The importance of a detailed and realistic business plan for entrepreneurship cannot be overstated. Such a plan will give you an unequivocal definition of your business idea and premise. Moreover, it will serve to highlight potential opportunities, and conversely, issues, both of which you may not be aware of before you start working on the plan. Also, it serves as a sort of road map, helping you come up with a clear set of goals for your business and something to measure your success against.
Having a written business plan is also extremely useful for several other reasons – it can help you secure external funding for your business, whether from a business bank, venture capitalist or private angel investor; it can provide a potential business partner with detailed information about your venture; it can help you clarify what you are trying to achieve with your business and how you are going to achieve it; and it can help you set financial targets.
Developing an Internal Plan
Business plans are usually developed at the very start of a business to provide a clear road map or raise external finance/funding. This said in many cases entrepreneurs fail to realise how valuable business plans can be in pushing existing organisations to greater success. Below you’ll find some of the key ways business plans can further help you achieve commercial greatness as your business grows.
Producing an internal business plan is a fundamental exercise even if you’re not seeking funding or looking to sell. It is an indispensable tool for management as it obliges you to analyse the basic cogs of the organisation to evaluate how well it is working. Even non-profit organisations and non-trading bodies use business plans as a way of setting goals and objectives, assessing the strengths and weaknesses of the company and determining its direction. There is also the common misconception that only entrepreneurs or start-ups need a business plan, when in actual fact they are useful for any organisation, however well-established.
Internal business plans help to run organisations in several ways:
- Strategic direction
- Performance measurement and management
- Communication
- Empowerment
Strategic direction
Laying out the objectives and goals of the company alongside the workings of organisation allows you to see what strategies are succeeding, and where new strategy is needed. Once strategy is established, business plans are also a useful tool for uniting a common company vision in larger, sprawling companies.
Performance measurement and management
By establishing a company vision, the business plan can then be used to develop a performance management programme. This makes sure that everyone in the company is working towards shared goals, under the same ethos.
Think of the plan as your business roadmap: it should show you where you are heading and how to get there. Departmental or individual goals can be set, complete with work plans to show how these can be achieved. The plan can be used to figure out which objectives should be priorities and expose which strategies and objectives are currently incompatible. Figuring out the source of such incompatibility is key to developing the company and changing direction to reach the main objectives.
When setting targets, it is important that they are both realistic and measurable. Goals should be clearly defined, and the specifics should be made clear to those who are expected to achieve them: exactly what is to be achieved, by whom, by when and how.
Communication
Many studies have proven the positive effects of good communication within a company, from higher productivity to higher staff retention. A 2014 study from About.com showed that communication related issues account for the top three reasons why employees leave their jobs. The top issue was poor communication from management.
Many employees feel undervalued and unheard in larger corporations. It is important to involve employees from lower down the business when creating a business plan and to determine the feasibility of your objectives, so that goals are motivating rather than stress-inducing.
Empowerment
Distributing a business plan to all levels of the company allows for better transparency, a better company-wide understanding of the direction and objectives of the company and higher level of trust and morale. These factors can contribute hugely to the productivity and profitability of your organisation. Staff who feel more included are more motivated to contribute and are more inclined to assume responsibility.
Furthermore, it encourages open communication in both directions: it is important for your employees to feel that they can suggest improvements, report problems and discuss ideas with management.
