It’s estimated that a quarter of small and medium businesses in the UK don’t have a Business Plan, and that less than half of those businesses that have a plan have a formal plan which is documented. In addition, less than half of UK businesses have a Succession Plan in place
These are staggering figures, because a Business Plan is one of the most valuable tools a business can have! Large corporate companies have entire teams dedicated to planning, because of how important it is (I know – I used to work for one!).
Here’s 10 reasons why it’s important to have a Business Plan in place:
Proactive, not reactive; successful businesses are forward thinking, proactive and get in front of things that might impact their sales, profit, growth, sustainability etc – having a Business Plan helps to get ahead of things and be proactive, and not just reactive. It’s a much more comfortable place to be.
Outside influences; businesses don’t operate in their own little world where outside influences never impact them, everything from politics, to legislation, the environment and many other factors (look at PESTEL analysis or Porter’s 5 Forces) have an impact on a business. The planning process helps to take these influences into account, mitigate their impact where necessary and take advantage of them where possible.
Strategic Direction; what does your business stand for? What are its ethics? Where is it going? What is the target audience? Who are its ideal customers? These are the bones of your business, and this is information that you should have documented to feed the direction of your business.
Set goals and prioritise them; setting goals helps you to achieve your desired outcome – they’re the map that helps you get there. And, because you have strategic direction, you can prioritise those goals to help you efficiently move towards your success.
Targets; once you have your overall goals you can break those into more bitesize chunks in the form of targets. Targets are the steppingstones to reach the goals, and influence business operations so targets can be met.
Cash; without cash your business can’t operate. You plan your resources in a Business Plan, and cash is one of those resources – ensuring sufficient and sustainable cash flow is paramount!
Funding; businesses often can’t secure funding without a Business Plan. Lenders want to know the direction of the business, to be sure they’ll be able to repay the money they’re lending. Some businesses are able to secure other types of grants and funding than just from lenders, again a Business Plan will be a necessary step in the process to securing those funds.
Support and influencing decisions; you have a plan, you have strategic direction, goals and targets, meaning when it comes to making decisions you have resources available to you to support the decisions you’re making, or to help influence you to make the right decisions based on your business’s strategy and goals.
Sustainable growth; if you have an ambitious strategy and ambitious goals then you need a plan to get you there sustainably. The Business Plan is your sustainable growth guide, it’s built on the steppingstones you need to take to get you there in a manageable way.
Succession planning; once you’ve built your business then what? When you hit your goals and expand, what’s the plan? When you want to retire, what’s the plan? These are things that should be considered and planned into your Business Plan!