I have had many business ventures in life, some successful and some not so much. When a business idea gets stuck in my head, I tend to think about it all the time, trying to come up with a strategy to start the business, how to execute ideas and how to make it successful. And I use to think that I had the whole plan at the back of my head and there is no need to write it down. Writing a business plan felt boring and useless. I did not think it was worth the investment of time and resources.
However, with experience I have realized that writing down a business plan helps to broaden the thinking process. It raises many questions which might be there at the back of my head, but I never processed those issues in enough detail. Starting a business is not just something which you can just wing it and skip the whole planning process. Any start-up or existing businesses can and should make use of a business plan. And it should be done properly as a business plan is not a bunch of scribbles and buzzwords you wrote on the back of a napkin at happy hour with your friends.
So, what is a business plan?
A business plan is a written guide that outlines goals and objectives for your business and the actions which you need to take to accomplish them. It contains an overview of your business strategy, milestones to track tasks and responsibilities of the owners/management.
However, the most important aspect of any business plan is the basic financial projections which you need to forecast e.g., your sales, expenses and cash flow.
A standard or traditional business plan typically includes an executive summary, products and services, a market analysis summary, a strategy and implementation summary, a company and management summary, a financial plan, and maybe an appendix.
However, it must be noted that a business plan should not be a one-size-fits-all formula. Each business idea has its unique opportunities and problems which should be considered accordingly.
I have discussed the detailed contents of a business plan in a video which you can access on the link https://youtu.be/rn3F7sFEP44
Who is a business plan for?
A business plan is for whoever you need to see it. Business plans aren’t just for loan applications, they’re not just for first time start-ups, and they’re not just for business school students. It can be an internal document that you show to employees, co-founders or others inside the company to help them catch the vision and understand your strategy.
They can also be used externally to show potential investors, future employees or possible partners what you’re planning to do while you’re doing it and how you’re going to succeed.
If you are writing a business plan as part of your coursework for a module, do make sure that you understand the requirement of the assessment brief and parameters it set for the business plan. Business plans usually don’t follow the strict referencing protocols as in academia. However, for a coursework you should reference all the data appropriately.
How long should your plan be?
Whoever the reader/user of a business plan is, they would specify the time period it needs to cover. Your business plan can be as long or as short as you need it to be. It just has to outline your goals and be able to change when new data comes in. It can be a dozen pages long, or you can boil it down to just one page. But shorter, more concise business plans are usually the best way to communicate your vision and goals.
The cash budget in the business plan should be given monthly, at least for the first year. This helps to identify all the inflows and outflows of the business and the monthly cash position which can be a critical piece of information for investors or lenders.
A business plan is living and breathing document, able to change and be flexible. You should review it regularly. Your business plan should be dynamic. You should revise it when new data comes in. In fact, when businesses plan and then track their performance against the plan, they can grow faster than their competitors.
This article is written by Raja Mizan who is a senior lecturer in accounting & finance in a UK university. He is an ACCA member and also runs his own accountancy practice RMR Accountants & Business Advisors.