We’ve all been taught that when we’re starting out, we should develop a business plan for our company. I’m sure when you started your business you spent countless hours working on yours. But have you looked back at it? Does it really form part of your day-to-day management and strategic planning? I doubt it. Don’t feel guilty. You’re not alone. I’ve spoken to loads of successful small business owners who haven’t given their business plan a passing thought in years; some have never even done one. That doesn’t mean they aren’t useful, just that they aren’t used properly. I’ve noted below a few suggestions on when to develop a business plan, and when to forget it.
When to develop a business plan
- When you’re seeking financing. Let’s face it, lenders and other financiers need business plans. I don’t think there’s a single lender in St. Lucia that does not ask for a business plan. If they don’t specify it, they create an application form that requires most of the business plan elements. Obviously, the most crucial part of your plan when you’re talking to lenders is your financial projections. So get that part looked over by a professional financial advisor.
- When you’re hiring staff. This may seem a bit odd, so let me explain. Many people hire their first team members based on necessity; i.e. they’ve reached a stage in their business when they know they need additional help. They look at everything that they need help with and create a position to fill that gap. This works fine in the short term. But over time you’re overwhelmed again. A better approach would have been to develop a business plan (or look back at the one you already have) and determine what skills you will need to have on your team to achieve your goals. If any of those skills are needed today, fill that position first, even if you know the role will need to evolve over time. The added benefit is that when you present your plan to potential lenders, the Team section would be strong.
- To help you plan. The main benefit of a business plan is to help with strategic planning. Developing all of the sections should help you align your vision of your business with the practical steps you will need to take to get there. Some people don’t need a business plan to do this. But in my experience most new business owners need a structure to help them create a cohesive strategy.
When not to develop a business plan
When not to develop a business plan- When you’re first testing your business idea. Too many of us create business plans before we’ve figured out if our product/service is even marketable. This is a huge waste of time. Why would you spend hours, and sometimes money, developing a plan for something that no one wants to buy? It may seem obvious, but for most new business owners it’s not. Many people create business plans before they’ve figured out if there is a market for their idea. Don’t do it. Test your idea first. Not only will this save you time and money, it will also help you develop a better business plan down the road.
- When a strategic plan would be better. For most of my small business clients I develop strategic plans rather than business plans. Strategic plans focus exclusively on how to get your business from Point A to Point B. Yes, we cover some of the same ground as a business plan, but we don’t have to bring someone who’s not familiar with your business up to speed (as with business plans). We focus on determining the best strategy to grow your business and the steps, big and small, to get there.
- When you’re not clear on your numbers. One of the biggest reasons why lenders reject business plans is because the numbers don’t add up. Maybe the revenue growth projections are too optimistic or the expenses too low; there is no basis for your price points; your wage bill may not reflect market conditions; etc. Good accountants can help you with this, but the onus really is on you, the business owner, to back up every number with facts. So, until you get some concrete data to base your numbers on, you’re not ready to do a business plan.
