One of the first things we ask each new client is whether they have an up-to-date business plan. This puzzles some people. “What does my business plan have to do with redoing my website, or getting more leads?” More than you might think.
Many owners think of a business plan as a complex document that’s really only necessary if you are approaching a bank or investors for money. While business plans are certainly used to obtain funding, their main purpose is to document what your business is, what you plan to do, and how you plan to do it so that all of the members of your company are operating within the same framework.
“The main purpose of your business plan is to document what your business is, what you plan to do, and how you plan to do it.“
Creating this clarity can increase your likelihood of success. A study in Harvard Business Review found startups who wrote formal plans were 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs.
Writing a business plan can be done with as much or as little formality as you need for your company. A good business plan doesn’t need to be a 50+ page formal document to do its job. Regardless of length, we have found in our experience working with startups, small businesses, and enterprises, that there are eight things that all good business plans accomplish.
What does a good business plan do?
Define your goals
What is your business setting out to achieve?
From your overarching mission statement, to your top priorities for the next five years, your business plan should document these with as much specificity as possible. This includes defining what metrics you will use to measure these goals. Doing this allows you to align everyone in your company around clear initiatives.
Create a business roadmap
Once you have defined your goals, your business plan should spell out how you intend to get to these milestones. Say your goal is to increase your annual revenue by $5 million in the next 5 years. How are you going to grow your revenue to this level? Are you going to introduce a new service or distribution channel to get there? What operational support will that entail? Do you have the team members you need to achieve this goal? These are the types of questions we seek to answer when crafting a business plan.
Document assumptions about your business for consensus and revision
By recording your assumptions as you build your business plan, you can determine where your team operates on a shared understanding and where more clarity and consensus are needed.
This also gives you the opportunity to periodically check which of your assumptions are still valid. Did your revenue projections assume that your sales reps would be able to achieve a 25% win-rate, but the real rate has consistently proven to be around 15%? Then you know where your plan needs to be adjusted as you gain more accurate data.
Set expectations for how you want your company to operate
The level of detail you include in your business plan about your company’s operations can start simple and increase over time as you identify and define processes that are crucial to your business. But even when you’re just starting out, it is helpful to document what is important to how your business operates. What are the values that guide what you do and how you do it? The more clearly this is defined, the easier it will be for your team members to operate according to your expectations without constant oversight or discussion.
Establish awareness of the competitive environment
Your business doesn’t operate in a bubble. In order to be successful, your plan needs to address where your firm fits into the marketplace and what opportunities and threats exist. While we often do a lot of competitive research, we find that a SWOT analysis is a helpful way to quickly communicate your company’s position within the competitive environment to everyone on the team.
“Your plan needs to address where your firm fits into the marketplace and what opportunities and threats exist.“
Allow for ongoing accountability
By documenting your goals, your roadmap for achieving them, and the metrics you will use to measure your progress, your business plan becomes a tool for ongoing accountability. As you define the key metrics for each goal in your business plan, make sure that you have the tools and systems in place to measure this data. If not, determine what you need in place to measure your performance according to your plan.
You should revisit your business plan regularly (at least once a year, but ideally once a quarter) to track your progress and to make adjustments as needed.
Make you think about all aspects of your business
By outlining your assumptions for all areas of your company (product/services, operations, sales & marketing, staffing, management, and finance) your business plan ensures that you think about all of them and how they align. It’s easy for a leader to get focused on one particular area, either because it is the top priority or because it’s their area of expertise, and forget how the other areas are needed to support this.
For companies just starting out with one or two people, it’s easy to think that you don’t have much to document about staffing and management. But if your goal is to grow the company beyond what the founders alone are able to support, then you need to think about what milestones will prompt you to start hiring and which roles you will prioritize first to support your goals.
Set the foundation for your marketing and sales strategies and tactics
Strategic marketing isn’t possible if you don’t have your business goals and overall strategy in place. We often see marketing and sales tactics used in an effort to paper over business problems, such as not having clearly defined services or not having a clear target market.
Your Strategic Marketing Plan is an extension of your business plan. Taking a business-first approach to marketing and sales planning sets you up for greater success and less wasted effort.
“Strategic marketing isn’t possible if you don’t have your business goals and overall strategy in place.“
If you already have a business plan, look it over to see if it is doing everything listed above.
If you don’t have a business plan, now is the perfect time to start one!
We have put together a handy checklist to help you optimize your business plan or write one for the first time. You can download it here.
Of course, if you would rather have someone else work on your business plan, we are happy to help! We can review your existing business plan or write one from scratch. Visit our business planning page for more details.