The importance of a business plan

‘Let our advance worrying become advance thinking and planning’ – Winston Churchill

Planning is crucial, even more so if you’re running your own business. Preparing a realistic, working business plan can be the difference between you getting your hands on the required capital needed for your start-up, or your business closing up shop a few months or years down the line. As Churchill alluded to, planning can spare you a lot of unnecessary worry and grief.

It’s a process that’s all too often neglected though, or thrown together haphazardly, as a brief glance at the likes of The Apprentice will illustrate. Different entrepreneurial minds and differing businesses dispute about the scale of their importance, some arguing that they’re restricting and can prove a hindrance.

To a degree it’s debatable and ultimately it’s up to your discretion as a business owner, but to the majority of banks you’ll need to show a detailed business plan to get your hands on any of their finance. Even more so given their increased unwillingness to lend.

To my mind I can’t see anything but value in a business plan. It can help provide greater vision; the establishing of goals and regular benchmarking providing managers and employees alike with a greater understanding of where they are and where they need to be.

Simultaneously a realistic plan can help to create momentum within a business, the meeting or excelling of various targets acting as a motivational tool.

Furthermore, they can help further growth and expansion, illustrating what works, where the opportunities are and what the future may hold.

Constructing a business plan can be time-consuming, but it’s a process that should pay dividends if done correctly. At the most basic level, a business plan will be comprised of the following components:

A description of the business

Your plan will need to provide an overview of your business, including its vision, aims, and how it plans to achieve them. The acronym SMART is useful to when drawing up aims and objectives, the respective letters standing for specific, measurable, achievable, realistic and time-bound, all of these being qualities your goals will need to have.

An outline of the existing market details and their significance

Shaped by your market research, within the business plan you’ll need to provide details on the size of the market, as well as an overview of the potential competitors. Anything significant your market research shows should really be included, this helping to gain the confidence of investors and help shape your future marketing decisions.

Operational details

The length and detail of this section will depend heavily upon the nature of your business. If you plan on producing your own products you’ll have to outline how and where the product will be produced and the scale that you plan on producing. Information on the proposed number of employees will also need to be included as part of the operational information, so that potential investors can cast a wry eye over plans and either scale back or even scale up your ambitions.

Financial information

Probably the most important section of the business plan to an investors or lenders eyes is all the financial data. Information on things like a capital equipment and supply list will need to be provided amongst accounting staples such as predicted or existing balance sheets, income statements and cash flow forecasts. Once you’re up and running, Online Accountancy can make the process of checking this data easier, as construction of such information can be made at the click of a button.

You may plan to go ahead without a business plan. If so, good luck. You’ll be following the logic of unintentional comic Karl Pilkington, who once remarked ‘You get nothing done by planning’. Needless to say, he’s star of a TV show called ‘An Idiot Abroad…’