Why a business plan is the core of small business success
Lewis Carroll’s delightful story of Alice in Wonderland has been a source of philosophical inspiration for many years. Readers try to make sense of an illogical story…a metaphor in so many ways of life, and in this case, business. In the book, Alice comes to a fork in the road and asks the Cat for advice:
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where.” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
Why we Plan
A business plan is the map, or route, you wish to take your business on. Without a route mapped out, businesses are just meandering along, directionless and drifting. It doesn’t take rocket science to see why the number one reason small businesses and start-ups fail is ineffective planning.
“The ability to look forward and plan characterises a successful growth business,” says Doug Richard, founder of The School for Startups and a former member of Dragons’ Den.
“As much as you need passion to start a business, you can’t do it on passion alone,” says Wilfred Emmanuel-Jones, founder and CEO of food business The Black Farmer. “You must research and plan. You need to challenge yourself. All too often people aren’t prepared to do that. If you don’t, it’s a recipe for failure.”
Aspects of an Ideal Business Plan
Business Planning is essential to the success of any organisation. This is why all funders, donors and credit institutions will ask for a detailed business plan; they need to know that thought, planning and most importantly, strategic thinking has been applied to the business concept, as this is the greatest single determinant of success. In an ideal situation, the business plan evolves from a detailed corporate strategy and should:
- Significantly grow your business or organisation;
- Accompany a business loan or funding application;
- Support an investment decision, and establish company valuation;
- Create new business, sell products and services, and develop alliances;
- Align staff, management team and partners;
- Facilitate decisions on expenses, the hiring of staff and the development of new products and services;
- Set business goals and targets.
Perhaps the most valuable consequence of a real business plan is the effect it has on the time management within any organisation. Displacement is a crucial practical business concept that is described as “Whatever you do is something else you don’t do.” Displacement lives at the heart of all small-business strategy, and without an effective strategy and business plan, can completely ruin any small business.