Why everyone needs a business plan

Updated: Aug 8, 2019

We're going on holiday. I'm not telling you where we are going. I've got no plan. I've got no budget worked out. But, we're going to have a great time. Get your things and get in the car.

So, who operates like this in their domestic life? You do? Really? No, I thought not. Typically, people plan their holidays. They know where they are going, when, how, with whom, what for, how much it'll all cost, etc.....

So..... why is business planning so hard? I think it's because it sounds like something that only experts can do. Surely it requires an intimate, even nerdy, appreciation of spreadsheets and finance? Also, it's limiting! I want my business to be free to flow and grow, organically; unshackled by old-fashion business plans......

Dream on. There's an adage, origin obscure, that says: if you don't know where you're going, wherever you arrive is OK. Is that how you want to run your business? Is it good enough to end up anywhere?

So, let's think about business planning and let's go back to the holiday planning idea. This is something that you can do.... you do it every year (or more, or less, but you have done it, surely?). If holidays aren't your thing, then think of something else that you have planned. A party, a meeting.... there must be something!

My tips for getting started:

1. Imagine the destination you want to achieve

Think out far enough to be realistic - 1, 2 or 3 years might be OK. 6 months might work, but less than that is likely to be too short a period to allow things to work through.

2. Pick out the details of that image

Where are you; who's with you, what are you doing; what physical things are in place..... get really detailed about all the main elements of the picture. Normally, you need not worry about the colour of your shirt in the image, but if it's part of a uniform, it's important.

3. Now trace each element back to where you are now

For example, if your +3 year image has you employing 5 people, you need to know how many people you employ today. Or, if you are in an office in Manchester, then you need to know where you are today. These AS IS and TO BE pictures will determine the journey that you have to take to get across the gap between the two points. If you already have 4 employees, then the gap is +1 employee. If you are working from home in Cornwall, then the gap is different and, notionally bigger.

4. Think about the journey

Once you have all the gaps articulated, think about the journey entailed in crossing each one.

Some journeys can be combined, some must be taken in sequence. Some will be long and difficult; some short and easy.

5. Identify costs

As you plan each journey, and all of them, you'll identify the costs that will be incurred. This will determine your overall financial plan.

6. Consider critical items

When you think it's all complete, start to ask yourself: what are the critical items; what can go wrong; how will I deal with things if and as they go wrong; what are my contingency plans?

7. Covering contingencies

As you complete step 6, ask what additional financing you need to cover those contingencies. This is a vital step. It's no good running out of money 9/10ths of the way to your objective and thus failing.

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