Although business planning is a widely discussed and written about topic, I come across many businesses that don’t have a formal business plan that is reviewed, monitored and used as an effective management tool in the day to day running of a business. So why bother with a business plan when many businesses have got by without one? In these cases, often the plan is ‘in the head’ of the business owner or a core team of managers in a small business can informally run a business plan through regular meeting and discussion.
However, business planning proponents will always quote Winston Churchill with ‘he who fails to plan is planning to fail’ or Benjamin Franklin with ‘if you fail to plan, you are planning to fail’. There are many similar quotes out there!
What to do with that business plan?
When working with businesses, the last thing we want to see is a business plan prepared and then put in the third draw and not looked at again until the same time next year. A good business plan will be prepared by the key stakeholders and managers in the business and it will be used to help:
- communicate the vision for the business
- steer stakeholders and managers toward a common set of business goals
- establish a set of key performance indicators for the management of individual performance of managers and/or other employees, and
- allow the regular review of strategy, the challenging of ideas in a constantly changing business environment and agreement on refinement of the plan or adaption to change.
Business plans are also widely used for start up businesses (taking a general idea and commercialising it on paper), justification for the acquisition or commencement of a new line of business, raising finance and a starting point for raising capital.
Types of business plans
Notwithstanding the large amount of publications I have seen on this topic, I can broadly categorise business plans into three distinct types:
- The ‘lean canvas’ style of plan that is used by start up businesses and lean tech companies in their early stage. The plan is often on one page and provides a snapshot without over-engineering, it can be easily understood and communicated in any pitch and can be quickly adapted while the business is going through early hurdles of commercialisation.
- The ‘business planning workshop’ style of planning, which focusses less on producing a polished business plan document, but more on identification of business opportunities, key actions for the next reporting period and most importantly, engaging a larger team of managers in a common set of business goals. This planning process relies on the ‘SWOT analysis’ approach to planning. The outcomes of this process (which may involve a series of workshops over time) will include a high level business plan document that is used for internal purposes and a framework for managers to report back regularly on achievement of agreed goals.
- The formal business plan. This process is the traditional approach to planning and is relevant for businesses seeking external finance for growth. The finance may be sought from a banking institution or a potential equity holder and a more detailed and formal plan is required to support the assertions of management and to legitimise financial projections. Larger business will also adopt this approach because of the complexity of their business or the multiple channels for sales and markets.
Where to next?
While the choice of the type of business plan that is appropriate for your business will be fairly obvious, preparing a good plan is not necessarily an easy task. I will write more on this topic in future posts and please contact me if you would like with your business plan.
As a starting point, you can check the business planning templates and guides provided on the Australian Government website business.gov.au.