I know, I know. Business planning doesn't seem to be most people's favorite topic. Usually people's eyes glaze over - let's face it, business planning isn't the sexiest part of running your own business! But I've got to say that it's such a valuable tool that I always enjoy digging into writing one with a client, or looking at one that was previously written to diagnose new directions.
To keep things simple, business planning can be broken into four key parts: 1) Concept; 2) Customer; 3) Cash; and 4) Controls.
1) Concept - This part of your plan lays out all the elements of what your business "dream" is and why you'll succeed. It also covers nuts and bolts of business model implementation. Vision, mission statement, business history, legal structure, organization structure and management, key competition and an overview of your offerings all fall under this section.
2) Customer - This section describes who will buy into your dream and how they will find out about you. You identify your target market/s, customer demographics, distribution channels, and the 4 P's of the marketing mix (product, place, price, promotion).
3) Cash - Sharpen your pencils for this section. This covers start-up resources required, projected cash flow (projected and actual if you've been in business awhile), projected income statement, balance sheet, break-even calculations, sensitivity analysis and ratio analysis if comparative data is available.
4) Controls - This covers how you plan to monitor your business for performance and for any legal and regulatory adherance. Finding an attorney and accountant early on can save you much aggravation down the road. Bankers will tell you that it's best to go for a loan when you don't really need one in order to build a relationship that shows your capability to repay. Having a good lawyer and accountant in place before a crisis occurs is the same sort of strategy. You'll also want to have good record keeping practices set up and a means of evaluating your marketing.
When you recognize that it's time for a new direction in your business, these four key elements come in handy. Take a look at your concept as originally drafted. How have thing changed since then? Do you need to be thinking about a new business model if you aren't realizing the income you had hoped for? Have you drifted from your vision and mission? How has the competitive landscape changed?
Reconsider your customer. Have you effectively reached your target market? Have you identified new target markets? Do you need to rethink distribution channels? Does your marketing message need a remake? Do you need to develop new offerings to meet your customers current needs?
Take a good hard look at the cash section. How have your financial requirements changed? Have your operating expenses gone up without an increase in your pricing? What trends can you identify in your financial statements? What line items can you effect to help your business be more efficient?
As far as controls go, have you been utilizing them? Are there new controls that should be put in place?
Change is a constant in small business management. Business planning can help you strategize about it ahead of time and give you a place to re-evaluate when the time arrives.