So You Want A Business Plan

Quite frankly the most important requirement for success in business is a business plan. After all, if you don't know where you are going, how the heck can you get there?

A staggering statistic is that 80% of all Australian businesses will be out of business in 10 years. Now, sure, not all will have gone broke. Some will have been sold, merged, taken over or just plain given up. But incredibly, a huge percentage will have failed.

When you understand too that around 50% of businesses in Australia do not have a business plan, you can probably get a connection between success and planning. Whilst we cannot say that all businesses which fail did so because they didn't have a plan, there's a heck of a lot of evidence to suggest that lack of planning is the major factor in the downfall of business.

If you fail to plan you plan to fail.

In my opinion around 60% of success comes from having a simple business plan or a "Profit Blueprint" as I like to call it.

Now Australian businesses are not renowned for the enthusiasm with which they produce business plans and, in fact, business plans are notorious more for their absence than for their presence.

What makes a business plan?

Perhaps some of the blame rests with advisors who prepare business plans. In my view, a business plan is made up of three components. These are the operations plan, the financial plan and the marketing plan. Each of these components forms an integral part of the overall business plan.

For example, if a company manufactures widgets, then the operations plan would detail how the company will get its raw supplies, what it needs to do for machinery, how many widgets it will deliver, and so on. The financial plan will assess such aspects as the fixed and variable costs and required pricing arising from the operations plan and dictate minimum financial requirements to continue in business. The marketing plan will relate in detail how market intelligence will be gathered to ensure that the widgets reaching the market are in line with what the market needs and the strategies necessary to ensure that the potential markets are aware of the availability of the widgets.

Very often I see business plans which prove to be only a financial plan, and scant at that. Sometimes these have been prepared merely by grossing up the known expenses of the operation to produce a figure for income which must be generated by sales. Sadly, the business operator scratches his head in puzzlement, because what he wanted was a total plan to tell him how he could make and market enough of his products to generate the required financial results. Most people know that they ought to have a business plan but strike great difficulty in preparing one. It's worthwhile finding a way to put one together and the investment of time will verify the '6P' rule– Proper Planning Prevents Pretty Poor Performance.

Getting the facts together

One of the best ways in which the facts can be gathered to produce the business plan, is by use of the SWOT (strengths, weaknesses, opportunities and threats) analysis. In undertaking a SWOT analysis the key members of a management team work together to identify the strengths, weaknesses, opportunities and threats facing the organisation and set goals to achieve the most important agreed objectives. This has a side benefit in that it is a highly motivational experience for the people involved.

The SWOT formula works very well in that it helps the people in the business get their plans together and affords them time to understand each other and to renew their motivation in a group experience. This could involve sacrificing a weekend starting on Friday night and finishing late on the Sunday afternoon with most of the time being devoted to the SWOT itself. Some of the time, however, is allocated for what can broadly be called motivational experiences. Whilst many would view such a subject with a cynical eye, the overall results can be exceptional.

Ideally, a SWOT should be conducted by an independent external facilitator. The best sort of person for this task is one with a broad background of business experience. They can usually act as a catalyst and add something from their business background to promote discussion where necessary. The broad outline of a how to conduct a SWOT session follows, but there are a couple of important rules to remember.

A SWOT session is not a blame laying or criticism exercise. Rather, it is a free-ranging discussion and assessment of the businesses over-all position. Therefore, every thought is important. So whenever a person suggests a weakness, for instance, it should be recorded. Under no circumstances should a value judgement be made or they be asked to justify it. Similarly, too, items that are seen as strengths by some may be perceived as weaknesses by others. If so, don't worry, record them under both headings. The rule which should apply to the whole exercise is: "If it's worth thinking, it's worth saying and recording."

How you do a SWOT?

Working in groups of about five or six people, first list all of the strengths about the business. This should take 40 to 60 minutes. Most groups will find at least 60 to 80 strengths.

Each group then does the same for the weaknesses of the business. They will probably find about the same number of weaknesses as strengths. Next, the group thinks about the threats and finally the opportunities. In each case they will find about 30 to 40 of each category.

If you have several groups, each should work independently on each category which has been analysed. It is important to ensure that all findings are listed and written up on big sheets of butcher's paper to be pinned to the wall.

Once you have the findings of your SWOT analysis covering the walls of your meeting room, you can move to the next stage. Ask each participant to individually consider all of the evidence that the analysis has revealed and then answer the following question.

Knowing our strengths and weaknesses and the threats and opportunities we face what are the 5 most important things we must now do in addition to running the business?

Participants should be given 30 to 40 minutes to wrestle with this and to write their thoughts down.

The strategy behind asking for the five most important things is simple. Time management techniques indicate that we, as individuals or companies, can handle only five extra tasks effectively.

Turning ideas into action plans

You might be expecting to get a huge number of suggestions, totalling something like five different ones from each participant. In reality, you don't get anywhere near that number because what becomes clear is that most participants have fairly similar thoughts on what they see as important and as a priority for their company. What normally clouds the issue is that nobody usually gets a real opportunity to express their thoughts, appreciate other people's positions and then prioritise the results.

Once each person's suggestions are written on a whiteboard, explain that the business has the resources to work on only five projects. To narrow down the list, have participants discuss the suggestions and eliminate duplications or combine similar ones. Then have each participant vote for the five they prefer. You will again be surprised at the speed at which the most favoured ideas emerge and the level of support for them.

From that point, the five winning suggestions are allocated priorities, assigned target dates and the impact at their implementation on results.

Now we have two things. The first is our five goals for the coming year. The second is an analysis of all the things that make up our company - its strength, its weaknesses, its opportunities and its threats. All of these components are relevant in assembling the plan.

The business plan must answer three questions:

Where is the company now?
Where does the company want to be?
How is it going to get there?

A distillation of the information revealed by the SWOT will give much of the component parts of the answers to those three questions.

Well, we have some of the answers don't we?

The SWOT exercise has revealed the objectives that we believe are important for the company to achieve.

Assessing the impact

Look at those objectives and make a realistic assessment as to what impact they will have on your financial result. Don't forget you'll need to consider not only the extra sales you may generate, but also the costs of staff and materials to generate more sales.

Then, if you have a budget, incorporate those financials into it; if you don't prepare one.

Next look at how you go about making your business happen. Assess what the 5 objectives you have decided will mean in terms of more (or less) people and plant. Make sure that the dollar costs are reflected in the budget and that you list out all the operational consequences and requirements.

And finally look at the objectives you've now set yourself and realistically assess what extra people or production (and costs) will be required to get the sales turnover. List out what you have to do (and incorporate the costs in the budget).

Guess what you've now got?

A business plan. You know where you are now, where you want to be and next importantly how you are going to get there.

Wow! You're now no longer part of the 80% of businesses who don't have a business plan. And better still, you're now probably amongst that dynamic band of businesses who will survive and prosper.

And isn't that a great feeling?

One word of warning. Before attempting to write the business plan, remember that sometimes many are caught up by the magic of enthusiasm and there is a tendency to aim too high. It's best in preparing the first business plan to aim the sights a little lower than you might otherwise wish. Often the first fresh flush of enthusiasm for results is replaced by hardened cynicism as time elapses and practicalities make it difficult to get everybody into the follow-through mould. It is best, therefore, to suspect that the results achieved will be lower than aimed for in the first year rather than higher.

Winston Marsh specialises in marketing, communication and motivation. One of Australia’s leading business advisors he speaks to a wide range of audiences on those subjects as well as writing and recording prolifically. His contact details are 03 9887 5511, guru@bgrowth.com.au and www.bgrowth.com.au
First published: 15 December 2005.
Last updated: 1 February 2006.