plan helps to recognise strengths and weaknesses while adding
structure to the proposal of the entrepreneur.”
Having
established what a business plan is, we can now proceed to the features of a
good business plan.
A
good business plan should help to spell out why you are in business. In my
opinion, this is the most important thing in business. Businesses should be
built in such a way that they should produce something unique, they should
solve a problem in the economy. When this is done, a business will be supported
by its customers like they own the proposed solution. The business will succeed
because the customers will do anything possible to see that you succeed. That’s
why a good business plan should clearly show the problem that you want to
solve, underlie the solutions and show how it will be when the problem is
solved.
In
addition, the business plan should be focused on the customer and not on the
product, this means that you need to target a certain problem that is affecting
the customers you are targeting. Many businesses with a clear sense of why have
a higher chance of success. This is because people don’t buy what you are
selling, they buy what you stand for. They want to feel your business cares for
them, that’s why they will definitely be your partners. Truly, we are all in
business to make profits, but businesses that truly make profits focus on the
problems of the people they are serving.
A
good business plan should address both short term and long term business goals.
The business plan has to spell out where you want to be in 5 year time. By
making forecasts of the business turnover, gross profits and net profits will
help the owner of the business decide if the business model is working. We all
start businesses to make profits. But sometimes business do not make profits in
the first years of operation due to high start-up costs. The business plan
should address the short term sales and long term sales forecasts to help
decide whether the owner can stay in the business.
A
good business plan helps define the scope of the business (the range of
activities your organisation will be doing). In other words a good business
plan will help the business concentrate its resources on the activities that
will yield maximum returns. Concentration in business can be either on a
certain market segment, a product or a process that is bringing your company
profits. Sometimes companies lose focus when they introduce other products in
the market along with their product they are selling. The chances are that the
market might not appreciate the product introduced in the market. For instance,
in an attempt to create a more competitive product, Coca-Cola introduced a “New
coke,” in 1985, the company saw a drop in the sales of Coca-Cola, but after
asking its customers, the company discovered that they had to bring back the
old coke, which came with a new label called classic coke.
A
good business plan will help you anticipate change within the business
environment. This is very important for any business because success depends on
how the business will react to the changes in the market. The business
environment have many potential risks and in most cases, these risks if not
well managed will be the downfall of the entire business system. Therefore, it
is imperative for the business owner to be aware of the changes that occur in
the business environment. This will help you devise a mechanism for handling
the change from the environment.
The
change in the business environment can be in terms of cyclical change and evolutionary
change. Cyclical change involves variation that is repetitive and often
predictable for instance, fluctuations in the business cycles (times of boom
and recessionary times). Evolutionary change involves a more fundamental shift,
for instance the introduction of the iPad, changed the demand for eBooks. In
addition, the evolutionary change can be seen as a change in the taste of the
consumers due to an innovation being introduced in the market.
To
sum it all, a good business plan will help predict the future with educated
estimates that will help an already concentrated business to make sound
decisions. Will act as a guide to help the business owner deal with changes in
the market. The plan will also help the outside audience to see that you have a
well thought business and are ready to take on the market no matter what may
come your way.
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