Most printers would have one problem when it comes to business plans: they don’t have one.
A National Australia Bank survey last year found that 80% of Victorian small businesses and 66% in New South Wales did not have a business plan. The worst place was South Australia: only 3% of businesses there had one.
There are many good reasons why small business owners would not bother to sit down and write a business plan. First, who has the time? Entrepreneurs tend to be action-oriented people. If you have to choose between selling to a customer and writing a plan, you follow the money. Most SME owners don’t have a business plan because they are too busy making money.
But small business owners can’t afford not to have a plan these days. Banks have pulled back on credit. They now expect to be provided with a business plan. They want to know whether the business owner understands the cash flows and they want to know all about the inventory management system.
Banks will feel a lot more comfortable if the entrepreneur walks in with a plan rather than turning up and saying: “I don’t have a plan but can I please have another $250,000?”
Business plans are important for other reasons too. The plan helps clarify whether the business is headed in the right direction. Is the market growing as fast as the business owner thought? Do the entrepreneur have the right products? The right staff? Are the margins correct or do they need adjusting? Asking hard questions gives the owner the control and confidence to move ahead. With the questions answered, the plan has identified criteria to compare performance year on year. The plan also helps clarify what exactly the business is selling.
A business plan sells others on the business. This is very important for attracting investors, arranging strategic alliances and partnerships, attracting key employees, obtaining big jobs and contracts and, most importantly, getting finance from the banks.
Specialists say the best plans cover such areas as the company’s intellectual property strategy if they are offering services that are unique, the product overview, and the corporate structure including such issues as all shareholder agreements and the spread of equity. The marketing plan looks at the tactics the company will use to implement the four Ps of marketing: price, product, promotion and place. Financial modelling looks at sales forecasts and expenses and should, ideally, be done looking five years ahead with the first two years done on a monthly basis, or 24 projections. Operational plans look at such issues as how the product is placed on the market, the business systems and the supply chain.
The plan should also cover funding sources; potential partners and third parties; legal and compliance issues and the team itself, examining the current staffing levels and how this will drive growth. Depending on the size and complexity of the business, it can take a good few days to knock a plan together. The best time is usually the weekend.
No plan should be set in stone. Customers change. Suppliers drop off. The market changes. It’s important to update the plan at least once a quarter.
Checklist
Your business plan should include:
· Executive summary
· Market analysis
· Company description
· Organisation and management
· Strategic analysis
· Marketing and sales management
· Service or product line
· The amount of funding needed to start or expand
· Financials
· Appendix
Leon Gettler is a senior business journalist who writes for a range of leading newspapers and journals.
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