HOW TO PREPARE A BUSINESS PLAN
The following 8 steps represent the major issues that should be addressed during the Business Planning process. As you proceed through these steps remember that it is not so much the finished plan itself, but the process of planning that is important.
Step 1 Analyse your Business
The first step in preparing a Business Plan is to analyse your business and take stock of where your business is at the moment. Identify all the measurable features of your business such as revenue; number of customers; amount of repeat business; current sales/conversion rates; lost customers. Do a complete accounting and financial audit analysing areas such as debtors, creditors, cash requirements, debt levels and accounting systems.
Review each major component of your business, from human resources through to production and distribution. Compare all these variables with the previous years. This analysis should help you to determine many of your business strengths and weaknesses.
Look also at the less measurable areas such as the quality of management, acceptability of products to the market, depth of the established networks, reputation of the company etc. In later steps you will add to these strengths and weaknesses and summarise your findings in “Step 5 – the SWOT analysis”. On completion of Step 1 you should write down a clear concise statement, indicating the rationale behind your business and outline the major issues.
Step 2 Analyse your sales
In this section you will need to look at your total sales and then break these sales figures up by product group or major products. Compared to last your, are your sales increasing or decreasing?
From this big picture, divide your sales by type of customer or market segment. (Segmenting the market means listing the common types of people that potentially could by your product or services. We have included Tables in “step 3 – Analyse your Market” to help you segment the market) this will, among other things, help you to understand who your product mix appeals to at the moment. Many businesses find that the more they break down their sales, the better their understanding of the market the easier it becomes to determine how to increase sales.
Remember also the 80/20 Rule. In most businesses 80% of your revenue will come from 20% of your clients. It is important to identify the top 20% of your customers for two reasons. Firstly, to direct sales programs to look after these customers and secondly, to identify the type of customers to prospect in the future.
Step3 Analyse your Market
Having looked at your business it is now time to have a look at the market. Do you know the total market sales and trends? Is the market a good growth market? Will external factors such as legislation, economic and political issues affect your businesses long term competitiveness?
In the previous step you looked at the type of customers you have. In this step we are more concerned with all the types of people that will potentially buy you products or services. Break down the market into market segments and conduct a detailed and thorough analysis of the needs of each segment. Who is your customer and what are his/her needs? Understand the influencers in the marketplace and how they may possibly affect your sales. If possible cultivate new contracts from these groups.
Finally look at how the market perceives your business and its offerings.
Step 4 Analyse the competition
All businesses have some form of competition whether it be from direct or indirect sources. Businesses might find that they face competition from similar products (e.g. Apple vs IBM Pc’s), from substitute products (i.e. margarines vs butter) or simply competition for the amount of dollars that the consumer has to spend.
A well managed business will analyse and isolate major business opportunities and threats. The business must evaluate the needs of the market, the competitors’ offering to the market, the major promotional selling points of competitors and the relative success of these appeals. This should be compared against the firm itself…. has it positioned itself with a strong long term competitive advantage?
Step 5 Summarising the results in the SWOT Analysis
“Steps 1 – 4” involve an analysis of your business and all factors that affect your business. “Step 5” consists of summarising this information in a SWOT analysis. SWOT is an acronym for strengths (business), weaknesses (business), opportunities (market) and threats (market).
Step 6 Write the Plan
When writing a Business Plan you should be listing the means by which you can capitalise on your strengths and minimise your weaknesses, it will state how you intend to take advantage of opportunities and avoid potential threats to the business. The document should include a marketing plan, a finance plan, a human resource/training plan, and plans covering any other major areas of your business.
Step 7 Implement the Plan
This section breaks the plan into a number of tasks, timings and responsibilities. It should state who is responsible for “Getting the Task Done” and specify a date for this action to occur.
Step 8 Monitoring the Plan
On a regular basis, all activities should be monitored to make sure the business is achieving what was planned. All business managers no doubt are aware of falling into the trap of constantly “Firefighting”. Always keep the big picture in your mind and stay focused on the job of achieving your goals. If any objective is not met, ask the question, “Why not?’
If objectives are not being met then you may have to reconsider your initial plan. Often events occur throughout the planning period that will affect your initial assumptions. A good evaluation of all your objectives and the level achieved will lead to better future planning.
If you encounter any difficulties in completing your Business Plan or would like a Business Advisor to work with your through the process, contact RF Business Solutions at firstname.lastname@example.org