A business plan is a guide for growth*/
Is a business plan important?
A business operational plan can keep that from happening, as long as it includes specific, attainable goals and the means by which a business owner and their team can achieve them. Business plans can help owners stay motivated when it comes to scaling and bettering the company as a whole.
Businesses with operational plans, forecasts and KPIs significantly outperform those that operate without them. This is because a business plan lists the specific goals that they want to achieve as well as the milestones and key performance indicators (KPIs) that give them feedback on how they are tracking towards that vision.
These plans and benchmarks become the playbook a business follows in order to know how to apply resources, where to prioritise workloads and funds, the basis for staff performance goals and even boosts their chances of gaining additional funds to meet their needs.
Is a business plan important?
A Harvard business study showed that 83% of people don’t have goals. 14% were shown to have an overarching plan, but they weren’t written down. Only 3% of people had their goals written down and externalised. The study found that the 14% who have goals but they aren’t written down are 10 times more successful than those without goals and the 3% with written goals are 3 times more successful than the 14% with unwritten goals. The evidence shows that setting goals and putting them on paper amplifies your chances of success.
Not only is having a business plan important when it comes to running your business, it’s also a crucial component when pitching to funding sources that you are effectively managing your business and controlling your risks.
Sadly, most businesses do not document their vision or goals, what they plan to do to achieve those goals or measure if they are successfully implementing their plan. Having no plan can, and will, lead to business failure.
We’ve also seen business owners in an attempt to counteract having no ‘business plan’, engage a business plan writer to draft a business plan from a template to apply for a grant or funding which is then left on their desk or in their top drawer and never looked at again because there is no clear or measurable tasks to action. Execution is everything!
What exactly goes into an operational business plan?
Getting a generic business plan template from the internet and putting a few sentences in each section is not a business plan. You should prepare a genuine operating business plan which is a series of ‘live’ working plans to achieve results across all aspects of the business.
The operating plan should comprise of measurable financial and non-financial KPIs and milestones. The plan should include your yearly goals (financial forecast, marketing and sales) and your areas of focus projects. Your yearly goals should be monthly stepped to ensure you can measure your progress each month. Each area of focus (marketing, operations, governance, financial reporting etc) should have a detailed list of tasks that you will be executing into fruition.
When establishing a business operational plan, you will need to have the following:
- Goal/goals – what are you hoping to achieve?
- Strategy – What are you going to do in order to achieve those goals?
- KPIs and Milestones – what does success look like each month?
- Marketing plan – How are you going to market your business to get your ideal clients at the best bang for buck?
- Sales plan – How are you going to go about selling your products or services once you have those marketing leads? Do you have a process that works better than others? Do you regularly train and receive feedback from your sales staff?
- Forecasts – To achieve $x profit at the end of the year what revenue and expenses would you need each month to get that result?
One of the most important aspects of the business plan is your financing needs. These can’t just be guesswork; you have to create accurate forecasts that take your genuine expenses and working capital into account. Without comprehensive financial information, your business could risk not being prepared for upcoming challenges or be able to obtain financial support from lenders or investors which you might need in order to scale and reach bigger goals.
How can you measure if your business plan is working?
A business plan is something you have to actively implement. Having frequent accountability meetings as a team is a great way to stay on task. Without it, you can easily drift off course.
But a meeting without an agenda or specific measurables and milestones to hold everyone, especially yourself, accountable is destined to fail. Developing financial and non-financial measures and project milestones will help provide tangible measures and benchmarks to work towards.
But what are we measuring? Specific monthly KPIs will differ for each business and industry however here are a list on generic monthly KPIs to kick start your thinking:
- Revenue v Forecast
- Gross Profit margin v forecast
- EBITDA margin v Forecast
- Debtor days
- Inventory days
- Creditor days
- Return on Assets
- Return on Equity
Your project milestones will be based on the tasks you have listed under each project. For example, ‘fixing’ your marketing is an area of focus, a project as part of that area of focus would be the website and improving your design, content and loading speed would all be tasks under the website ‘project’. Each month you will need to determine if you are actioning your planned tasks in line with your project plan timeline.
By holding monthly meetings, you can refer to the business plan, to see what’s working, what’s not and to make sure you are executing the tasks intended to get results and importantly adjust it as needed in case external factors are affecting the business more than anticipated.
What happens if we don’t hit the target or milestone? The purpose of the meeting is not to attribute blame for not hitting your goals but to ‘check in’ and pinpoint where additional resources may be required or where greater opportunities lie to improve the business.
If you want your business to succeed with the help of a business operational plan, get in touch, we’d be happy to outline any gaps in your current plan or help you write one from scratch.