A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals, and financial plans to ensure sufficient resources can be made available.
Business plans may also target changes in perception and branding by the customer (the company or person paying the invoice), client (the person or company receiving the product or service), or community. When the existing business is to assume a major change or when planning a new venture, a 3 to 5 year business plan,based on strategic intent, is required, as this is typically the length of time it takes to begin to enjoy a return on investment.
Who is interested?
Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, such as financial stakeholders. They typically have detailed information about the organisation or team attempting to reach the goals. With for-profit entities, external stakeholders include investors, suppliers and customers.
External stakeholders of non-profits include donors and the clients of the non-profit's services, as well as government agencies at times.
In the main, most business plans make their way across the bank manager or business advisor's desk.
Internally focused business plans target medium term goals required to reach the external goals. They may cover the development of a new product, a new service, a new technology system, a restructuring of finance, the refurbishing of a factory, relocation, merger or joint venture as a restructuring of the organisation.
An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors (key result areas KRAs). This allows success of the plan to be measured using non-financial measures.
We like the Balanced Scorecard (BSC) approach as it covers more than just the financial KPIs (Key Performance Indicators).
Typically the structure begins with Learning and Growth, which is about developing well-trained and highly motivated people.
Learning and Growth is the leading indicator of the next section Business Systems, which looks at what is required to ensure the highest quality and fit for purpose outcomes.
Business Systems is the leading indicator of Customer Satisfaction, which identifies the key expectation drivers of the businesses Customers.
Once, and only once Customer Satisfaction drivers have been identified, can we move to Financial, which include such things as profits, revenues and the like.
It's important to note that each section should limit itself to the primary indicators of success and have no less than five and no more than 10 indicators in each section.
Operational plans describe the goals of an internal organization, working group or department, and identify and allocate the three main resources (time, people and money - TMP).
Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals, and are unique one-off's that have a specific start and end date.
What's in it?
Preparing a business plan requires a broad and deep range of knowledge from many different business disciplines: finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others.
Many business people, driven by mortgages and bank needs, view their financial components, such as Profit and Loss statements, Cashflow projections, debtors and creditors (as part of the Balance Sheet) and so on, as their business plan.
They have nowhere to go when things go pear shaped if this is their way of thinking.
As is often said, "fail to plan and you plan to fail."