The outlook for business growth in 2013 depends mainly on one’s point of view, but at least this appears certain: The success of a business, or lack thereof, can often be traced back to the business plan. What’s more, the absence of a business plan, or one that is skimpy or thrown together in a rush, can be damaging.
Look at an annual business plan as a detailed blueprint for the upcoming year. Here are several ways such a plan can benefit a business operation:
It charts a clear path.
The plan can examine where the business is right now, where it is going and how to get there. Of course, it is important that it remain flexible enough to be modified. For instance, new developments may require a slight deviation from the original. However, business decisions will be fundamentally sound if they are made within the context of the basic plan.
It encourages action.
Instead of addressing problems as they arise, a business plan is proactive. Committing thoughts to a document requires discipline, but the process is usually worthwhile. In contrast, a hastily conceived plan will not look as appealing when it is put in writing. It has even been argued that the experience of developing the plan is more beneficial than actually having the plan.
It improves communication.
Developing a business plan forces the owner to crystallize a vision of the company. At the same time, it will likely encourage input from key players within the organization who are involved in the planning process. This sort of back-and-forth dialogue may be especially important in small firms where the owner calls all the shots.
It helps raise capital.
Focusing on accounts receivable in a business plan may increase the revenue generated by the firm. Furthermore, if the owner is attempting to borrow money, it is likely that a lender will require a business plan, including cash projections, before such a loan is approved.
It gives the business “instant credibility.”
The plan may be persuasive to customers and creditors, as well as lending officers at a bank (see above), providing a sense of legitimacy. It may also satisfy a psychological need for the owner to have the company taken “seriously.”
What is covered in a business plan? Generally, it includes a statement of objectives, strengths and weaknesses, position in the marketplace, future direction, critical issues, etc. It certainly cannot hurt to obtain input from your professional advisers with regard to the specifics.
However, there is no magic formula. The plan can be shaped into whatever format the owner desires.
Reminder: Usually, the owner will tinker with a business plan periodically and update it when necessary. Rely on business advisers to provide guidance. Be sure to have an existing plan reviewed at the beginning of the year.
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