Simply, a business plan is a forward-looking document that helps our business achieve its medium- and long-term goals.
A full business plan should answer all 4 questions that we’ve covered this week:
• How will we make money?
• How will we continue to protect our ability to make money?
• What must we do to achieve our goals?
• How will we afford to make it all happen?
The contents of the business plan depend on how it will be used, and this depends on the intended audience:
A lender wants to know that we can repay their loan with interest. The numbers – the cash flow statement – is key to them. They also want to understand the assumptions that created the cash flow. They want to read our story – the narrative – behind the numbers.
An investor is usually interested in growth and exit because they want a VERY healthy return on their investment. Can we quickly grow our venture? Can we then sell it in three or five years? The business model helps them make investment decisions very quickly: does our business have high margins that are scaleable? How will we reach our intended market and convince them to buy?
Staff want to know what they need to do and by when. So project plans are super helpful. But staff also respond very well to the strategic stuff. What is our long-term direction? What are the key over-arching things I should keep in mind as I do my job?
Management (you and me) are interested in all of it. We probably won’t create very formal documents unless we’re speaking with a lender or investor. But going through the process, and creating some kind of documentation is important. Helps us think. Helps us share our thinking. And helps us manage.
In their simplest forms, each of the four questions can be reduced to a single page: a business model canvas is a great overview. A strategy map tells a very clear story about our company’s medium-term focus. A Gantt chart breaks things down into projects and tasks, deadlines and responsibilities. And a six-month monthly cash flow projection avoids nasty surprises. These are the arrows in our management quiver…
…which are only useful if we use them. They must be referred to regularly – weekly – to check our progress. Hold the team accountable. Adjust, as necessary. And then, every three months, revisit and update to ensure that they reflect our new reality.
This review, this updating, this accountability: THIS is management and it is THE most important part of the business planning process.
I hope this has been helpful…
…and if you’d like to learn more, including seeing live examples of some great planning tools, please join me in one of my live, online sessions on January 19.
LEARN MORE ABOUT PLANNING!
Join me on January 19 for a free 60 minute live training on business planning.
Woo hoo! 🙂
Two times to choose from: