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May 13, 2020

Why A Business Plan Is Not Overrated Or A Waste Of Time – Breaking The Issues Down For The Layman

This article was inspired by a social media post which said that writing a business plan is overrated. Being my usual curious self, I went through the comments and observed that a few individuals shared similar sentiments. However, I believe that assertion may be true only for the people who develop business plans just to answer the question; “do you have a business plan?”

A lot of the frustration we express about writing a business plan stems from the misconception that it ought to be detailed, lengthy and comprehensive. That misguided opinion alone sends shivers down the spines of people who need to draw business plans. As a result, many rely on consultants to give them documents they might not execute or even bother to read critically.

Once everyone understands what a business plan is, in very simple terms, and how to write one, they’d realize that it’s a very important tool needed to provide the required structure to an idea and a motivation for execution.

WHY DO YOU NEED A BUSINESS PLAN?

The most fundamental question anyone must address is; why do I need a business plan? First of all, every business needs a plan to present a clear vision for execution. This should be the heart and soul of every business plan. 

The second reason for developing a business plan is to have a document that tells your business story in a way which is compelling enough to get a third party to immerse themselves in your vision and be willing to invest time and resources in that vision. 

WHAT CRITICAL ISSUES OUGHT TO BE ADDRESSED?

A business plan must show that you have given your idea serious thought and are aware of all the factors that can adversely or positively impact your business. 

In very simple terms, a business plan ought to answer the following fundamental questions:

STRENGTH, WEAKNESSES, OPPORTUNITIES & THREATS 

What opportunities exist? What strengths do you have to leverage these opportunities? What limitations do you have as a business and what potential threats are there to mitigate the efficacy of your business idea? And, how do you intend to circumvent them? This internal and external analysis is what is summed up as your SWOT analysis – Strength, Weakness, Opportunities and Threats.

It must be borne in mind that this section does not need to contain tons of pages. The goal is just to give you the required insight to keep your eyes on your vision. 

CRITICAL SUCCESS FACTORS

A business plan must also answer what we call Critical Success Factors. These are factors that are important to the success of your idea or business. It’s easy to identify these factors after you have conducted your internal and external analysis. 

VISION, MISSION & CORPORATE GOALS

Every business must have a vision and mission that drives the business and you must document them. A vision statement is simply a definitive statement of the company’s future-oriented aspirations or desired long-term status. The mission statement, on the other hand, refers simply to how the company intends to operate in a bid to reach its future aspirations. A mission statement may capture the markets the company operates in, how it operates and how it intends to compete in the marketplace. 

I understand the frustration of aspiring businesspeople or strategists; sometimes, you’ll have a business idea but unsure of how to couch your vision or mission statements. No worries. You only need to understand what they are and their importance in your business. It always helps to start with a few ideas, discuss them in detail and refine them until it fits your business’s aspirations.

Some simple examples are those of GCB Bank and CIMG. 

GCB Bank’s vision is to be the leader in every market it operates in and its mission is to provide first-class banking solutions for customers and value for all stakeholders. Clearly, this example speaks to a desired future position (vision) and how it’s operating to meet that desired future position (mission).

The vision of the Chartered Institute of Marketing Ghana (CIMG), is to be the voice of marketing practice in Ghana (desired future position) and its mission is to lead in the development of world-class marketing professionals and practitioners for effective marketing practice in Ghana (how it operates to achieve that vision – mission).

The CORPORATE GOALS flow directly from the vision and mission. If your mission and vision lack clarity, it will rub off on your corporate goals. If you are clear about your desired future position, clear about how you intend to operate to achieve that desired future position, you must set specific, measurable, actionable, realistic and time-bound goals to drive your operations. These narrow goals are to guide the day-to-day operations of your business.

You must therefore document what your corporate goals are; what do you want to achieve in 1-5years? For example, if you are starting a clothing manufacturing company, you must have a fair idea about how many units you want to produce daily, monthly, quarterly or yearly, especially in your first year. You need to document and revise these numbers to give you a focus to track your efforts. 

Another misconception is that these numbers ought to be cast in stone. No! They can be revised upwards or downwards depending on the complexities of issues that arise. The most important thing is that it gives you a target and motivation to evaluate your efforts and to take remedial measures. Simple!

SEGMENTATION & TARGETING

Another fundamental question a business plan must answer is what can be termed the STP (Segmentation, Targeting and Positioning).

Every business exists to offer some sort of solution (products/services) to a target market. Therefore, the question you need to ask is; who are these people? Who is your target market and why? One thing businesspeople should understand is that you can’t sell to everyone! You must have a clear understanding of who you want to sell to, to understand their unique needs, track their changing needs, understand where and how to even reach them with both your communications and products, what pricing level to adopt etc. 

Once again, target marketing is not cast in stone. As the business evolves, as your idea expands, the target audience can be expanded or refined. 

POSITIONING

This is also a fundamental question that ought to be answered. There may be many competing solutions targeted at a similar market. The question is; what image do you intend to create in the minds of your target market relative to competing solutions? Let’s even assume that based on your analysis, you have realized that your solution is novel, you still have to create a succinct image that is compelling to lock your solution in the minds of your target audience. 

HOW DO YOU INTEND TO COMPETE?

Once again, I’ll explain this in layman’s language. 

Great, you are starting a business but how do you intend to compete in the marketplace? There are various strategic options available to you. Each of them has strategic implications, but do not worry if you do not even understand all the implications clearly in the beginning. As you focus on doing the right things at the outset, you’ll learn along the way. 

You must know that the business world is brutally competitive and you ought to have an approach to compete; 

  • Do you want to compete on price? If you want to use price as a competitive advantage, you must understand that your cost of production and overheads must be very low so you can price low and still be profitable.
  • Do you want to compete by serving only a narrow segment of the market with a very unique need?
  • Do you want to compete as a premium brand? This also has serious implications because you can’t claim to be a premium brand and be selling on the streets of Makola at the price of the lowest price on the market. 

There are various approaches to documenting your competitive strategy but that’s up to you. The most important thing here is to be conscious of this fact. 

EXECUTION SCHEDULE

A plan without a timeline is a wish at best. As a serious businessperson, you need to draw a schedule to break down whatever you need to do, when you have to do it and how much you expect to expend on each activity. The advantage of having a detailed schedule is that it makes it easy to put all ideas into a workable plan and also serves as a tracker to help you identify any lapses. 

A schedule is “Action, not a talk shop!”

FINANCING

Once you have done the analysis and understand the goals you have set and key activities to execute, especially for the first year, you’ll have an idea as of how much you need to kickstart the business. This must be documented. Once again, this is not necessarily cast in stone; you may have to start much smaller than you envisaged for the idea to take-off. 

You must also understand the potential sources of funding and funding expectations and also document how you intend to pay back. Very simple, innit? (As my London friends would say).

Therefore, in very simple terms, these are SOME of the basic issues that a business plan ought to cover and everyone should be able to do this, even if it’s only a few pages! As I stated in the beginning, once you understand that essence of a business plan, you’ll know that it’s only a basic tool to guide you structure your idea and motivate you towards execution.

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