Companies with a written business plan grow 50% faster and chalk up gross profit margins that are 12% higher than those without one, according to research by the Kauffman Center for Entrepreneurial Leadership.
When you build a good business plan, it becomes clear where the opportunities for growth are. It also gives prospective investors confidence, so you can secure external funding if you need to.
I've heard just about every excuse in the book from entrepreneurs about why they don't have one, but invariably they're all wrong. Every business needs to create a written business plan – and not just once, but every year.
Here are four of the most common excuses – and why they miss the point:
1. I only really needed a business plan when I was starting up, or when I was trying to get a loan/investment.
A business plan should be helping you make decisions that keep your company on track and stop you straying off the path towards your ultimate goals.
You should be sitting down every year to strategise for the coming 12 months. Absorb what you learned in the previous year, monitor how you’re measuring up to the industry as a whole and re-evaluate the direction of your business. It may almost be March now – but that’s no excuse either.
2. I don't need to write down my business plan - I've got it all in my head.
If you want to grow your company, then not writing down your business plan is definitely hampering your ability to do so. By putting pen to paper, you begin the process of systemising your business, so that you are not absolutely required for it to keep running. The way we define a successful business is ‘a profitable enterprise that can run without you’. If you're keeping your business plan all in your head, then that can never happen.
3. I need to change my mindset to stimulate growth, not write a business plan.
Usually, in my experience, it's not the mindset that's the problem, but the model. When you spell out your business plan, you can start to see it as just that, and not put all the pressure on yourself to change. Then you can start to see strategies – usually ones that are really quite simple to implement – that will stimulate growth in your business again.
4. There's no point writing a business plan, the situation in my business changes every few weeks.
Your business plan is not a wish list – instead it should be used to create real, tangible and achievable goals, along with actions to achieve those.
However, it should not be thought of as a definite path, but more as the general direction in which you want to go. You need to learn to plan, so that you can weather whatever surprise storm blows your way.
While creating an exhaustive list of what your business plan should contain would be impossible – especially since every business will have a unique plan – some of the most critical aspects include:
• The company culture: what are your core values and beliefs?
• Your purpose: why does your company do what it does?
• A SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)
• Your targets: where you want to be in 3-5 years.
• Your goals: where you want to be in one year.
• The key forces that will get you to your goals and targets.
• The key performance indicators (KPIs) that will allow you to measure your progress.
• The key personnel accountable for different areas in your business.
• A marketing plan: how you're going to sell what you're doing/making.
• An operations plan: the processes that allow your organisation to operate on a day to day basis.
• A financial plan: ensuring that your business is meeting costs and making money.
This is an incredibly important document. Businesses with a good business plan do better than those without one - in profit, sales, team retention and longevity. And that’s the bottom line.