Business plans and 7 reasons why they're a must
Most of us are familiar with the very high failure rate of small businesses. It’s scary and sobering. It’s also preventable, with a plan.
Can you imagine how successful a wedding day, an overseas trip or building a new home would be without a plan? We all spend time planning events like these to ensure a successful outcome. Why is it that so many small business owners embark in business and work without a plan?
In the past five years I have assisted some 350 small business owners develop their business and strategic plans. They realised that their business would flounder or was “at risk” without a clear business and strategic growth plan. They took the first and essential step in ensuring business success.
Why do people not think this far ahead? Some of the reasons often given for failure include:
- Risk management strategy and contingency plan
- Personal and fiscal discipline
- Cash flow
- Personal and professional networks
- A clearly defined niche market
- Life plan
- Poor financial management
- Substandard customer service
- Inexperienced leadership
In my speaking engagements I often stress the importance of three things to ensure your business is successful – a map, method and mentor.
And of all these, why is a map so important?
Context and Content
Many business owners are so busy in the day to day operations of their business (content) that they have forgotten why they are in business, where they are headed (context or vision) and the key strategic goals needed to grow their business.
This is clearly illustrated in the two photos down below. The picture on the top is of an ordinary leaf. It’s a rather unremarkable photo. It does not have context or perspective. It’s random, simple and lacks clear purpose. That’s what happens when we operate our life and business without a plan. We are reactive and focus on whatever is demanding our attention at the moment.
‘We can’t see the wood from the trees’ as the old saying goes. We are so busy working in the ‘content’ of our business we have not taken the time to plan.
The photo on the bottom is the landscape we see when we consider the forest as a whole. There is a clear vision here. The result is beautiful and productive. It attracts huge amounts of business (tourists). Do you have this kind of perspective for your business?
When I ask for feedback from my workshops and coaching participants, nearly 100% report that developing their business plan has given them clarity. They know why they are in business, how this aligns with their purpose, they have a clear vision of where they are headed and know how and where their growth is coming from. They have clear SMART goals and actions steps to achieve these. Our thoughts and ideas are great but they are also random, numerous and often confusing. Getting them out of our heads and on paper gives clarity and focus.
Confidence and Certainty
Certainty is something we all strive for, in life and in business. Without it, confidence fades and confusion takes it place. How do we gain it? It might be a cliché but as far as confidence and success are concerned, knowing is half the battle. You need to see the big picture (the context) as well as the detail of how to get there (the facts), and in doing so you form the cornerstone of your business in the short and long term. Tapping into your knowledge base and pinpointing your place in the world equates to less stress and greater peace of mind. It also saves a lot of time by not getting lost from one fin year to the next!
Checkpoints and Confirmation
Like a map, a business plan has checkpoints or key markers along the way to where you are headed. You need weekly, monthly or yearly ‘checkpoints’ in terms of your staffing, marketing, operational and financial goals. Seeing where you are headed and passing the clearly signed checkpoints is a powerful motivator and confidence booster, knowing that you are on – track.
Currency and Continuity
I hear so many people remark that business plans are a big waste of time because once written for a particular reason (usually to raise finance for an idea or interest) they get left on the shelf or in the filing cabinet, never to be looked at again.
Your business plan needs to be current and provide you with continuity. It also needs continual and constant reviewing and revising. It should be central to your weekly, monthly and yearly planning. If you are using this to build your business, Version 1 will become Version 4 (at least) by the end of 12 months. So be proactive and keep your business plan current. Doing this it will ‘force’ you to take time out to work on your business.
No matter how small your team, your business plan should be central to your business conversations. Aligning teams to the Purpose, Vision, Missions and Values of the business is essential. Conversations around strategic goals, people performance, operational goals, and customer satisfaction arise from the strategic plan, not just on an ad hoc reactive basis. If you are a solopreneur, then use your plan in mastermind groups and with your business mentor or coach.
Think of your business plan as your business compass – it gives you and your business ‘true north’ and keeps you moving in the right direction - with confidence, focus and clarity. Many distractions will come your way ( a new marketing tactic every week!) and you will be tempted to move in different directions as you get nudged and pulled off course. Inevitably your spirit and mojo will be low on occasions too. When this happens go back to your plan and like a compass it will point you in the right direction. Knowing you are on track and passing your milestones is tremendously encouraging and keeps you on-purpose!