For those of us in business we usually have a clear idea of the terminology associated with our core business. Most of us have been asked at some time to prepare a Business Plan for their business. This could be requested by the bank as part of a loan application; by the purchaser of a business in a sale situation or as part of a grant application. It could be a strategic plan, a business plan or even a corporate plan. Most people don’t know the difference – even those people who ask for the plan to be prepared!
If you are in this situation, be quite confident in asking what sort of information is required and expected from you. What the bank calls a business plan is different to what a potential investor in your business calls a business plan, and different again from what a funding body may mean. The term business plan is used by many different people who all mean something different by it.
A strategic plan usually refers to the broader issues or opportunities faced by a business. It has a 3 – 5 year time frame and is usually much shorter in length than a detailed business plan. The topics covered in a strategic plan include: issues or opportunities (maybe 4 – 6 of these); objectives (what you want to achieve with from each issue or opportunity); strategies (how you are going to achieve each objective); performance measures (how you determine how well you are going); and performance targets (how well do you have to perform against each measure).
Business Plans take the broader information contained in the strategic plan and converts it into actions that need to be undertaken to achieve our targets within the timeframes indicated.
The duration of a business plan is usually 12 months and will deal with topics including markets and customers; staff training; product development; production planning; asset management; capital expenditure; profit and cash budgeting; financial reporting; and risk management.
The business plan will contain information describing what you expect to achieve in each of these areas and how you are going to do it. Whilst many people believe that a business plan is something that you can complete in a couple of hours by downloading a template from the internet, the smart people realise that the more time and effort they put into their business plan, the better they understand what drives the business and its profitability and the better job they will do in managing the business. One of the quickest ways of doing this is to work with your adviser in the preparation of your business plan. I emphasise working with your adviser – not asking your adviser to do it for you, otherwise it becomes the adviser’s business plan and not yours because you miss out on learning all the vital information about your business obtained whilst developing the plan.
Good business operators have some sort of business plan – even if it is in their head so why waste the work of producing a business plan for someone else, you might as well make the best of it and produce a business plan for yourself.