The Importance of Having a Business Plan: Avoiding Failure

“Fail to plan is planning to fail” – Winston Churchill.

Even though this well used line receives universal acceptance in conversation……. few businesses “walk the talk”.

If fact, based on a number of recent business reviews it’s obvious that more planning goes into an overseas holiday, than many business owners put into planning for the success of their business.

Few businesses were actively “not planning”, with the majority either not having the time or seeing it as a low yield activity. This finding did not just apply across business planning, but equally to marketing, employees, sales and cashflow planning.

So here’s 5 reasons why you should find the time to plan:

Business – focus

• A business plan is the handbook for your business – showing the critical elements of where the business is going, why and how it is going to get there. Without it – you are wasting resource (aka burning cash) in your business. 
• A business plan houses aspects such as the key strategies, market size, sustainable competitive advantage and market forces (amongst others) – which define where the businesses finite resources should be applied.
• It brings into clear focus what the business is concentrating on – and equally, what it’s not. When used as the reference tool for decision making, items not aligned to the plan can be quickly discounted – resulting in a saving of time and money.
• A comprehensive business plan makes a valuable management tool for owners, manages and financiers.

Marketing – saving and revenue

• A focused marketing plan saves unwanted expense – as it applies your marketing resources for greatest return.
• A marketing plan should not be a scattered collection of disparate activities, which are poorly targeted and rely on luck. Instead, it should be well articulated, identifying who is your target market, aligned with your sustainable competitive advantage and then coordinated to drive prospect opportunities.
• Marketing is not selling, but is getting the prospect to the position where they can be sold to.

Employee – efficiency 

• Employees are expensive and must be applied wisely. Planning succession, leave, training, recruitment and employee performance levels provide the business with a clearer understanding of a precious asset of any business – their people.
• Forecasting gaps in staff can mitigate customer service issues, whereas a skill matrix across the workforce can highlight critical dependencies.
• For many businesses the cost of staff can be the difference between red and black ink, so accurately forecasting staff numbers and their cost is essential.

Sales – revenue

• Poor sales equals poor performance, low sales generally means no business.
• Sales plans are the most common, as businesses normally have a focus on top lines sales. To make this effective however, it should be broken down to time increments (days, weeks or months), allow for any seasonality and track to a margin level. A sale without an appropriate margin is seldom worth having and is otherwise known as charity.
• An effective plan enables crucial measurement and management of the sales force and sales levels to ensure that results are where they need to be, as opposed to where they happen to be.

Cashflow – liquidity

• Cash is the lifeblood of any business – without it, death normally follows. 
• For such an important factor in any business, it astounds me how few businesses plan out their cash position – seeking to identify, and thus be able to manage any peaks or troughs.
• The benefits of accurate cashflow planning includes the ability to avoid dishonoured payments, penalty rates and fees, the creation of angry creditors or the non-payment of your staff. Equally, understanding your cashflow means that you have the ability to take advantage of discounts or early payment terms, or even to extend favourable terms to seduce a new client.

And lastly – as a bonus 6th reason ………. planning works! 

I have worked with some successful firms who have not planned well or just planned in some areas, BUT….. the common theme across 100% of those businesses who I have seen fail – was the absence of quality planning. 

Rule to close on – Failure to plan places your business at risk.