Why is Business Planning So Critical?
The first sound advice to give a business owner or entrepreneur is that he needs a sound business plan. Investors, financial institutions and the owner himself need to read the business owner or entrepreneur’s plan before entering into funding discussions. The entrepreneur needs to show that he has thoroughly thought of all the aspects of the business undertaking and that there is a business plan that summarizes the steps to be taken.
The business plan must focus on the following:
> The business plan must describe the necessary steps in a roadmap to build the company and achieve its long-term objective of say, achieving $15 million over 3 years.
> The business plan must set goals in the short-, medium- and long-term so that the necessary resources can be deployed to reach the goals.
> The business plan must have a resource allocation plan and help the company identify how to work with scarce resources and shore up additional resources as required.
> The business plan must plan for contingencies so that the company can react to and overcome business challenges as they occur.
> The business must describe the competitive landscape and sound business planning will help the entrepreneur position the company to effectively compete in the marketplace for business.
Fundamentals of Business Planning
The business plan is a "live document"
What constitutes a good business plan? A good business plan focuses on its function to solve the business purpose. It only needs to be carefully formatted and well prepared for the business challenges ahead. The business plan must have the vision and mission statement, objectives, areas of focus, strategy and tactics, plans of execution, roles and responsibilities, milestones and deadlines and performance metrics. It needs to be a "live" document with regular updates. The business plan should be results-oriented with performance reviews done regularly.
Business planning incorporates change
A good business planning will have multiple scenarios and with different levels of success. Scenario planning should not just be for large organizations in volatile markets but should be embraced by smaller organizations as well.
The business plan uses a pragmatic projection of numbers and figures.
The numbers that you see in a business plan - sales projections, estimated costs, expenses, salaries, administrative costs, profits, cash flow, required working capital and assets and liabilities - are projected to the best of our knowledge and must take into account the business realities and fragilities.
Business planning disciplines us to be prepared for uncertainty
With the ever-changing business landscape in a fast-paced Internet world we live in, business planning helps to establish key performance indicators (KPIs) and metrics to review and measure our performance against, and to keep us on track to meet our goals and objectives.
A good business plan is only as good as its results
With great execution, a good business plan will deliver the results. Strategy and planning is only on paper but a well-executed plan is what it takes to succeed.
Keep the business plan simple.
A business plan has to be kept short and manageable to be well-understood. It is not meant to cover every possible scenario or cater for all contingencies.
Practice your elevator speech and business pitch
Continue to test out (or tweak, when necessary), practice and perfect your business pitch and unique selling proposition (USP) until it becomes ingrained in your DNA.
Test out your business plan against the real world
Prototype and test your products and services within a design thinking framework, against the real world with real people, real leads, real prospects using practical systems and processes.