Why bother with a business plan?

Business planning is not just for start ups who want to secure initial funding. It’s also crucial to managing your business more effectively, and helping you set realistic goals and objectives that you can return to, and measure your progress by on a regular basis.

Business plans are not just useful at critical moments in business time. They have a role to play in everyday business management. When you're faced with customer demands, tax deadlines, VAT returns and a dozen other business-as-usual problems, it can seem hard to justify devoting any time at all to drawing up a business plan, when no one's actually asked for it.

But a business which doesn't have a clear idea of what it is trying to do will find any plans for growth difficult to follow and will probably have an unsound financial structure. This means that its long-term prospects are (at best) stagnant, and at worst could see the business declining into bankruptcy.

How can a business plan help my business?

A business plan is a strategy document which defines where your business is going and how it intends to get there. It is usually a long-term vision and normally spans either 1, 3 or 5 years.

Although the document itself acts as a useful benchmark, allowing you to check your progress every three months or so, the process involved in producing it is as valuable as the documentation it creates.

A business plan makes you analyse the resources you have - finance, people, facilities and premises - to see whether you have enough to reach your end goal. If you don't, not only have you identified this as a risk but you can now work out how to make up the shortfall. It also makes you research the markets you will compete in both today and tomorrow, this helps you ensure there is a growing number of customers who will continue to want what you sell.

When you draw up a business plan, you are forced to distil your ideas, rank your priorities and clarify your objectives. It also commits you to going down a certain road and helps you stay on that road despite distractions.

Finally, at some stage you are likely to want to exit your business. Considering what you would like to happen to your business when you’re starting out may seem like a bit of a stretch, but it may help with present day decisions. A well written business plan can clearly highlight the opportunity for potential buyers or investors when you decide to bow out.

It’s all there in my head, why do I need to write it down?

If something's down in black and white you can't pretend three months down the line that it didn't exist. If your plan didn't work out then it is important to acknowledge it, assess what’s wrong and see what changes you can make in the future or adjustments you need to make to your strategy.

By writing about your business as if you were describing it to an outsider you are forced to ask questions you could otherwise easily avoid, or you may not have thought to ask yourself in the first place.

Writing your business plan stops you getting distracted. It's easy to be distracted by new opportunities that business life throws up. Having a blueprint allows you to compare these ideas against your original objectives.
Will they really help you achieve your goals? If not, then leave them for now and focus on them later or dump them altogether. What you mustn't do, is try and do everything at once.

Finally, if you ever do need to produce a business plan for someone else, having it there already will not only make it easier for you to produce what he or she wants, but the fact that such documentation exists will instantly make you look more credible.

Can I cheat?

You should never fiddle your figures - no matter who is or isn't seeing your business plan.

Adjusting your accounts is obviously fraudulent. While it might be tempting to inflate your less tangible market forecasts by the odd decimal point or two, it's not worth it. Professional investors and bankers are skilled at seeing through such bluff and even if they accept it at face value you will then have to deliver against those targets. Unrealistic projections only store problems up for the future.

A business plan will only help your business if it's grounded in reality. Once it becomes a work of fiction it's worse than useless - it's delusional and will only result in bad decisions.

To find out more about business planning software that can make writing a business plan as easy as 1-2-3, see our product and service pages.