YBC Academy : Business Plan

A Business Plan is a document that lays out in simple terms what your business is, its objectives, plans and resources. They are primarily used when raising finance and as a means of measuring performance.

There should be an executive summary at the start of the document which outlines opportunities and defines strategies along with financial predictions and an overview of the business and its operations. It should explain who you are, what the business will do now and how it will develop in the future.

Strategies should focus on marketing and sales and highlight which channels you will be promoting your business through, how you will achieve sales and your pricing policy.

Operations should discuss where your business will be working from and your proposed systems for IT and managing information.
The financial forecast should include cash flow statements, profit and loss and sales forecasts. List any security you can offer and how the business will be able to repay any borrowings.

Growing Your Business
With many businesses struggling and worse it should be remembered that many businesses are still bucking the trend and growing. Why is this. They might be in a growth market, they might be lucky or they could well just be running an efficient well managed business.

Business Planning

So, what is the key to business growth? For one it’s staying on top of the numbers; understanding your financials, margins, profitability, sales, marketing funnel and cash flow. It’s by delighting your customers or at the very least meeting their expectations and requirements (so you keep them!). Thirdly it’s about creating a clear direction, goal setting and planning and measuring and of course understanding your marketplace and competition. This is vital yet only a small proportion of businesses in the UK do this. And finally, it’s about seeking external help and support – gaining knowledge, a mentor or business coach is ideal as they help you navigate your business through the ups and downs of running a business and make you accountable ensuring set goals and targets are met in the agreed timescales.

Do all of this and you are mitigating the risk of failure, creating a business that will operate efficiently and beat the competition.

Business Planning
Many people think business plans (1,3 or 5-year commonly) are just for start-up’s, or to seek investment whether that be loans or investors. The truth is that business planning offers many benefits for every business.

A living, breathing business plan helps you grow. According to a survey conducted by the Kauffman Center for Entrepreneurial Leadership companies with a written business plan have 50% greater sales growth and 12% higher gross profit margins than those without one.

It should be pointed out what is meant by a living breathing plan. It’s a plan that is live and you can adapt, update and add in ‘what if’ scenario’s, i.e., it’s a useful flexible tool that will help your business. After all there is no point in having a plan where you can’t revise and add in the monthly revenue, sales figures and other key information to see whether you are on, above or below your projected (planned) targets. Any of these figures will have a bearing on how well your plan is being implemented.

So, what are the top ten Business Plan benefits of having such a plan?
1. Priorities will be clearer. Business planning should connect the dots in your business, so you get a better picture of where you are and what you want or need to do. Strategy is supposed to relate to tactics with strategic alignment. Does that show up in your plan? Do your sales connect to your sales and marketing expenses? Are your products right for your target market? Are you covering costs including long-term fixed costs, product development, and working capital needs as well? Take a step back and look at the larger picture.

2. Strategic Focus. Start-up’s and businesses of all sizes need to focus on their special USP’s (Unique Selling Points), their target markets, and their products or services tailored to match.

3. Set priorities. You can’t do everything. Business planning helps you keep track of the right things and focus on the most important things. Allocate your time, effort, and resources to those tasks that are going to grow your business and make it a success.

4. Manage change. With a good planning process, you should regularly review assumptions, track progress, and manage new developments so you can adjust as time progresses. This will also help you avoid costly mistakes. This is especially important in these turbulent times.

5. Metrics. Put your performance indicators and numbers into the business plan where you can see them. Use your business planning tool to define and track the key metrics.

6. Develop accountability. By having a planning process and tracking results you can review regularly – spot the good and bad (plan vs. actual) and adjust either yourself or by delegating.

7. Manage cash flow. Poor cash flow is nine times out of ten why businesses fail. Mitigate problems and adjust; profitability, products, purchasing assets, repaying debts, bad debtors, overstocking… to name a few.

8. Strategic alignment. Make sure your day-to-day work fits in with your business tactics which in turn matches the strategy. Alignment equals greater success.

9. Milestones. Good business planning sets milestones (goals) you can work towards. These are key goals you want to achieve, like reaching sales targets, hiring staff, or opening a new location.

10. Ensure your success. A business plan will undoubtably clarify your strategy and goals but the key to success is using your plan within your business on a constant basis building it in to your day-to-day activities and updating it as time progresses.

Cash Flow
If not managed correctly your business will experience cash flow shortages which hinder growth or place your business at greater financial risk as the percentages in these areas grow disproportionally to your revenue. The challenges for you and your team is to continually catch this disproportion before it becomes a problem.

The maintenance of positive cash flow and the management of the cash collection function are fundamental to the success of any company. especially during the Covid-19 crisis as historically nine out ten business fail due to poor cashflow.

A good strategy to manage cash flow is concentrating more on what they refer to as ‘A’ Class clients – i.e. your largest ones. This strategy alone should result in improved cash flows and working capital for the company for the following reasons:

• Larger clients should be more creditworthy
• Payments from larger companies tend to be easier to predict due to their higher reliance on systemised payments (as opposed to ad hoc payment from small businesses)
• Larger clients and higher fees will result with less work being required to collect the same amount of cash
• Fewer and larger clients will enable better credit control

Other strategies could be:
To monitor and assess the gap between conflicting items e.g., Revenue to Growth Profit percentages; Revenue to Net Profit percentages; Marginal Cash Flow percentage change; Operating Cash Flow percentage change; and Net Cash Flow percentage change.

To project the future growth of your business using robust business modelling tools and running a number of what if scenarios.

Once this has been done, you can then adjust the parameters to produce revenue growth with an alignment in gross profits, net profits, working capital and business value increase. Build in key financial indicators for your business to follow as your business grows.

Monitor regularly. Once a what if model has been agreed to e.g., the level of desired growth is set, profit is assured, cash flow aligned, and your business’s value is increasing you then move forward with growth plans and monitor your business financial performance monthly, quarterly, six monthly and annually. We do this monitoring to make sure your ’now in place’ financial budgets to the actual monthly results are within desired levels.

Monthly budget to actual is the regular monitoring process and is great to keep things on track but it’s simply not enough. Annual planning with financial modelling gives an ability to assess exponential growth via methods outside of simply selling more products or services.

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