Is it the length of the plan? The information it covers? How well its written or the brilliance of its strategy? No. Read on to discover the essential ingredient in any effective business plan.

There is no such thing as a standard business plan but there is one truth that can be applied to all – it must not be static.

Many business owners only write a business plan when they have to, say for example when they need funding or are planning an exit strategy, and it’s commonly seen as just another admin burden. However, business planning is a key management tool that can be used for a variety of purposes: to raise finance; evaluate strengths and weaknesses; increase sales and enter new markets. Viewed as part of a process, it can make a tremendous difference to the success of your business.

Business planning must be seen as a blueprint to the future, one that will be adapted and reviewed on a regular basis. As a rule of thumb, you should revisit it on a quarterly basis or more frequently if you are seeking finance. What you may have prepared for at launch may not be case one, two, three or many years down the line and you have to respond to risks and opportunities as they present themselves.

A common objection to developing and maintaining a comprehensive business plan is that the owner already knows where the business stands and where it’s going. This may be true, but there are considerable psychological and commercial benefits to formalising the strategy. Not only will the process help clarify the aims and direction of the company, but it can also help relieve stress by providing a clear road map to follow.

Furthermore, a business plan is an invaluable tool for helping others to understand and appreciate the company’s value. For example, banks and other third parties who support your business are constantly looking at risk: the more they understand about the business, how it works, who the key players are, what the market is like, where the company derives competitive advantage, etc, the more likely they are to offer support. Individual reports on their own, such as accounts, can’t provide this information to third parties, which is why a well written business plan is essential.

Often when we prepare business plans with clients, it focuses their minds on what they want to achieve and creates a starting point to improve the business. If this process is then supported with forecasts that can be monitored, it helps with forward planning as performance can be measured.

The wider benefits of an effective business plan include:

  • Focusing the sales and marketing strategy.
  • Reassuring suppliers to build relationships and help with credit limits.
  • Highlighting weaknesses in staffing levels, productivity, market penetration and reputation.
  • Improving relationships with staff by building confidence and morale, and enabling them to understand and support the business far more effectively.
  • Revealing potential obstacles to growth which can then be tackled and overcome.

Regardless of industry sector or type of business, the key to an effective business plan is that it is developed as part of a dynamic process – a working document that is used to evaluate progress and check the business stays on track. It mustn’t be long, complicated or include assumptions and generalisations. Keep it focused, accurate, positive, and above all: updated.

For more information and advice on developing an effective business plan, please contact our Business Advisory Team.