Why do I need a business plan?
A solid business plan is a crucial tool for success for businesses of all sizes. Whether you are a sole trader, or you run a limited company with several members of staff, a business plan keeps you focused, aligned and aware of what is going on under the surface.
Not only is it a tool for you as an owner, but it also allows you to communicate and demonstrate your business’s success to stakeholders, including investors and lenders who want to know what is happening to their money.
When should I update my business plan?
Putting pen to paper and crafting your business plan should be one of the first steps on a start-up journey, something to do before you even begin trading. However, once you have a plan in place, it should not be static.
Revisit and update it periodically, and you stand a better chance of ensuring your business still aligns with its purpose, and that any market, economic and consumer developments are considered.
Having an updated business plan is perhaps more crucial right now than ever. Costs are spiralling for both companies and consumers, inflation is sky-high, loans are more expensive thanks to increased interest, and we are in a period of general economic and political volatility.
A business plan that considers all of this will allow business owners to navigate these challenges and stand a better chance of steeling themselves against recession.
Business plans should be based on company performance and what is going on within its markets. From here, realistic goals, plans and contingencies can be identified to act as the solid foundations on which to achieve continued business success and growth.
How to analyse business performance
Owners need to consider multiple aspects when assessing business performance. There are, of course, hard statistics such as turnover, profits and leads, but there are also less tangible elements to consider.
If you have employees, for example, how is their experience? Is there anything in their day-to-day work that you may not see as the boss? How do your customers and clients perceive you and how does this compare to competitors? Reviewing this will help give you a true overview of how the business is performing.
Review sales performance and budget
Looking at your finances first will give an immediate indicator of your business’s health. Good cashflow should be a small business’s biggest focus, especially in times of economic turbulence.
Examine the success or failure of different strategies in delivering a good reserve of cash, and how changes such as growing the team or moving premises may impact these.
This will tell you what you can afford and how much money you need in the bank, helping to make informed decisions accordingly.
Look at the wider market
A successful business is aware of what its competitors are doing and how they’re doing it. Stay up-to-date with what’s happening in the market, predict growth and trends, and keep an eye on developing niches within the industry. It will strengthen your position and allow you to jump on opportunities.
There is a lot to be learnt from gauging competitors, particularly in looking at what they do, that you are not, and the reasons for this. There’s also a lot to learn from ailing competitors or those who go out of business. Competition is dynamic, so it is important to regularly update this.
Engage employees
Talking to your team will flag any areas that require extra resource. Are packing and dispatch staff overstretched because more orders are coming in? Are the customer service team twiddling their thumbs because there aren’t that many enquiries? Getting this on-the-ground intel will indicate if teams need restructuring, a different allocation of resources, or simply more people on board.
This will also reveal employee satisfaction and show if you need to re-evaluate the way you support employees in doing their job, and reward them. Ensuring your team is happy is more important than some owners give credit for, so make sure it’s a core element in your plan.
Seek customer feedback
Your audience is what keeps your business going and without them, there would be no cashflow at all! Engaging in casual conversation with appropriate customers and clients and looking at online reviews are simple ways of doing this, but there are also data-driven ways that will give richer insight.
Digital feedback tools ask for reviews that can lead to more focused discussions, and business analytic tools give insight into what customers are buying and their purchasing journeys. Audience needs to be at the centre of every business plan, so really try to understand what your ideal customer needs and how you can provide it for them.
Does your plan fulfil the business’s purpose?
With an accurate view of your business’s performance, founders need to ensure that it is still meeting its purpose. The business plan needs to clearly demonstrate what customers want and how you are achieving that. If the plan, performance, and purpose no longer align, it’s time to revisit what you’re doing, and how, and then communicate this to those involved.
How regularly should I monitor business performance?
Analysis across every area of the business must be ongoing. Each month, business owners should have a top-line look at their finances, employee satisfaction, customer feedback and the wider market. This will highlight any immediate issues as they arise, and allow owners to tweak business plans accordingly to mitigate the impacts.
Ongoing monitoring and reporting will help catch problems in their infancy, rather than allowing them to fester and grow over time.
Business owners should then do a deep dive into their business performance on (at least) an annual basis. This can coincide with the end of the financial year to give a good view of the yearly results and allow comparison. At this point, founders should be willing to throw their whole plan out and start again if required.
Setting realistic goals
Goals in a business plan need to be achievable and realistic. Etsy sellers, for example, probably shouldn’t aim to double their profits in the midst of a cost-of-living crisis. Having unrealistic targets will give you a warped view of how much money you need or will have in the bank, and lead to problems further down the line, as well as having the potential to demoralise owners.
Creating SMART targets (specific, measurable, attainable, relevant, time-based) will ensure goals are ambitious enough to encourage growth without being impossible to achieve.
Why is updating your business plan important?
A business plan is the fabric and foundation of a business – you would not start building a house without clear and accurate plans of what you wanted to achieve.
- Focusing on the next stage of growth maps out how to achieve it, keeping goals and targets on track
- Helps you to make better decisions and formulate ongoing strategies
- Allows you to share the vision of your business and communicate viability to investors, employees, freelancers, lenders, and business partners.
All in all, your business plan is an essential resource that legitimises a business, as well as you as its leader. Keeping it up-to-date and sharp demonstrates business know-how and makes you a trusted partner.
Despite it having the potential to be a burdensome task, a solid plan will underpin success.
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