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The Business Planning Process
Sceptics and fans of business plans all agree that securing funding almost always requires a formal plan, writes Pat Sutton from O’KellySutton.
Companies funded by friends and family may not need a plan but if you go to commercial banks, venture capitalists, government-backed lenders or most angel investors, you must have a well thought-out documented plan.
Various research shows that entrepreneurs who use a business planning process are twice as likely to be successful in getting a business started than those without. Some successful entrepreneurs might lead you to believe they do things on the fly and do not need business plans. However, these people just happen to be exceptions to the norm who got lucky. In any event, most of them actually do planning even if it’s ad hoc and unconventional.
Business Planning Process
One could argue that the process of business planning is much more important than the end plan itself. It is an important management function that allows an organisation to evaluate the health of its standing in the market and industry, and adapt accordingly. The results of the business planning process will trigger a series of changes that should be made to the business. Failure to conduct regular checkups may result in a failure to detect early signs of business problems and may even ultimately lead to a company’s demise.
The planning process should look at the very core of the business model, including:
- mission and values
- products and services
- target markets, routes to market, marketing strategies
- operations, management, key resources and activities
- competitor analysis
- internal systems, process and technology review
- external forces evaluation
- financial analysis with detailed underlying assumptions upon which the financials are built
- risk analysis – what happens to cashflow if we don’t deliver fully on sales, margin, cost control etc?
Covering all of the above in your business planning process should help you to develop a new road map to success.
Business Planning Tools
There are lots of helpful tools and pro forma plans that can be used to facilitate the process; most of these are freely available online – such as on AIB’s website: http://business.aib.ie/help. Over the years, we have found that plans developed by the team – management and staff – are always more powerful and successful that those just created by the business owner in isolation. There must be ownership of the plan by the full team, with common goals and purpose. Even if you are a one-man or one-woman outfit, get family, friends or business supporters with you and go through the process. There should be someone involved who will ask the hard questions and give guidance; that’s where an experienced business facilitator will add substantial value to the process.
Bringing it all Together
The planning process should seek to highlight what you and your business are really good at doing, how to accelerate the growth in those activities, and how to evaluate what parts of your business offer potential value and opportunity. Too many businesses are either afraid of innovation or do not push themselves hard enough to look beyond the here and now. The business planning process should try to identify the golden nuggets in the business and develop them.
The business plan needed for external purposes has to tick all the usual boxes, but the internal working plan should not be a long bulky document. There are many international business gurus – such as Verne Harish and James T. Horan – who advocate the one-page business plans through their books on the subject. But whatever the length and content of the business plan, it’s only as good as its execution. I’ll repeat – it’s only as good as the execution. That’s the bit many fail to grasp. You need to prioritise your goals and establish action plans for implementation – allocating timelines, responsibilities and resources. There should be a performance measurement system in place with monthly reviews to see where the actions followed through on. The execution is hard work and many who fail are not prepared to see it through to the end.
Written by: Patrick Sutton, O’KellySutton, Chartered Accountants and Business Advisers, Kildare
Please be aware that all of the views expressed in this Blog are purely the personal views of the authors and commentators (including those working for AIB as members of the AIB website team or in any other capacity) and are based on their personal experiences and knowledge at the time of writing.
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