BP - 9 Ways to Use Your Business Plan

8/12/2019 BP - 9 Ways to Use Your Business Plan

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9 Ways to Use Your Business PlanIt's not just for financing--your business plan can help you spot future success or

failure, attract suppliers and employees, and more.

September 27, 2005By David H Ban!s "r

Editor's note: This article was excerpted from Business Plans #ade $asy, a guide tocreating a high-impact business plan.

%&e pro'ess o( )ritin! a business plan &elps you ta*e a t&orou!&, 'are(ul and'ompre&ensive loo* at t&e most important (a'ets o( your business, in'ludin! t&e 'onte+tsin )&i'& it operates "ust raisin! uestions 'an sometimes lead to a solution, or at leastensure t&at i( 'onditions '&an!e you )on-t be (or'ed to ma*e de'isions &astily %&eon!oin! .)&at i( t&is or t&at &appens/. in&erent in t&e plannin! pro'ess *eeps you alertn ot&er )ords, t&e plannin! pro'ess itsel( ma*es you a (ar more 'apable mana!er t&an

you )ould be )it&out it 1or many, t&is is a more valuable result t&an se'urin! (undin!

n many )ays, )ritin! a business plan is an end in itsel( %&e pro'ess )ill tea'& you a lotabout your business t&at you are unli*ely to learn by any ot&er pro'ess You-ll spot (uturetrouble areas, identi(y opportunities, and &elp your or!aniation run smoot&ly, simplyt&rou!& t&e a't o( )ritin! a plan

Evaluating a New Venture

3isa 4n!o)s*i o!a* is an entrepreneur )&o started several ne)sletters in mu'& t&esame )ay S&e devised a plan (o'usin! on mar*etin! strate!y and 'as& (lo) pro6e'tionsto see i( s&e 'ould 'ome up )it& a )ay to sell t&e ne)sletters )&ile *eepin! &er bills

paid S&e t&en prepared a sample issue to be used in a dire't mail and publi'ity 'ampai!n.Plannin! is t&e *ey to t&e su''ess o( your ne)sletter,. says o!a*, )&ose latest ventureis Williams Hill Publis&in! .t-s t&e sin!le most important t&in! you 'an do to ensure t&esu''ess o( your ne)sletter.

%&at-s t&e *ind o( en'oura!ement t&at &elps entrepreneurs persevere, )&et&er t&ey &avean e+istin! 'on'ern t&at-s &ittin! a rou!& spot or a startup 'on'ept t&at nobody else seemsto believe in umbers 'an lie, o( 'ourse, and nobody 'an 'reate a spreads&eet t&at reallytells t&e (uture But evaluatin! (inan'ial data is to entrepreneurs&ip )&at evaluatin! labresults is to a medi'al do'tor ( your vital si!ns are !ood, odds are your (uture )ill be as)ell

But )&at i( t&e odds don-t loo* so (avorable/ W&at i( t&e (irst pass t&rou!& your 'as&(lo) pro6e'tion or in'omepro formas'ontains more red t&an a (ire station paint lo'*er/Sure, you 'an !o ba'* and loo* (or an error or an overly pessimisti' or 'onservativeassumption You 'an even try alterin! a (e) o( t&e inevitable numbers t&at you really&ave no )ay o( estimatin! a''urately to see )&ere t&e pressure points are, i( not&in! else


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But )&at i( you do t&at, even pus&in! your alterations past t&e point o( 'redibility, andyour plan still doesn-t ma*e sense/ Well, in t&at 'ase, you-ve probably done yoursel( t&ereally bi! (avor o( (indin! out somet&in! isn-t !oin! to )or* be(ore you sin* your moneyinto it obody *no)s e+a'tly &o) o(ten t&is &appens, but it-s sa(e to say t&at a lot o(businesses are never attempted be'ause t&e plan 'onvin'in!ly says t&at t&ey s&ouldn-t be

s t&at bad/ Well, it may (eel bad But t&in* &o) mu'& )orse you )ould (eel i( you )enta&ead )it& t&e venture, and t&in!s turned out as t&e plan (ore'ast Business plannin! is apo)er(ul tool (or evaluatin! t&e (easibility o( business ventures Use it

t )ould be a s&ame to *eep t&e bene(its o( a )ell8done plan to yoursel( 4nd yous&ouldn-t You 'an use your plan to (ind (undin! But a !ood plan 'an also &elp sell yourprodu'ts, servi'es, and your )&ole 'ompany to prospe'ts and suppliers 1urt&ermore, aplan is a valuable tool (or 'ommuni'atin! your visions, !oals and ob6e'tives to ot&ermana!ers and *ey employees in your (irm

elling with !our "lan4s a rule, your business plan is only li*ely to be reuired in t&e later sta!es o( bein!sele'ted as a supplier 3et t&e 'ustomer-s pro'ess de'ide )&en or i( you-ll present yourplan 4s an added bene(it, )or*in! your )ay t&rou!& t&e early sta!es o( vendor sele'tion)ill !ive you a '&an'e to re)or* your plan, i( ne'essary, to stress t&e areas you-ve learnedare more important to your potential 'ustomerInforming uppliers and #ustomers

n'reasin!ly, 'ompanies lar!e and small &ave been tryin! to trim t&e number o( suppliersand 'ustomers t&ey deal )it& and develop deeper and stron!er relations&ips )it& t&e onest&ey *eep 4n essential part o( t&is is !ettin! to *no) more about e+istin! andprospe'tive vendors and 'lients So don-t be surprised i( one day, )&en you-re tryin! to

set up a ne) supplier relations&ip or pit'& a deal to a bi! 'ompany, t&e person you-rene!otiatin! )it& as*s to see your business plan

W&y do suppliers 'are about business plans/ Suppliers only )ant to sell to people )&o'an pay, )&i'& is one important reason a ne) supplier is li*ely to )ant to see yourbusiness plan be(ore ta*in! a bi! order emember, i( a supplier is sellin! to you on'redit88lettin! you ta*e delivery o( !oods and pay (or t&em later88t&at supplier is, ine((e't, your 'reditor Suppliers )&o sell (or ot&er t&an 'as& on delivery &ave t&e samele!itimate interest in your business-s strate!y and soundness as does a ban*er

Say a supplier-s analysis o( 'ustomer re'ords s&o)s it &as a *na'* (or developin! lon!8term pro(itable relations&ips )it& moderate8sied 'ompanies t&at emp&asie e+'ellentservi'e, pri'e at a premium level, and provide only t&e best mer'&andise Business plansprovide all t&e in(ormation su'& a 'ompany )ill need to (ind and 'lone its best 'ustomersSo i( a supplier as*s to see your plan, be )illin! to s&are it t 'ould be t&e start o( a lon!and mutually bene(i'ial relations&ip

ustomers are li*ely to be 'on'erned about &o) )ell your respe'tive strate!ies (it )it&t&eirs 1or instan'e, say your mission statement says t&at you intend to produ'e t&e best8


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in8t&e8)orld e+ample o( your produ't no matter )&at t&e 'ost Your 'ustomer,mean)&ile, is a &i!&8volume, lo)8pri'e reseller o( t&e type o( produ'ts you ma*e $veni( your o((erin! (its t&e 'ustomer-s need t&is time, odds are !ood t&at t&e relations&ip)on-t )or* out over t&e lon! &aul (, on t&e ot&er &and, a loo* at your business planreveals t&at your 'ompanies s&are t&e same *ind o( strate!ies and &ave similar ob6e'tives

in type i( not s'ope, it-s an en'oura!in! si!n

%&e spread o( t&e open8boo* mana!ement t&eory means a lot more employees are seein!t&eir 'ompanies- business plans t&an ever be(ore W&en employees !et t&e *eyin(ormation mana!ers are usin! to ma*e de'isions, t&ey understand mana!ement betterand ma*e better de'isions t&emselves, and e((i'ien'y and pro(itability o(ten in'rease as aresult

#any 'ompanies &old annual meetin!s at )&i'& t&ey present and dis'uss an editedversion o( t&eir business plan to all employees :t&ers provide ne) &ires )it& t&eirbusiness plan8type in(ormation as part o( t&eir indo'trination in 'ompany 'ulture Bot&

are e((e'tive approa'&es You 'an also use bulletin boards or 'ompany ne)sletters topublis& smaller se'tions o( your plan, su'& as your mission statement or some details o((inan'ial ob6e'tives and &o) you-re pro!ressin!

:ne dra)ba'* to usin! a plan to &elp in(orm and mana!e your employees is t&at many)on-t understand it Some (irms provide employees )it& rudimentary trainin! in mattersli*e &o) to read a (inan'ial report be(ore t&ey &and out t&e 'ompany-s plans :(ten t&istrainin! is done by t&e $: and 'an ta*e 'onsiderable time But don-t be a(raid to s&aredetails o( your business plan )it& employees %&ey may turn out to understand it bettert&an you

$onitoring !our %usiness's "erformanceUsin! a business plan to monitor your per(orman'e &as many bene(its ( your 'as& (lo)is runnin! mu'& s&orter t&an pro6e'ted at t&e moment, even t&ou!& you-re not 'urrently introuble, t&at in(ormation may &elp you to spot disaster be(ore it o''urs By 'omparin!plan pro6e'tions )it& a'tual results, you !ain a deeper understandin! o( your business-spressure points or t&e 'omponents o( your operation t&at &ave t&e most e((e't on results

potting trouble early. 4 teena!er ta*in! driver-s edu'ation is told to loo*

t&rou!& t&e rear )indo) o( t&e 'ar in (ront to try to see t&e bra*e li!&ts on t&eve&i'le a&ead o( t&at one %&e idea is t&at i( t&e novi'e driver )aits until t&e 'arimmediately a&ead slams on t&e bra*es, it may be too late to stop 3oo*in!(or)ard, past t&e immediate (uture, &elps tra((i' move more smoot&ly and averts

'ountless a''idents

%&e same prin'iple applies in business plannin! You don-t &ave to be a )iard to !etsome solid &ints about t&e (uture beyond tomorro), espe'ially )&en it 'omes to t&eoperations o( your o)n business You 'an loo* at virtually any pa!e o( your businessplan and (ind an important 'on'ept or number des'ribin! some e+pe'ted (uture event t&at,i( it turns out to be diver!in! (rom reality, may &int at (uture trouble


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Say your pro(it mar!ins are s&rin*in! slo)ly but steadily and seemin!ly irreversibly (you 'an see t&at )it&in a (e) mont&s your de'linin! mar!ins )ill pus& your brea*8evenpoint too &i!& to live )it&, you 'an ta*e a'tion no) to (i+ t&e problem You may need toadd a ne), &i!&er8mar!in produ't; !et rid o( an old one; or be!in mar*etin! to a morepro(itable 'lientele 4ll t&ese moves, and many more you 'ould ta*e, &ave a !ood '&an'e

o( )or*in! i( your 'are(ul 'omparison o( plan pro6e'tions )it& a'tual results )arns youo( impendin! dan!er Wait until t&e last minute, and you 'ould be peelin! yoursel( o(( t&e)inds&ield

&nderstanding pressure points.ot all tips t&at 'ome (rom 'omparin! plans

)it& results &ave to do )it& avoidin! dan!er Some &elp you identi(y pro(itopportunities :t&ers may s&o) &o) seemin!ly minor t)ea*s 'an produ'eoutsied improvements in sales or pro(itability 1or e+ample, t&e plan (or a one8person pro(essional servi'e business indi'ated t&at risin! sales )ere not, in!eneral, a''ompanied by risin! 'osts 1i+ed items su'& as o((i'e rent andinsuran'e stayed t&e same, and even semivariable 'osts su'& as p&one bills )ent

up only sli!&tly %&e bul* o( any e+tra business )ent strai!&t to t&e bottom line,s&o)in! up as pro(it improvement But one 'ost t&at didn-t seem espe'iallyvariable )ent up s&arply as business volume 'limbed %&at )as t&e number o(transa'tions

:rdinarily t&is )ould be a !iven and not ne'essarily a matter o( !rave 'on'ern 4 lar!eenterprise 'ould absorb t&ese 'osts, but (or t&is sin!le pro(essional, &o)ever, addedpaper)or* 'ame at a very &i!& 'ost88&er o)n time 4s a part o( '&e'*in! &er plan a!ainstresults, s&e noti'ed t&is une+pe'ted in'rease in transa'tions and 'al'ulated t&at s&e spentaround an &our on paper)or* (or ea'& transa'tion no matter &o) lar!e or small S&erealied t&at one o( t&e most important pressure points in &er business )as related to t&e

sie o( a transa'tion By re(usin! small en!a!ements and see*in! 'lients )&o 'ould o((erbi! 6obs, s&e )ould redu'e t&e amount o( time spent on ot&er)ise unprodu'tivepaper)or* and in'rease t&e time s&e 'ould spend 'ompletin! 'lient reuirements

Ultimately, s&e )as able to trim )&at &ad been


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t&at 'omes out )it& a ne) pro!ram 6ust be(ore #i'roso(t unveils a top8se'ret, lon!8termdevelopment e((ort to 'reate somet&in! t&at does t&e same 6ob (or a lot less money

t-s probably not a bad idea, as part o( your business plannin! pro'ess, to try to in'ludesome in(ormation in your business plan about t&e a'tivities or intentions o( t&e potential

embar!os and #i'roso(ts ( not&in! else, 'ra(tin! a s'enario in )&i'& t&e unt&in*ablya)(ul o''urs may &elp you to deal )it& it i( it does But some t&in!s are 6ust )ild 'ardsand 'an-t be predi'ted 1or t&ese you 6ust &ave to trust t&e lu'* o( t&e dra)

So )&at numbers &ave to add up/ ertainly you &ave to be sellin! your produ'ts andservi'es at a pro(it t&at )ill let you sustain t&e business lon! term You-ll also &ave to&ave a (inan'ial stru'ture, in'ludin! payables and re'eivables systems and (inan'in!, t&at)ill *eep you (rom runnin! out o( 'as& even on'e ( you &ave investors )&o )ant to sellt&e 'ompany someday, you may need a plan )it& a bi! number in t&e (ield (ors&are&olders- euity on t&e pro6e'ted balan'e s&eet

W&en you-re as*in! yoursel( )&et&er t&e numbers add up, *eep t&e needs o( yourbusiness and your business partners, i( you &ave any, in mind $ven i( it loo*s li*e it-llta*e an air stri*e to *eep your business (rom !ettin! started, you don-t )ant to do it i( t&enumbers say t&at lon!8term it-s &eaded no)&ere

ttracting (ood "eople

t ta*es money to ma*e money, sure, but it also ta*es people to ma*e a 'ompany, t&at is,unless you-re a one8person 'ompany Sometimes even t&en a plan 'an be an importantpart o( your e((ort to attra't t&e best partners, employees, suppliers and 'ustomers to you

"rospective partners.Partners are li*e any ot&er investors, and it )ould be a rare

one )&o )ould 'ome on board )it&out some *ind o( plan Partners )ant to *no)your basi' business 'on'ept, t&e mar*et and your strate!y (or atta'*in! it; )&oelse is on your team; )&at your (inan'ial per(orman'e, stren!t&s and needs are;and )&at-s in it (or t&em 3u'*ily, t&ese are e+a'tly t&e same uestions a businessplan is desi!ned to address, so you-re li*ely to please even a demandin!prospe'tive partner by simply s&o)in! &im or &er a )ell8prepared plan %&e onedi((eren'e is a plan probably )on-t 'ontain t&e details o( a partners&ip a!reement4nd you-ll need one o( t&ese to spell out t&e 'onditions o( your partners&ip, nomatter &o) )ell you and your prospe'tive partner *no), understand and trust oneanot&er

"rospective employees.4lt&ou!& employees may not be ma*in! 'as&

'ontributions to your business, t&ey-re ma*in! an investment o( somet&in! euallyimportant88t&eir o)n irrepla'eable time %&e *inds o( employees you probably)ant are 'are(ul, t&orou!&, !ood at assessin! problems and ris*s, and un)illin! toleap into &aardous )aters 4s it &appens, t&ese are 6ust t&e *ind o( people )&oare !oin! to )ant to see a )ritten plan o( your business be(ore t&ey 'ome onboard


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o), it-s not !oin! to be ne'essary, i( you-re runnin! a restaurant, to s&o) your (ullbusiness plan to every )aitperson or assistant dis&)as&er )&o (ills out a 6ob appli'ationt-s t&e most desirable employees88t&e talented te'&nolo!ists, t&e )ell8'onne'tedsalespeople, t&e inspired 'reative types, and t&e !riled, seen8it8all mana!ers88)&o aremost li*ely to (eel t&ey 'an and s&ould demand to see details o( your plan be(ore t&ey

'ast t&eir lot )it& you

So even i( you don-t s&o) your plan to more t&an a (e) prospe'tive employees, )&en youneed it, you may really need it bad #a*e sure you-re ready )&en a promisin! butinuisitive 6ob 'andidate s&o)s up at your doorstep 4not&er t&in!, as )e-ve pointed out,not all businesses &ave plans So by &avin! one, you-ll be ma*in! yoursel( a moredesirable employer

%&ere-s no point in plannin! (or (ailure, but t&ere is a point in )ritin! a business plant&at-s )illin! to admit t&e possibility o( (ailure t-s only natural to 'reate a plan t&at )illdes'ribe a roarin! su''ess, but you &ave to be 'are(ul not to present an overly optimisti'

vie), espe'ially o( su'& elements as sales, 'osts and pro(it mar!ins

t-s temptin! to noodle around )it& t&e numbers until you 'ome up )it& t&e desiredresult 4nd i( you only ma*e small '&an!es &ere and t&ere, it may seem all ri!&t W&atdi((eren'e does it ma*e/ Say you in'rease your pro6e'ted mar*et s&are by < per'ent &ere,redu'e e+pe'ted 'osts by 2 per'ent t&ere, and lo)er your estimate o( reuired startup'apital by a (e) per'enta!e points as )ell

4 number o( similarly small '&an!es, in sum, 'an ma*e a bi! di((eren'e in t&e bottomline o( your plan and turn )&at ot&er)ise loo*s li*e a loser into a pro6e'ted )inner Butdon-t be sedu'ed You may be as*in! (or investments (rom (riends and (amily you 'are

about as )ell as puttin! your o)n li(e savin!s into t&e enterprise 4rm-s8len!t& investors-(eelin!s may not be so important, but i( you mislead t&em in your plan, you may openyoursel( up to a''usation o( misrepresentation

3oo*in! at t&in!s in your plan t&rou!& rose8'olored !lasses may even doom yourbusiness to (ailure i( it 'auses you to see* insu((i'ient startup 'apital, underpri'e yourprodu't or servi'e or e+pe't unrealisti'ally rapid !ro)t& %emper your ent&usiasm (your plan indi'ates t&at t&e business idea isn-t sound, by all means loo* (or errors Butdon-t ma*e t&e mista*e o( s*e)in! your plan to (it an idea t&at isn-t sound

&pdate !our "lan

Writin! a business plan is one o( t&ose s*ills t&at improves )it& pra'ti'e %&e (irst one ort)o times you 'reate one, you may (eel a little unsure o( yoursel( and even less 'ertaint&at )&at you-re doin! &as value

( you !o on to start several ventures durin! your 'areer, you-ll naturally )rite severalbusiness plans, and ea'& one )ill be better t&an t&e last t-s li*ely as )ell t&at )it& betterplannin! s*ills )ill 'ome improved business s*ills, boostin! t&e odds t&at ea'&su''essive 'ompany you start )ill do better t&an t&e one be(ore


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But t&ere-s no reason t&at only serial entrepreneurs s&ould !et t&e bene(it o( re!ularbusiness plannin! sessions ( you start 6ust one 'ompany or even i( you never start a'ompany at all, you 'an and s&ould be 'onstantly &onin! your business plannin! s*ills byupdatin! and re)ritin! your business plan

Updatin! a plan is normally easier t&an startin! (rom s'rat'& nstead o( tryin! to (i!ureout )&at your basi' business 'on'ept is, you only &ave to de'ide )&et&er it-s '&an!in!nstead o( )onderin! )&ere you-ll (ind t&e 'urrent mar*et resear'& you need, you 6ust&ave to !o ba'* to t&e ori!inal sour'e (or updated (i!ures You-ll usually be able to reuset&e (inan'ial (ormulas, spreads&eets, mana!ement bio!rap&ies and ot&er more or lessever!reen 'ontents o( your plan

t-s important, &o)ever, t&at a plan update not be a me'&ani'al tas*, limited to plu!!in!in t&e most re'ent sales (i!ures %a*e t&e time to '&allen!e some o( t&e 'ore assumptionso( your prior plan to see i( t&ey still &old up Have pro(it mar!ins been &i!&er t&an youe+pe'ted/ %&en start plannin! &o) to ma*e t&e most o( any e+tra 'as& you !enerate s

your ne) retail store unit not per(ormin! as )ell as ot&ers or you e+pe'ted/ %&en no)-st&e time to (i!ure out )&y Has 'ompetition (or your ne) produ't arisen sooner t&an you!uessed/ %a*e a loo* at ot&er produ'ts )it& an eye to seein! i( t&ey are also morevulnerable t&an you t&in*

n lar!e 'orporations )it& stri't plannin! routines reuirin! annual, semiannual anduarterly plans and plan updates, mana!ers spend at least part o( t&eir time )or*in! on ort&in*in! about a ne) plan or plan update 4ll t&at in(ormation (lo)in! up to seniormana!ers in t&e (orm o( plans &elps *eep t&e brass in(ormed t &elps t&ose in t&etren'&es, too t-s a (a't t&at everybody is 6ud!ed by past per(orman'e 4nd t&e best )ayto ensure t&at a year (rom no) you-ll be loo*in! ba'* on your per(orman'e )it&

satis(a'tion and pride is to plan no) and o(ten

Here are ei!&t reasons to t&in* about updatin! your plan ( one applies to you, it-s time(or an update

e) or stron!er 'ompetitors are loo*in! to your 'ustomers (or t&eir !ro)t&5 Your (irm develops or is about to develop a ne) produ't, te'&nolo!y, servi'e or

s*ill ( your business &as '&an!ed a lot sin'e you )rote your plan, it-s time (or anupdate

? You &ave &ad a '&an!e in mana!ement e) mana!ers s&ould !et (res&in(ormation

7 Your 'ompany &as 'rossed a t&res&old, su'& as movin! out o( your &ome o((i'e,rea'&in! @< million in sales or employin!


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A Your old plan doesn-t seem to re(le't reality anymore #aybe you did a poor 6oblast time; maybe t&in!s &ave 6ust '&an!ed (aster t&an you e+pe'ted But i( yourplan seems irrelevant, redo it

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BP - 9 Ways to Use Your Business Plan