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The Importance of Business Planning

"Failing to plan is simply planning to fail"

Business plans are a bit like road maps: while it’s possible to travel without one, doing so will only increase the odds of getting lost along the way.

Sure that's a pithy turn of phrase, but how is it relevant to growing my business I hear you ask? Well, according to a study published in the Journal of Business Venturing, organisations with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans. Pretty compelling stuff.

What is a business plan?

But before we get into the thick of it start, here is a definition that we use to describe Business Planning:

"the marshalling and prioritisation of resources both within and external to an organisation, to deliver key business outcomes that are aligned with an agreed business strategy."

Put another way, a business plan is a document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances.

Business planning sits below corporate strategy and integrates budgeting & forecasting, as well as a collection of individual business cases, each representing a unique business proposal for change.

These proposals represent projects that the organisation wishes to embrace as separate from what they are currently doing (which we call “business as usual”).

What is included in a business plan and why is it important?

A well-written business plan is an important tool for businesses because it offers them the ability to clearly lay out their goals and track their progress against them as their business grows.

A business plan also provides context for the business in terms of how much all these desired changes will cost, how the business will benefit, the risks associated with those changes, and the financial rewards they collectively should generate over and above “business as usual”.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

  • A market analysis: gathering information about factors and conditions that affect your industry

  • Competitive analysis: evaluating the strengths and weaknesses of your competitors

  • Customer segmentation: divide your customers into different groups based on specific characteristics to improve your marketing

  • Marketing: using your research to advertise your business

  • Logistics and operations plans: planning and executing the most efficient production process

  • Cash flow projection: being prepared for how much money is going into and out of your business

  • An overall path to long-term growth

The benefits of a business plan

While putting together a business plan might sound like a lot of hard work, it's a crucial tool in your belt to help facilitate sustainable business growth. Here's why:

1) Facilitates better alignment

It’s a mechanism for ensuring that all new business activity remains aligned to your agreed strategy. It should explain the why, the how, and the when, and clearly define what the outcomes for the business are on its completion.

2) Encourages prioritisation

It encourages organisations to prioritise initiatives so it’s clear on what is the most important through to the least important. This is important as while the capacity for each business is different, generally, no more than 5 projects should be initiated in any financial year as resourcing often becomes an issue.

3) Offers a detailed lens

It encourages a more detailed lens on specific strategic outcomes the organisation seeks. For example, growing market share, improving the customer experience, or improving productivity or profitability.

4) Makes you ask the hard questions

Putting together a business plan requires businesses to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. The practice alone of writing these down will help to articulate your vision and determine if there are any gaps in the strategy.

5) Helps you avoid mistakes

While there are many reasons why small businesses fail (no market need, lack of capital, inadequate team, stiff competition, pricing issues), many of the most common are purposefully addressed in business plans. Creating one can help you avoid these issues by spotting them before they arise.

6) To secure financing

Did you know you’re 2.5 times more likely to get funded if you have a business plan? That alone should make you want to write one. Business plans are the most effective ways of proving that your business is viable in the long run and are typically a requirement for anyone seeking outside financing.

What next?

A business plan is a living and breathing document. It provides a focal point for the business that should be shared with all staff and stakeholders of the business to ensure everyone is on the same value length, supports it and is fully engaged in delivering on it.

Sounds easy and straightforward, yet a lot of business struggle to effectively build it into their ethos. If you want help with your business plan, please don't hesitate to get in touch with us for a chat. Our free, commitment-free, discovery briefings are a great way to get the ball rolling!

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