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Why Writing a Business Plan is Critical for Success

Man sitting at desk writing a business plan

We’re not talking War and Peace, just the business plan basics. After all, failing to plan is planning to fail.

Writing a business plan is considered an important part of launching and scaling a business.

Unfortunately, for them, most small to medium businesses don’t have a business plan. Or if they do have a business plan, it usually isn’t up to date or clearly communicated to the employees whose shoulders the successful execution of the business plan rests.

Fortunately, for you, you’re about to make a really grand plan, and it won’t rest heavy on your shoulders alone if you follow it through. And while you may encounter the odd ‘catastrophic muck-up‘ along the way, as we’ve all come to expect, we encourage you to trust the business plan process in all its guts and glory. 

In the words of the late Jim Rohn, mentor to Tony Robbins, and one of the most famous business philosophers of our time: “If you want to turn your business around then don’t start a day until you’ve finished it on paper. If you want to be really successful then don’t start a week until you’ve finished on paper. If you want to be a star then don’t start your month before it’s finished on paper. If you want to retire rich and happy in record time, then don’t start your year until you’ve finished it on paper.”

Want to build a good company, and be in good company, as in, the company of Rohn and Robbins? Start the plan and finish it — you heard the man — on paper.

Why writing a business plan is important

It’s not so much the act of writing a business plan that’s important, but the due diligence you’ll end up doing on your own business.

If you hope that one day someone else will want to do due diligence on your business, then you should at least try it first, given the opportunity. Maybe that time is now and you’re already seeking debt or equity finance. Congratulations! But first, as Jim Rohn famously said, finish this first.

Potential investors will want to know how your business operates and your financial forecasts. Business lenders will want to know that yours is a viable business that can make its debt repayments. A business plan can also be helpful if you are planning to sell your business.

Writing a business plan requires you to review your processes and think clearly about the way you do business, forcing you to focus on the areas of your business that need improvement. An up-to-date business plan is a passport to securing additional funding, from lenders or investors. As a bonus prize, writing a business plan will probably reignite your passion and energy for the business in general. It’s a win-win for everyone.

There are as many different opinions on how to write a business plan as there are business owners who don’t use one to control their business. Business plans differ between organisations but the principles of planning remain the same. Factors that will affect the content and style of the typical business plan include:

  • Who the business plan is being prepared for
  • The type of business
  • The size of the business
  • The reason the business plan is being prepared. For example, the business plan you write to start a business will differ from the business plan of an established business seeking debt or equity finance.
  • Time available for writing the business plan.

Business plan structure

Here is a basic structure that all business plans should include:

Cover Sheet: Including name, address, principal contact, phone no, and date the plan was written

Table of Contents

Executive Summary: This briefly outlines key content of the business plan.

Business Overview: Including a brief description of how, when, and by whom the organisation was started. The business overview should also include the organisation’s key achievements, setbacks, current status, and a mission statement which clearly and concisely states where your business is headed and what you hope to achieve.

Products and Services: Describing the need for the products/services in today’s marketplace, how they will make a difference, the benefits derived from using them, and detail any exclusivity or uniqueness.

Market Description and Analysis

  • Customer profile: Describing who is your target market, where they are located, and the market size.
  • Industry profile: Discuss relevant trends past, present, and the future, including data on past and current sales, and future sales growth forecasts, so you can demonstrate your business is viable in the long term.
  • Competitive profile: Compare and stress the advantages your business has over the competition including; price, quality, service, promotional strategies, and distribution.

SWOT Analysis – Outline the key:

  • Strengths that can be built upon
  • Weaknesses that can be strengthened
  • Opportunities that can be capitalised upon
  • Threats that can be reduced.

Marketing Plan: Specifying the organisation goals, how they are to be achieved, and planned sales and marketing strategies. This will also include a marketing analysis looking at the size of the market, competitors and other factors.

Operations Plan: Disclose present operational capacity and capabilities, as well as future staffing, equipment, and facility requirements. Substantiate any licensing or patent advantages the business has, and any future research and development plans. This will also include a description of your management team, outlining their skills and experience.

Financial Plan: Include financial projections with key financial performance indicators if you’re preparing the plan for financing. This will include a cash flow statement, balance sheet, and profit and loss statement (also known as an income statement). A sales forecast is a critical part of your financial plan.

Appendix: Provide a glossary of all key pieces of documented evidence.

Writing a business plan does involve considerable time and effort. The long-term rewards, however, well outweigh the investment of business resources. There are plenty of aids, such as Moula’s free business plan template, that can assist you to accelerate the business plan writing process.

Finish it! But first, this.

Completing your business plan is just the beginning. As your business evolves, conditions change. You gain more knowledge and experiences. This is why a business plan must be updated on a regular basis.

Note that Moula does not require a business plan when making business lending decisions. Get the business loan basics from Moula.

Author:

All the thoughts, ideas and musings from the Moula team! Covering everything from work/life balance to general finance tips plus everything in between!

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