The Top 5 Components of Every Business Plan
Last month, I was invited to join National Post columnist, Rick Spence, and my QuickBooks ProAdvisor® colleague, Andrew Wall, for a discussion about the importance of business plans and the role they play in the success and longevity of small businesses. As a bookkeeper, I spend my time working on clients’ books that can be minimized if they had made planning a priority. Needless to say, I have plenty to say about this topic. A recent study by Intuit found that 62% of Canadian small businesses launch without a business plan. My first thought was that the 38% of small business owners making businesses plans truly are elusive creatures because not one of my clients has come to me with a plan!
I think there are two main reasons why so many entrepreneurs don’t dedicate time to planning:
- They don’t know exactly what a business plan is but are convinced it’s a daunting, 50-page document that will take up a lot of time
- They feel their time would be better spent working on the business than working “in” it
The fact of the matter is that there isn’t a prescriptive format that business owners should follow, and it’s different for everyone. The plan can be as detailed or as simple as they want it to be … it’s the process of making the plan that is truly the most valuable. However, if we’re going to determine a good starting point for entrepreneurs, my top five business plan components would be the following:
Clear and Concise Objectives
Start by identifying key objectives, and then refine them to their simplest and most succinct form. I like to think of it like a menu: when you’re creating a business plan or developing a strategy for your business, you never want the banks, potential investors or clients to feel overwhelmed.
Understanding the Market
Small business owners should get to know their target audience. I’ve seen so many businesses make a critical error when they’re identifying their target client, and it has set back the business significantly. Take your time in selecting the right target audience and understand what will click with that group.
It’s important for small business owners to set realistic projections. So many small business owners are overly optimistic about growth or profitability. Projections aren’t a self-fulfilling prophecy, and it’s important to make projections and bounce them off peers and financial professionals. And, it’s always great to meet, or even exceed, those expectations!
Small business owners should dedicate a substantial amount of time to figuring out how they will reach their target audience and how their audience will find them. The “build it and they will come” model isn’t going to work in today’s competitive business landscape.
Although timelines can be flexible, it’s important to keep them in mind that these goals and benchmarks will help you chart your progress toward growth and expansion.
I walked away from this experience knowing that the majority of startups and businesses (including all of my clients!) still put the buggy ahead of the horse. We’ve also established some possible reasons why and I’ve thrown in my 2 cents as to where entrepreneurs can start. The only thing left to do is start planning. Don’t worry about Word, Excel or PowerPoint for now; all you need is a piece of paper to get started, in order to reign in your goals. Otherwise, you are just driving down a bumpy road in the dark.