(Note: I posted this Wednesday on the Small Business Administration’s Industry Word blog, where I am a guest expert. I’m reposting it here because it seems appropriate. Click here for the original.)
It’s a shame that so many people think business plans are just for startups, or to back up loan applications, or for getting investors. The truth is that business planning offers serious benefits for everybody in business.
And I’d like to point out that none of these benefits require a big formal business plan document. A lean business plan (as in What Business Plan Type is Best for Me) is usually enough. It takes an hour or two to do the first plan, then just an hour or two to review and revise monthly.
Here are those top ten benefits.
- See the whole business. Business planning done right connects the dots in your business so you get a better picture of the whole. Strategy is supposed to relate to tactics with strategic alignment. Does that show up in your plan? Do your sales connect to your sales and marketing expenses? Are your products right for your target market? Are you covering costs including long-term fixed costs, product development, and working capital needs as well? Take a step back and look at the larger picture.
- Strategic Focus. Startups and small business need to focus on their special identities, their target markets, and their products or services tailored to match.
- Set priorities. You can’t do everything. Business planning helps you keep track of the right things, and the most important things. Allocate your time, effort, and resources strategically.
- Manage change. With good planning process you regularly review assumptions, track progress, and catch new developments so you can adjust. Plan vs. actual analysis is a dashboard, and adjusting the plan is steering.
- Develop accountability. Good planning process sets expectations and tracks results. It’s a tool for regular review of what’s expected and what happened. Good work shows up. Disappointments show up too. A well-run monthly plan review with plan vs. actual included becomes an impromptu review of tasks and accomplishments.
- Manage cash. Good business planning connects the dots in cash flow. Sometimes just watching profits is enough. But when sales on account, physical products, purchasing assets, or repaying debts are involved, cash flow takes planning and management. Profitable businesses suffer when slow-paying clients or too much inventory constipate cash flow. A plan helps you see the problem and adjust to it.
- Strategic alignment. Does your day-to-day work fit with your main business tactics? Do those tactics match your strategy? If so, you have strategic alignment. If not, the business planning will bring up the hidden mismatches. For example, if you run a gourmet restaurant that has a drive-through window, you’re out of alignment.
- Milestones. Good business planning sets milestones you can work towards. These are key goals you want to achieve, like reaching a defined sales level, hiring that sales manager, or opening the new location. We’re human. We work better when we have visible goals we can work towards.
- Metrics. Put your performance indicators and numbers to track into a business plan where you can see them monthly in the plan review meeting. Figure out the numbers that matter. Sales and expenses usually do, but there are also calls, trips, seminars, web traffic, conversion rates, returns, and so forth. Use your business planning to define and track the key metrics.
- Realistic regular reminders to keep on track. We all want to do everything for our customers, but sometimes we need to push back to maintain quality and strategic focus. It’s hard, during the heat of the everyday routine, to remember the priorities and focus. The business planning process becomes a regular reminder.
3 thoughts on “10 Benefits of Business Planning for All Businesses”
I couldn’t agree more. I could weep at the networking meetings I go to when I ask how many businesses have business plans and only my hand goes up (and those of my clients :-))
It’s how to persuade them that this really is an important thing to do when they think they are poddling along quite happily now. I’ve tried waving my plan at them and telling them it just got me a £1k grant and if they want a grant too, come to me and I’ll help them! The lot of a decent business coach/consultant can be a frustrating one 🙂
Thanks Karen, and I hope you emphasize the “coach” element in your practice, so that your clients always understand that it’s something they do, with you helping. Check out this one: http://timberry.bplans.com/2007/07/my-worst-ever-b.html (still very valid today).
And thanks for your addition. Glad to have you here.
I like how you said that business planning helps you keep track of the important stuff. That seems like a really important thing to do because it would allow you to progress more. Focusing on the necessary and essential would really mean that you could do more and accomplish more it seems to me.
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