SO WHY IS A BUSINESS PLAN SO IMPORTANT ?

Business planning is one of those issues that other people do or bankers request when they want to obfuscate on why a loan is not forthcoming. Nevertheless, a plan is always advisable because of the following reasons:

1. it forces the business owner to sit down and get the ideas for the business out into the open so they can be discussed and if necessary changed

2. it provides specific targets or milestones that holds everyone to some degree of accountability

3. it allows all stakeholders [ family, partners, shareholders, lenders, suppliers, investors and others] to make an objective assessment of where you are trying to take the business

4. it becomes a transparent, open document that people can either buy into or opt out of

5. it should rigorously examine all aspects of the business including : finances, people/employees, manufacturing/products, marketing, contracts, consultants/advisors, exit strategies, successions plans, risk and mitigation, KPI’s, solvency, growth, ROI, legal framework, litigation, relationships with suppliers and service providers including banks and tax authorities. There is no limit to what a business plan can focus on. It can even look at health and matrimonial issues that may impact the business.

6. more obscure issues can be around the LACK of communication, family disputes, CGT matters, conflicts of interest, business contras, lack of probity, poor product warranties, under insurance, no superannuation, poor trading structure, poor data protection, stealing, employee theft, unsatisfactory pricing, the views of spouses, bad accounting advice and so on.

7. a business plan should provide everyone with a goal or a target at which to aim. So it does not matter how far off course you become, you can always find the ‘goal posts’ in the business plan and fight your way back on the right path.

8. a business plan should be a living dynamic document which changes to meet the challenges thrown up by the economic environment. But at its core, the plan should unashamedly be profit and values driven. It should seek to find that enviable balance between completing needs and wants of stakeholders. It should be an open and consultative document that does not shy away from the creative tension that its creation will inevitably highlight. Only brave proprietors are capable of drafting business plans properly and then leading the execution of that plan in an honorable fashion.