Approximately 75% of new companies close their doors within the first three years.
Successful company owners know the importance of planning and strategy and incorporate these processes into their day-to-day operations.
They will still be more successful than if they had not made any preparations.
Small businesses are especially vulnerable because they lack the resources of more prominent companies to see them through difficult times or costly mistakes.
For small businesses, knowing their market and allocating their scarce resources wisely is even more critical so that they can adapt swiftly to shifts in the industry and avoid making fatal strategic mistakes.
These facts alone should motivate every company owner, no matter how big or small, to study and master the art of business planning.
Money-Borrowing Isn’t the Only Reason to Do Business Planning
When approaching a bank or investors for financing, many business owners and managers only create a plan for the first time.
Once the loan conditions have been met, the plan is typically put away in a drawer and forgotten about until another loan is required.
Writing a business plan is not a one-and-done task to please an outside entity. For optimal effectiveness, this feature must be incorporated into the day-to-day operations of your company.
Planning for a company’s future is an important task that can mean the difference between success and failure.
Components of a Business Plan
No matter the industry, there are a few consistent components of any formal business strategy.
The sooner you acquire this knowledge and apply it to your company, the sooner you will be able to steer it in a more lucrative direction.
If you want your business plan taken seriously by a third-party financier or investor, I’ve included a high-level overview of what they’ll seek.
However, it would be best to build your plan so that it covers the detail for prospective investors and becomes a critical tool that provides practical guidance for your business.
First, a synopsis
Your executive summary briefly discusses every part of your business strategy. It’s not just an overview; it’s a condensed version of your complete system.
If you are presenting your plan to an outside party, they should be able to grasp your company and your strategy just from reading the executive summary.
2. Exposition of the Firm
Your company is summarized here.
Here you describe:
What you do, who your customers are, and why your company exists Value Streams: Products and Services You Want to Create
As you build this component, you must also specify the following:
Value Proposition. Which describes the values and goals that serve as the foundation for everything you do as a company. Which explains the kind of business you hope to build. Which describes who you are as a business, what you do, and why you exist? – Aims and Purposes. Write down what you hope to accomplish during the time frame and how you plan to get there.
The Third Business Setting
In this section, you should elaborate on the dynamics of the local business environment. It would be best if you planned out the following:
What you see as the future of your market, the wants and needs of your customers, the nature of your competitors, the chances and threats your company faces, and a breakdown of your strategy for achieving success.
Company Profile 4
Describe the value your business brings to customers in this section.
Examine the following and explain how they contribute to your company’s assets and competitive advantage:
– The Organizational Model and Management Value Streams for Products and Services Your company’s innovative use of technology and its operational prowess Capabilities in Marketing – Capacity in terms of both money and people
5. Corporate Policy
In this section, you’ll outline the approaches your firm intends to take across several functional areas of the business.
Strategy for promoting and growing your company through advertising. Methods for enhancing productivity, quality, and costs in operations and creating innovative products and services Methods for Training and Educating Workers to Suit Emerging Business Needs Strategies to position your company’s finances to take advantage of upcoming possibilities.
You need to detail how your business strategies will affect the company’s future success and provide backup plans if the economy worsens.
6. Economic Snapshot
Financial statements detailing the “current state” of the company and your forecasts for the “future state,” supported by the strategies above and assumptions, make up the company’s financial review.
The “current state” and “future state” cash statements are essentially identical.
Statements of Operations, Financial Position, and Cash Flow
To understand where your revenue comes from and where it goes, you need income statements that dissect the financial data connected with each product or service value stream.
The projected values represent educated guesses about the future. Be careful to provide a connection between your predictions and underlying assumptions.
7 – Strategy
Your strategy for putting your company strategy into action is detailed in the tactical plan.
It should determine the following:
Essential Procedures Who is accountable for what tasks Timelines for completion and necessary tools should be included.
If the present state does not meet the needs of the desired future state, the strategy should detail how resources like equipment, facilities, personnel, and training will be acquired.
Incorporate the following into your strategy:
The measures needed to ensure good feedback is available to monitor progress against planned goals and objectives; include a short description of the planning organization structure; the frequency of reviews; the process for addressing the planned activities; and how progress can be monitored.
How long should you expect this to last?
No more than 20 pages in clear, concise English.
Do It Anyway
Don’t write a business plan until a lender or investor asks you to do so. Get started right away using the resources at your disposal. When creating a business plan, getting lost in the weeds is simple. Your foresight and beliefs must be solid, but not so much that you get stuck in an endless cycle of “analysis paralysis” and never take action.
If you create regular reviews of your plan against the current business environment, you can rest assured that the accuracy of your project is not necessary. Your plan’s efficacy will increase over time as you review it and make required adjustments regularly.
Your business plan needs to be a “living, dynamic” document that serves as the basis for all your company’s personnel actions. A company that goes through the motions of a yearly planning process only to file away its results until the following year is no better off than one that relies on ad hoc, reactionary tactics. The more often you engage in planning, the more refined, accurate, and fruitful your company plan will be.
Going through the process steps will prompt you to consider some fundamental questions about your market and company.
Eventually, this process of brainstorming and vetting new ideas will become ingrained in your company’s “culture” and require little conscious effort.
All the best,
Les
Highlander LLC Consulting is run by Les Ross, the company’s proprietor. He offers low-priced advice to help small businesses and industrial start-ups in the United States and elsewhere improve their chances of success.
A business strategy, digital and social media marketing, system design, value stream mapping, six sigma methods of management, and lean technology are just some of his areas of expertise.
Les brings a rational and practical approach to business management based on simplicity and ease of execution to his clients, who range from one-person professional organizations to large international enterprises.
With the help of online meeting technology, he can provide a coaching/consulting service to businesses all over the United States and the globe that is affordable and convenient for his customers and their employees.
On Twitter, you can find him easily. In addition to his website, he publishes a newsletter offering free advice and resources to small company owners.
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