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Business Plan - is it worth the effort?

Looking at a Business Plan that has been written some time ago (even as little as a year for new and expanding companies) is like looking in an old photo album and laughing at the silly clothes and haircut from a couple of decade ago.

I am yet to see a business that has followed even 80% of what had been written in its pre-launch BP. And this is no surprise – it is next to impossible to foresee all the eventualities that will face a business after it would have been launched. This is obviously true for a business in a new industry or market but, perhaps surprisingly also true for businesses in well-established ones because no business, business owner or environment are exact replicas of their competition and by definition the market is not the same once a new competitor has entered it.

Having said all of the above, Business Plans are important for (at least) 2 reasons:

  • If investment is needed, no potential investor will give you the time of day without one. A proper BP shows the potential investor that some thought had been given and plans were made rather than a hasty, not-thought-through move was to be taken.

  • Sense of direction – as someone who had written quite a few Business Plans myself I can say that the process is thought-provoking and that it at least gives the business owner a place to begin and a direction to start going.

However (with a capital H and not just because this is the beginning of a new sentence), one must not stick to plans only because they were in the BP. Circumstances change, knowledge and experience are accumulated, wants and wishes reshape and sticking to pre-launch plans just for the sake of it is a dangerous undertaking.

Furthermore – sometimes cash restraints can force a business owner to take a deviation from the course previously planned to keep the business afloat. Such a survival tactic is undesirable but if the alternative is to crash and burn it may be wise to use. It is, however, necessary to remember why such a move would have been taken and return to the main route once the crisis is over. Assuming that the original (or revised) Plan was good, staying off-course for too long will fail to bring about the results you had hoped for.

One question still remains, though - how to write one? The easy answer is to hire someone to do it for you but (A) it costs money you might not want - or have - to spend and (B) something might get lost in translation, and I do not refer to lingual translation but to transfer of ideas. Plus, when you have someone else write it for you there’s a chance you will lose at least part of the opportunity to scrutinise your thoughts and ideas before penning them. My suggestion - look for a template (the web is full of them) that seems right and fill-in the blank spaces. This way you don't have to worry about format or missing anything - although most probably not all of the template parts will be relevant and you might need to delete some of them - and concentrate on contents. Trust me - there’s enough work as it is.

There are 2 parts you need to pay the most attention to (although you can’t really disregard the rest - someone might actually read it…) - the Executive Summary and the financial reports. Many manuals on How To write a BP will tell you to write the ES only after you finish the Plan itself - I don’t find it too important since you probably know it by heart even before writing the first word but please go back to it (and the rest of the Plan) once you’ve had finished the financial reports and double-check the figures you had entered. You don’t want to write that the business will break-even in 18 months when the reports indicate it will happen in 30.

A word about the financial reports - these are, in my opinion the most important part of the Plan for 2 reasons:

  • they actually make the case for the business

  • they are most probably the first part of the Plan an investor or banker will look at and if what they show isn’t favourable the rest doesn’t matter

Not everyone knows how to prepare a P&L report, a cash flow chart or a balance sheet. This is part of the Plan where I strongly recommend to get professional help. You don’t want it to be poorly represented.

So in spite of what’s written in the opening paragraph of this post Business Plans may be important. Make sure to do them right but don’t forget to review (and revise if necessary) them every once in a while. If nothing else they will bring a smile to your face at a later time, like that old photo album.

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