When undertaken as a regular process, small business plans can provide substantial benefits. This article discusses four of the most important.
Don’t let being busy stop you
Many business owners say they don’t have a small business plan because they’re too busy. Immediate priorities tend to dominate our mindsets, and it’s easy to become more embroiled in fire fighting than strategic planning.
However, on deeper examination, it’s often the lack of a starting point and clear process that causes procrastination. Having a disciplined and structured approach, and making a small time window available to work on your business rather than in it is an investment that pays substantial dividends.
Planning is about considering trade-offs before you need to make them. Ad-hoc situations will always occur, but a disciplined planning process will assess many potential challenges and develop appropriate mitigation steps.
In a nutshell, it’s worth finding time to plan, because it will reduce the risk of unexpected results.
Benefit 1: Increase the value of your business
Whilst justifying the value of your business is one core element of a small business plan, the ability to set value objectives and measure your progress towards these over time enhances the value of your business.
Value is something that is often considered too late in the development lifecycle of a business. Considering overall value at the time of sale doesn’t leave you much time to build or increase your business value. Value objectives and value growth targets enable you to track your progress, not just in terms of revenue or cash flow, but in terms of overall business value.
The future value of your business is determined by what happens between today and the time in the future that you exit the business. Having a plan for how this value creation will occur and how you’ll align your business with the objectives of potential acquirers is critical.
The earlier you get started, the greater your opportunity.
Benefit 2: Attracting funding and partners
Many businesses need to attract funding and partners in order to grow. In order for potential investors to assess your business proposition you’ll need a proper plan, which should lay out a well-reasoned pathway to success and actually define what success means in terms of financial and strategic value.
A well prepared and reasoned business plan shows that you have the discipline required to prepare a plan, and outlines how you intend to achieve your business objectives. Using milestones can be useful in breaking down your plan into manageable and measurable actions.
Without a plan it’s also difficult for potential investors or partners to provide meaningful feedback. The document enables a critical review of key aspects of your strategy, business model and approach.
Whilst your plan may not suit all potential audiences, it does provide the basis for others to test your logic and suggest revisions where needed. It explains your strategy and proposed actions. Most importantly of all from an investor’s point of view, it explains when and how value will be created.
The plan is often just as significant a driver of value as the business itself.
Want more articles like this? Check out the business plans section.
Benefit 3: Aligning strategy with action
Many businesses seem to merely exist rather than preparing a coherent strategy. A great strategy means that all facets of your organisation will be working together in unison – even if that only applies to the many roles that you perform as a soloist. This means that you are able to best utilise your limited resources. Much like a conductor co-ordinating an orchestra, your strategy should provide the guiding principles on which decisions are made.
Once high-level strategy has been developed during the planning process, it needs to be translated into clear, identifiable activities. Write the activities down, and make a commitment to review progress at regular time periods and where necessary adjust your strategy, actions or timeframes.
The small business plan itself then embodies what you plan to achieve and works to ensure all your resources and energy are put towards your highest priorities.
Benefit 4: Improved decision making
Making decisions about how to apply limited resources is a constant challenge for soloists. Without a small business plan, the issue is often further complicated by not having a predetermined framework for how important decisions will be made, which can lead to hasty, rather than well-reasoned decision making.
Doing most of the reasoning and setting guidelines during the planning stage means that operational decision making is streamlined.
Can you think of other benefits of business planning? Please share your thoughts and comments below.