Monday, July 11, 2011

Do Not Do A Business Plan At Your Own Peril

Such a plan seems to be one of the accepted norms of going into business. As with most things in life, one should question this.

Let us start by establishing what a business plan is and why one would need one. A business plan in the most simple terms is a document which lays out a plan as to where one wants a business to be in a set period of time - generally this is 5 years.

It is drawn up by the businesses management or owner. It is a document that lays out the plans for the future and the standards for success. It is thus quite a positive document as one plans for success and not failure.

One of the most popular ways of drawing up such a plan in this day and age is to use software to guide one in setting up the plan.

While this probably creates the best looking and presentable business plan, it possibly allows one to miss the most important reason to set up a business plan. While appearing very comprehensive, all businesses are unique in some way and therefore do not fit exactly in a mould.

One of the most important reasons to do a plan is that it requires one to stop, think, gather more information, think some more and document ones thoughts and plans in an orderly manner. Thinking is the key word.

Business software often demands information, in a particular format, and one lands up focusing on the tool (i.e. the software) and not the process. The process is the most important by far. On the plus side, the software is very structured and would cover all the main topics e.g. financial, marketing, operations, staffing.

A criticism of business plans is that they are often done for financiers and once done and the finance arranged, they are put in a bottom drawer and not referred to again in a hurry. While this is not ideal, it does not mean that the plan is a failure.

It has allowed the business manager time to think through the business in a structured way that has convinced outsiders to buy into the plan - otherwise finance would not have been forthcoming. This is a big positive and should give the manager motivation to go forward.

To run a successful business one, in any event, needs elements of a business plan - financial reports, budgets, cash flows, sales targets and the like.

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