A business plan is an essential tool for start-ups and established organizations. It helps you make sense of your offering, the market you operate in, and other critical factors like projected costs, revenues, and profits.
But most businesses don’t have a formal plan, perhaps because most entrepreneurs see little point in creating a rigid strategy that becomes obsolete within weeks of its completion.
They’re right, but those who reject the idea of big planning risk missing out on a golden opportunity to isolate unnecessary spending, spot opportunities, and expand into new markets.
Jonathan Dowden, Product Marketing Manager at Sage, advocates for a new approach to business plans, one in which large, static documents are avoided in favor of practical information that changes as quickly as the markets it does. describe.
“For start-ups it can actually be quite dangerous to write a business plan,” he says. “Unless you have data, you can’t know what’s going to happen. If you go the route of traditional business planning methodology, the template doesn’t become an objective document that helps your business, but something that falsely convinces you that the idea will work.
“It’s also intimidating to fill out a template with words, with everything you know, especially if you’re not used to writing long documents – and many business owners won’t have since. they left school or university. “
The alternative, according to Dowden, is what business strategist Steve Blank calls “customer development.” Instead of writing down your prospects for rapid growth, significant profit margins, and evangelical followers, answer a few basic questions, including:
– Who are your customers, what do they like?
– How are you going to reach them – for example, online, face-to-face or a mix?
– Why would someone buy from you?
– What activities will generate income for the company?
– What resources do you need?
– Who will help you, for example a bank manager, an accountant and suppliers?
– Will you make a profit after the costs are deducted from sales?
“Get the basic ideas out of your head and onto a piece of paper. You can do it in a matter of hours with Post-It Notes. Then test your hypothesis with real customers and find out if your idea is reproducibly viable over a long period of time.
“No answer is given by filling out a huge template. By simply starting out, testing and building evidence, you can begin to fill the blank canvas of what is achievable and what is not, ”says Dowden.
The beauty of this ‘sandbox’ approach to starting a business is that it is just as relevant to FTSE 100 companies as it is to independent traders on day one behind a computer. The behemoths of Google technology,
Amazon and Facebook have dozens of live experiences, most of which are on the back burner. But the cost of every failed idea is small, while successes often attract millions of pounds in revenue.
Think of a business plan less as a document that predicts the future and more as a set of principles that will help you uncover it, or a science experiment with a hypothesis, methodology, practice and, once the evidence is gathered, conclusions.
The approach is especially useful in times of great disruption, according to Dowden.
“Imagine you were running a small business when the pandemic struck. The first thing to do is put your business back on the wall, look at what sales channels you have, and think about which ones you can adapt to the new environment.
“A yoga studio is extremely exposed, but could you put it online and, if so, what investments do you need to retain your customers? Maybe a professional Zoom account and better AV equipment to get the business online. Anytime you have an idea, you have to go back over that process, mix up the concepts, and innovate.
When it comes to the format of your plan, it’s important to choose something that suits your personal approach to business. Are you data driven or creative? Would you prefer an accountant to build one for you, or would that be a loss of control?
You may want to use a simple pen and paper or a word processing document, but the software will help you take full advantage of the agile approach as it is easy to save data and quickly adapt data. plans based on changing circumstances. By running reports, you can also measure the accuracy of your predictions against what is actually going on.
This is where Sage can really help you, according to Dowden: “It’s easy to generate reports that show how your business is performing. By storing data digitally, you can do cool things with it, whether it’s business planning, generating tax returns, or creating P&L reports to better understand your cash flow.
“If you can visualize sales and costs, it’s easier to focus on profit centers and manage overhead, all of that information being used to plan for the future. “
The bottom line? Don’t think of a business plan as a huge, immutable document. Start small, plan your business, and set goals. If something doesn’t work, change it and go in a new direction.
Get more business planning support in the Sage Advice hub.
This article was sponsored by Sage, the global market leader in technologies that help small and medium businesses perform at their best.