It’s common knowledge that every new business needs a plan. Whether to secure the investment needed for launch and growth, or simply to ensure that all stakeholders know their aims and objectives, business planning is an essential part of turning an initial idea into a tangible reality.
But, contrary to common belief, business planning isn’t just for start-ups. Whatever stage your business is at in its journey, strategic planning is essential. Here are four key reasons why:
A business plan that is known and understood by senior management only is a poor business plan. While, depending on the size of your organisation, it probably won’t be necessary for every employee to know all of the nuts and bolts of your tactics, they should still have a sense of your overall strategy.
Why? Employees who know the direction in which their employer is heading are more engaged and more committed. They have a greater sense of security in their own futures at your organisation, and this can make them happier and more productive. They can see how their own work is part of the bigger picture – and as such, they make decisions that better feed into your overall strategy.
If you have no idea of the direction you’re heading in, how will you know when you’re going off course? Businesses without a plan in place are more likely to make strategic mistakes in the first place, because they don’t have a clear and unified goal – and then, once made, those mistakes are more likely to escalate into crises.
By comparing your business plan against actual activity and performance, you will find it easier to identify small problems before they get bigger. What’s more, you’ll be more efficient at finding solutions to those problems, since you have a framework of aims and objectives to work within.
Productivity and the bottom line
All good business plans have powerful links to productivity, revenue and growth. But this is not just about saying ‘this is how much we’ll turn over next year’. It’s about setting a realistic yet ambitious target for that turnover, adjusted in line with everything from your current and planned workforce, to external market conditions, to what your competitors are doing.
It’s also about working backwards from those revenue targets to examining how you’ll achieve them at a tactical level – and in turn, this makes achieving those targets far more likely. Business planning enables you to break down the big goals into smaller, more achievable ones – and ultimately, to be more productive.
Start-ups need plans in order to secure bank loans or other investments to get their businesses off the ground. Yet start-ups aren’t the only businesses that require investment. Perhaps you need to purchase new equipment, or move to a new site. Perhaps you want to commercialise your offering in a new market, but need rapid scale to make that happen. Perhaps you need to make some new hires, or increase production in order to fulfil a big order. Whoever you approach for such investment, they will always want to ascertain your reliability and the appropriate scale of investment – and you demonstrate this with a detailed business plan.
The same principles apply if you are looking to bring new partners on board and team up with other companies. One part of the puzzle is demonstrating your strong track record – the other is explaining how that track record is going to continue and strengthen into the future.
As the old saying goes, knowledge is power...
A comprehensive business plan demonstrates knowledge in your capabilities, your goals and how you are going to achieve them – and this knowledge is valuable to investors, to employees and ultimately, to you.