Very little that is worthwhile in life happens by accident. Cause and effect dictates that worthwhile results come from worthwhile efforts and the converse is also true. It’s basic goal-setting theory. Set the goal, put in place the steps that will eventually lead you there, carry them out and you will eventually reach your destination. Think of a business plan as a goal-setting tool for your business.
There are two main purposes for writing a business plan. The first is to help you to manage your business. The second is to raise capital. The focus of the business plan for each purpose is different. In this article, we are focusing on the business plan as a tool to help you manage your business.
Why Write a Business Plan?
There are many reasons why a business plan is a valuable tool when it comes to managing your business. Most fundamentally, it helps you ‘set your sail’ in the direction you want your business to go. Rather than drifting along aimlessly, being tugged this way and that by random currents and puffs of wind, a business plan helps you steer a predetermined course and stay on track.
A business plan also facilitates focus. It can help you keep your attention where it is required … on those steps you need to take to bring you closer to your objectives. This creates a results-oriented mindset which helps break the inertia that can result from a lack of focus.
The process of creating a business plan can help you to anticipate hurdles and threats to your business and to formulate actions to overcome adverse contingencies.
A business plan also serves to keep your business on track by reinforcing your vision for your business. It acts as a check and a balance, something against which to weigh a proposed action. Does the action further the purposes you have outlined in your business plan? If so, go for it. If not, it is probably just a distraction.
Things to Think About In Your Business Plan
A good starting point to begin thinking about the elements of your business plan is to carry out a SWOT analysis (what are your business’s strengths, weaknesses, opportunities and threats)?
The strengths you identify will become the foundation for your competitive focus. You want to think of ways to exploit your strengths here as these are what will set you apart from your competition. For example, you may be particularly good with people. Use this talent in the customer service aspects of your business to distinguish yourself from your competition who may be lacking in this area.
By identifying weaknesses, you can plan for ways to compensate for them. For example, you may be in a business where you have to wait for some time to be paid by your clients and as a result you may be vulnerable to cash flow shortfalls from time to time. By recognizing this potential weakness in your business, you can take steps to minimize cash flow difficulties by arranging for an overdraft facility with your bank. Or introducing an incentive for clients to pay you earlier such as an early payment discount.
The opportunities you identify become the cornerstones for your business development. What opportunities exist that you can exploit in the next 12 months to develop your business? Think here in terms of things like technological advances that you are in a position to exploit but your competition is not, possible joint venture partnerships, or the exclusive rights to XYZ patent that you have negotiated.
Finally, the threats you identify become the foundation for your contingency planning. By recognizing the threats that exist to the future health of your business before they become a reality, the better placed you will be to implement contingency plans in case the worst happens and the better prepared you will be to ride out the storm.
Deciding on Your Plan
Once armed with your SWOT inventory you can begin to refine your thinking in terms of coming up with an overall strategy for your business. Remember, you want to exploit your strengths and opportunities and minimize the impact of your weaknesses and threats.
Once you have your overall business strategy in front of you, you are then in a position to reformulate the elements of your SWOT analysis into specific goals and objectives. Write objectives to support every goal for every area of your business. Think about your products and services, customers, competition, image, customer service, marketing and advertising, financial objectives and the like. For example, one of your goals may be to introduce a second or a third product line in the coming twelve months; or to launch a new advertising campaign or to negotiate a more favorable line of credit with your bank.
By the time you are done, you will be very clear in your own mind where you want your business to go and what you need to do to get there. In turn, this awareness will help you to recognize new opportunities as they present themselves.
Finally, bear in mind that a business plan is just that, a plan. It is not carved in stone and, as with any plan, be prepared to be flexible and make changes as circumstances and priorities change. Work with your business plan and treat it as a living, breathing, organic part of your business. By constantly keeping your plan in mind when making business decisions you can rest comfortably, knowing you are steering your business in the direction YOU want it to go.
2000 Elena Fawkner
Elena Fawkner is editor of A Home-Based Business Online … practical business ideas, opportunities and solutions for the work-from-home entrepreneur. http://www.ahbbo.com/
