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Why Writing a Business Plan Is Critical for Success

Man sitting at desk writing a business plan

Writing a business plan is critical to achieving consistent growth in any organisation. Unfortunately, most small to medium businesses don’t have a business plan. Even if they do have a business plan, it usually isn’t up to date and it isn’t clearly communicated to the staff, on whose shoulders the successful execution of the business plan rests.

Go from small to big with a business plan

In order to go from being a small business with small profits to a larger business with larger profits, you need to do the things large successful businesses do. All businesses should be sale-ready, even if the owner does not intend to sell. A sale-ready business means your investment is liquid and does not require you to be there in order to work. This kind of business is a valuable asset, creating additional wealth for the owner when they sell it. 

Jim Rohn, one of the most famous business philosophers of our time, says, ‘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.’ 

This is where writing a business plan comes in.

Why writing a business plan is important

It’s not so much the act of writing a business plan that is important, it’s the detailed analysis of one’s business which has the be undertaken that is the vital ingredient to success. Writing a business plan requires you to review and think clearly about the way you do business, forcing you to focus on the areas of your business that greatly need improvement and make you fix them. This reignites your passion and energy for what you’re doing. An up-to-date business plan is a passport to secure additional funding, from lenders or investors.

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

o Customer profile: Describing who is your target market, where they are located, and the market size.

o 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.

o 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:

o Strengths that can be built upon

o Weaknesses that can be strengthened

o Opportunities that can be capitalised upon

o 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.

A dynamic document

Completing your business plan is the beginning. As your business moves forward, conditions will change. You gain more knowledge and experiences. In addition, market conditions can change. This is why a business plan needs to updated on a regular basis.

Uses of a business plan

As well as clarifying your thinking and plan your business, there are other important reasons for writing a business plan. One is for seeking debt or equity finance. Potential investors will want to know how the business will operate and its projected results. Business lenders will want to know that it 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. 

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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