The Purpose of Business Planning

Occasionally I have a client who wants me to develop a business plan for a new business. Of course I’m happy to help out with this! However, most of those who approach me do not realize that the majority of a business plan’s work must come from the person who owns (or will own) the business – the person actually operating and managing that business!

Now why would I use that approach, when there are competitors out there who will prepare a plan with very little input from the client?

It’s simple. The client is going to know the business best. I know my business. I know the direction I want it to go. And I know how to get it there. Each client should also know this about his or her business. And the best way to learn this – and make it work – is to actually participate in the planning of that business. Learn each part of the plan and decide (that’s what managers should do) what’s the best approach for you within the context of your current environment.

Each business plan has to have certain elements.

  • There needs to be a market analysis, telling you what the industry is like and how the service or product for the business fits into this market. It’s great to have some further input and analysis elaborating on the strengths and weaknesses, threats and opportunities that are available. (Yes, this is a SWOT analysis.)
  • There should be an overview of the management team. Include any partners who will be helping.
  • There needs to be a simple product/service overview, explaining what it is that your business actually does.
  • There needs to be some kind of actual marketing plan (this is different from a market analysis, which shows about the industry & market). A marketing plan explains how people are going to find out about your business and why they would buy from it.
  • And there needs to be a financial analysis. This is where projections are done, based on realistic expectations. And this is often the hardest part for people who are not accountants. And that’s where I do the lion’s share of the work. Yes, I need basic information, and there will be a lot of questions for the owner to answer. That’s just part of trying to run a business. And these are things the owner needs to learn! Projections are often done for 3 to 5 years, and include at least a Profit & Loss statement and Cash Flow statement. Some plans also include the Balance Sheet, which I think is a good idea.
  • And all plans include a summary (usually called and “Executive Summary”) that gives a quick overview of the entire plan. This is most often only one page long.

Several hours of both the owner’s and my time go into planning, so be prepared! It typically takes my clients three to four weeks to come up with all of the information needed for a decent business plan. However, with a  bit of research and being prepared ahead of time, a plan can be completed much sooner. Yes, there is a cost involved. After all, you are getting financial statements prepared. And if you go to any of the larger accounting firms you will pay thousands just for that portion of the plan. Save yourself some money that can be better used in your new venture – work with me!

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I always welcome legitimate questions regarding this and other business issues. Please feel free to contact me or post your questions directly on my blog.

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