Business plan power

(Picture: Shutterstock)
(Picture: Shutterstock)
DON'T underestimate the importance of a business plan for budding entrepreneurs and established business owners alike.

In the current debate evaluating the importance of a business plan versus the character and passion of the entrepreneur or business owner, both come out as equally imperative to the success of any business.

Just being an enthusiastic entrepreneur with all the correct technical skills and the drive and personality needed to succeed in this difficult arena won't swing it.

By the same token, a well written and theoretically sound business plan won't get entrepreneurs lacking focus and passion where they want to be.

Statistics show that 40% of businesses fail within their first year. This percentage increases to between 60-75% failure within the second year, and 90% within 10 years. So, passion alone is not enough to survive.

A business plan is a fluid, ever evolving strategy to ensure that your business will succeed. It is a mistake to think that once written it is cast in stone.

As the economy and markets change, as the business grows and as the products and service offerings diversify the business plan needs to be constantly updated to reflect this changing environment.

The process of writing the business plan enables entrepreneurs to crystallise their thinking, and in larger businesses it ensures that all business owners and partners are on the same page strategically and that the company is heading in one focused direction. 

When creating a business plan it is not uncommon to find differences of opinion among partners, which may be critical for driving the business forward. 

The business plan allows all stakeholders to make an objective evaluation of the business. Having a single clear direction sets the strategy, enhances investor confidence and enables employee buy-in.

A business plan is necessary for startups and growing businesses to continually access funding and investment, but more than a fundraising mechanism, it is a strategic planning device.

There are numerous areas to be considered in the creation of a business plan – marketing, finances, operations and human resource needs – and all need to be comprehensively researched.  

Tackle your business plan the right way

Too many entrepreneurs assume that they know what their customers want, without actually speaking to them.  Be humble, don’t make assumptions and instead spend time with your clients to find out their needs. 

Allow them to sample your product or service and supply feedback. Modify your product accordingly. Time spent upfront on ensuring that there is actually a genuine and not an assumed market need for your product will save time and money later, when you are left wondering why your product isn’t flying off the shelves.

Identify the gap in the market and fill it. Investigate the operations needed to make your business a success. Part of a business plan is identifying how you will manufacture the product, what technology is needed to supply your services and what suppliers and distribution channels you will need to make use of.

Identify what personnel and skills you will need now and after one and three years of operating.  How fast do you expect your business to grow and who do you need to support you in this growth? 

These are important questions to grapple with on a continual basis as your business moves from being a startup into maturity.

When creating budgets spend sufficient time obtaining all the necessary costings from raw materials to salaries, from transport to office rental. Do not just guess these costs – base them on actual quotes.

The worst budgeting mistake that you can make is to overestimate your turnover in the first few months, and the first year of operating. When estimating expected turnover, err on the side of caution and rather budget for too few sales than too many, as overestimating your turnover could lead to serious cash flow problems.

A well written business plan along with realistic financial projections will set the firm foundation upon which you can build a strong business. Take the time to think through all the questions and problems that arise in the writing of it.

This time spent will be well paid back later when your business is able to survive the turmoil of changing markets.

There are many resources available on the internet that inform the structure and content of a business plan. Ensure that your vision and passion for your business shines through in the plan, as this will make it a lot easier to sell to potential investors, or to your fellow business partners and staff.

For those who are starting up and the entrepreneurs among you - on a softer note, share your business plan with your family and get their buy-in.

They are going to be the ones supporting you through the startup and the anticipated ups and downs of owning your own business. 

Good luck and get writing!

Send your business plan to Fin24 for feedback, or simply ask a pressing question. We can put you on the right path.

 - Fin24

*Co-author Ian Reid is the CEO of Platinum Black Consulting and serves on Fin24's panel of business experts.

*You can download the complete Business Plan Book or specific chapters of the Business Plan Book at NO COST to you in English and Zulu.

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