BLS MANAGEMENT TOOLS

Business Plans

Starting a business is a complicated undertaking. It is always a good idea to sit down and draw up a business plan before starting the business.

The business plan is a written document that clearly identifies and defines the goals of a business and precisely outlines the methods for achieving them. It is a complete and detailed description of exactly how you intend to operate your proposed business, as well as a communications tool for investors and others interested in understanding the operations and goals of your business. Your plan will be a working tool, a blueprint on how you are going to build your company, a succinct document that specifies the components of a strategy with regard to your business mission. (Michael Brassil “The Only Business Start-Up Guide You Will Ever Need.")

According to Palo Alto Software Inc, “A business plan is any plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities. Business existed long before computers, spreadsheets, and detailed projections. So did business plans.”

People tend to assume that they only need a business plan when they need to go to a bank to get a loan. This is the wrong attitude to develop. A business plan is essential for any business no matter how big or successful it is. It provides a map for the business showing were you currently are, where you want to be, how to get there, how long it should take to get there and can also include how much it may cost to get you there. Palo Alto Software Inc goes on to say that, “They (business plans) are also vital for running a business, whether or not the business needs new loans or new investments. Businesses need plans to optimise growth and development according to priorities.

While there is no standard format or set way for a business plan experts agree there are elements that should be part of every plan such as a description of the company, service or product, market, forecasts and financial analysis. A good way to start a business plan is to write a simple summary of the product or service, a mission statement, the market, and a financial including start up cost analysis.

The information in the business plan will also depend on the kind of business you’re starting or you’re in. For instance for bigger businesses the plan may include information on the management team which would not be necessary for a smaller, sole or family run enterprise. The information provided in this first draft should give you a picture of whether your business idea is viable or if you need to make changes.

Common Business Plan Mistakes

by Tim Berry of BPlans.com

What are the most common mistakes when writing a business plan? Here is my list of the ones to make sure you avoid. While including the necessary items in a business plan is important, you also want to make sure you don’t commit any of the following common business plan mistakes:

Putting it off

Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan. Don’t wait to write your plan until you think you’ll have enough time. “I can’t plan. I’m too busy getting things done,” business people say. The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

Cash flow casualness

Most people think in terms of profits instead of cash. When you imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

Idea inflation.

Don’t overestimate the importance of the idea. You don’t need a great idea to start a business; you need time, money, perseverance, and common sense. Few successful businesses are based entirely on new ideas. A new idea is harder to sell than an existing one, because people don’t understand a new idea and they are often unsure if it will work.Plans don’t sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information.

Fear and dread

Doing a business plan isn’t as hard as you might think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).

Spongy, vague goals

Leave out the vague and the meaningless babble of business phrases (such as “being the best”) because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

One size fits all

Tailor your plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can also be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

Diluted priorities

Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

Hockey-stick shaped growth projections

Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as ’something’ happens. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

Courtesy of BPlans