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If you were to run a marathon you would not embark on a 26.2 mile run without having prepared beforehand. Most people would follow a training plan and alter their expected finish time dependant on how their training went over the several weeks or months prior. Focus and execution are what count. A training plan for a marathon is just another version of a business plan. Too many businesses fail because they lack focus, execution and a plan.
A business plan owner must be prepared to seek the advice of others. It is this honesty and openness that will truly benefit the business and be the difference between success and failure. In the corporate world that is having board level governance and challenge but private businesses quite often do not have access to that sort of expertise and plough on until they need additional funds, go to a bank manager, prepare a business plan for that purpose and then have a surprise when the bank refuses to loan.
It is quite shocking that the first time the business plan is produced is when seeking others funds. Shouldn't it be a lot earlier? Remember that all the funds that are privately invested are yours, family friends etc and the reality of it is that you are investing your children's legacy so don't you think that it's worth having a business plan to ensure you are embarking on the right business opportunity?
Too often businesses launch into the detail of running the business and forget to look holistically to ensure that it makes business and more importantly financial sense. It's not a hobby, you are trying to seize a business opportunity.
In my 30 years in the financial services sector I have seen successful opportunities maximised because they followed a business plan. Sure, there have been some occasions when a plan has not been drawn up but they are most definitely in the minority. Even then if a good idea takes off without the initial business plan it will eventually need to be put to paper because that what is required to take it further.
A business plan is not cast in stone. It must adapt as the business environment changes around you. That said, it must also reflect the original business purpose, must be well thought out, flexible and above all demonstrate financial profitability in a defined period of time with absolutely realistic time frames.
Clear and realistic financials
Timeframes - key milestones and deliverables
Competitive landscape and Market environment analysis
Know your customer, target markets
Scaleability. Is it a single product business or does it have other opportunities?
It is very easy to focus on the business, sales etc, but it is absolutely critical to keep extremely focussed on the financials. Margin errors in pricing multiply rapidly and can ruin a good product or business model.
Ian Campbell is Managing Director of Guy Carpenter in the global financial services sector. He has 30 years experience in the industry.