Why a business plan is imperative to any business, how the business plan can be used and what attributes should be included in this business plan.
Business plans are vitally important, even for those who do not wish to borrow money in the short-term. It has been said that “wherever you go – there you are,” and although that philosophy may be fine in some situations, it is definitely not the best way to run a business.
Industries and economics can change in a heartbeat. A good up-to-date business plan is imperative to understand where you are right now and where you can be in the future. It also helps to keep track of competitive information and industry financials so you can be prepared for a downturn in the economy or increased competition.
As businesses grow, they tend to branch out either in additional locations or complementary industries. By keeping an up to date business plan, these additional geographies or industries will show themselves in your research and make it easier to make the right decisions.
Some aspects of a good business plan include the following:
- Company information: mission statement, goals and objectives, company philosophies and strengths and weaknesses.
- Products and services: what is being sold, what channels of distribution will be used, and current competitors.
- Market Research: industry financials, trends and ratios, and economic research.
- Customers: demographics and unmet needs.
- Marketing: promotions, branding and plans for gaining and retaining customers
- Budget: cash flow projections, costs, sales forecasts, profit and loss forecasts and pricing analysis.
- Operations: processes and procedures, managing sales leads, sales, inventory and distribution.
- Legal: permits, zoning and management and executive structures.
For businesses who are seeking a cash influx from either investors or a bank loan, information related to the funds must also be added. This information should include how much money is needed, how the money will be used and how the funds will be paid back or redistributed amongst the investors.
By keeping a business plan up to date, it is easy to monitor the attributes that might affect sales forecasts and break-even requirements. This monitoring allows you to asses where you are now and where you need to be to meet your goals and objectives. By understanding this lag, changes can be made quickly and effectively to reduce any negative differential. A secondary use for an up to date business plan is to identify growth opportunities. The customer’s demographics and unmet needs analysis could show an avenue of growth that may never have even been considered before.
Using a solid and complete business plan is the best method of monitoring where you are now, where you wish to be and how you need to get there. It is much better tracking your business than just blindly stumbling along and hoping you’ll make money or meet your costs.
