Business

It's all about the business plan

BY DENNISE WILLIAMS
Contributor

Wednesday, March 14, 2018

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UWI researcher Dr Carolyn Hayle says that business owners do not pay enough attention to their business plans. Each month, Hayle says, the plan should be looked at to determine if it needs to be updated.

“I am like a broken record when it comes to systems. It starts with your business plan. People do not seem to realise that all the tools you are given in business school or in the many short courses you take have value.”

Hayle says that the practical value of a business plan is that it is a strategy map.

“It begins with a vision. This signals the big long-term picture for the business. It tells you why you are doing this and how you plan to do it. Then you have a mission that tells you what you plan to do and who within the company is going to do it. From these simple statements you see you need to know why you are in business; how you plan to maintain, grow and eventually exit the business; who is going to do what within the business and how you plan to do achieve all of these things.”

While many people are slaving away at their business, the business plan is like a consultant that can help them along the way.

“Again, we are looking at the business plan. How do you plan to deliver the good or service? How do you plan to make back the money you initially put into the business and/or repay the other shareholders who lent you money to start it? How do you plan to communicate with your customers: internal (staff) or external (clients)? Do you plan to have weekly meetings or have some sort of informal mechanism for getting feedback, or do you plan to ignore them?”

From the proposition of value, Hayle says you have to next consider the financial perspective.

“If you plan to borrow money, the bank or the lender is going to want to see your cash flow projections. You are expected to have a business plan so they can get insight into your vision and mission. This is an indication to the lender of the level of detail and effort you have put into starting this business. It tells them how much money, if any, they should invest in you and your business. You need to have a firm understanding of the laws that govern not only the business itself, but also the laws that pertain to the industry in which you plan to operate. The lenders learn of your intentions and management capability through your numbers. You must have systems in place to track them.”

From the money, your business plan must next consider how you will position your business for growth.

“Issues of performance management, policies and programme management come to mind. Systems are both quantitative and qualitative, but can all be reduced to quantitative data waiting for analysis. Systems for tracking innovation, planning, budgeting, and processes are common.”

Hayle acknowledges that this might be a daunting process for some.

“You might say, but I am just running a small business, so why do I need all that detail? Many will say I made millions and I did not have a business plan. That might be so, but could you have made much more had you invested the time and effort? Did you short-change yourself?

“Let me give you an example. Recently I was in a meeting with a young woman who was trying to impress her auditor, but she could not explain how she had arrived at the numbers she was giving him. She felt that she could just put numbers on a piece of paper and it would be fine. She also refused to invest the time in developing a business plan. Every number represents an element or a composite of several efforts in running the business. These inputs carry costs which must be identified before you can satisfactorily price your goods. So the cash flow she was projecting made absolutely no sense because she had not identified the total inputs necessary to create her product.”

Then there are the people and the equipment which will help your business to run.

“You need to look at the organisational capacity in terms of people. How many people do I need to get the first product into the hands of the customer? What will it cost? Do I have the right technology? Do I need simple equipment or do I need sophisticated equipment to produce the product? Can I use second-hand equipment? What is the cost benefit of second-hand equipment purchase over new equipment? If I need to make changes, how am I going to manage that process so that I do not disrupt my staff and/or customer?”

Bottomline, it is the business plan that will guide you in order to make a success of your business.

“You go into business for no other reason than to make a profit — remember that! So, if you do not invest the time up-front to think through and create your business plan, you will not truly know the total inputs. You will be missing out on creating true value from your investment.”

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