Benefits of a documented plan for small business | Sunday Observer

Benefits of a documented plan for small business

8 August, 2021

To put it simply, a business plan is a document that details business concepts and strategies for the growth of a specific business. The plan helps guide the organisation’s effort and if required gives investors, lenders, and other stakeholders the information they need to decide whether they need to be a part of the organisation. 

A typical business plan provides details about the company, competition, market feasibility, customers, and industry in order to impart the required information to make business decisions. 

Do you really need a business plan for your small business? The answer is not a mere affirmative but it is an emphatic necessity. In Sri Lanka, the vast majority of small business owners do not even consider a documented business plan.

They simply work on natural boldness typical to risk-takers and usually plan everything in mind. Creativity and daring decision-making alone may not be sufficient for business success.

At the outset, the entrepreneur has to determine whether the planned venture has the potential to succeed and if so, whether the investment is worthwhile. For a small business enterprise, a simple business plan is merely a road map that directs the investor in the right direction, but not a signed contract with someone elsewhere he has obligations to fulfill.  

Direction

A business plan for a small business can be a simple document of a few pages. Having a documented plan for the business helps the entrepreneur with a sense of direction and it can pinpoint the best strategies for the business. Also, a proper plan helps you to prioritise your tasks from the word go, giving an insight on what to do at which time. 

It also allows you to work out important details before plunging into the investment. With a proper plan, the entrepreneur can get a better picture of the entire picture into the future.  

As an experienced business executive, my first and foremost advice for small start-ups is to analyse the market feasibility of the products or services they intend to continue the business with. Therefore, market feasibility analysis becomes the first key step of a business plan. In market feasibility analysis, important information about the industry, target markets, target segments, competition, customer behaviour, and market trends are looked into. 

Analysing market trends in the selected industry, opportunities available, possible threats, and the future of the industry are evaluated in the market feasibility study. Further, important criteria such as market size, future trends, and possible developments are included. 

Although these terms sound serious, they are quite simple information and all of them are relevant to a small business. These details in the business plan help the entrepreneur to gain a wider, deeper, and a higher degree of understanding of the target market. 

If someone is starting a new business, the business plan can explain all steps to be taken in the future to achieve the desired goal. The plan should typically include information on financial requirements before the start with a financial forecast. 

Proof

From the time of raising the capital until the product is launched and predictions beyond that  are also included in the business plan, giving important information on the future for the entrepreneur to rely on, rather than arbitrarily spending funds. 

A business plan is proof that the entrepreneur is confident and sincere about his intentions. It reveals to all stakeholders including employees, investors, partners, and suppliers that the entrepreneur is committed. Also, the business plan compels the entrepreneur himself or herself to think through and select the path that will propel him to growth.

Even before getting involved in the actual market, the information gathered at the initial level of the plan about the competition can provide the required edge in the market. The business plan provides the business an opportunity to study and counter the omnipresent competition in the market. 

An in-depth understanding of consumer behaviour is one of the most vital facts in any business. Without them, the business can fail. The business plan gives this vital information accurately to the organisation to strategise the marketing effort. Products or services marketed to suit the customer segment are a key contributing factor in business success. This factor not only increases the loyalty of customers but also acts as an important reason to attract them from the competition. 

Another benefit of a business plan is that it helps to document the revenue model of the company. This section of the plan answers critical questions on finance by documenting the revenue model.

A properly prepared financial plan includes forecasts, anticipated revenue, actual expenditure, capital requirements, and running expenses of the business. A financial plan also helps the owners to determine other financial needs such as extra capital requirements, future additional funding needs, expansion plans, and so forth.   

Best option

The business plan reduces the risk of trailing wrong opportunities. It evaluates the current opportunity and compares it with other openings in the market to recommend the best option. The business plan can provide alternatives to any factor related to the business that helps the business owner to make the right decisions.  

Recruiting and retention of employees of an organisation is an exceedingly vital factor. A business plan assists the organisation to attract the best quality talent for the company. The business plan can be a motivator for both management and staff as it gives inspiration and clearly define the strategic goals. Customarily, when an organisation grows, the employees manage most of the work. Therefore, getting them aligned and motivated can be done through the predetermined business plan recommendations.  Usually, a business plan is created with the contribution of a collection of people through brainstorming, discussing, analysing, evaluating, and creative interviewing. During this process, there is a high possibility that the entrepreneur or his planning team will come up with new opportunities.

Some of the participants of these sessions will see things from a different perspective in the context of opportunities that can create new markets and new consumer segments. The ideas generated in brainstorming sessions can also initiate business diversifications and new ventures.      An operational business plan or the action plan is a plan within a plan and perhaps the most important segment in the overall operation. The action plan enables the organisation to formulate step-by-step strategies to achieve the long-term goal.  Hence, the management and the staff can focus on their energy-specific tasks. Usually, the action plan details the entire operational aspect of the business. It separates priorities and sets specific periods for the business to operate efficiently. 

SMART model

The action plan is being used more frequently by companies due to the specific tasks being detailed. A successful action program is one which is ambitious enough to achieve success but realistic enough to prevent overextending.

The SMART model of action planning is often used the world over as the model is based on Specific, Measurable, Attainable, Relevant, and Time-bound criteria. The action plan also helps to overcome procrastination and provides adequate motivation to carry out planned action on time.  

Overall advantages and benefits of a documented business plan are immensely useful to any type of small business. Any entrepreneur eagerly looks forward to the growth of his or her business. Most of the Sri Lankan small-scale entrepreneurs do not either understand the importance of a plan or neglect it willfully. 

However, the Government, particularly President Gotabaya Rajapaksa, has repeatedly said that the aim of the government is to create more entrepreneurs who can create employment opportunities. Therefore, institutions such as Entrepreneur Development Authority must introduce awareness campaigns to educate small business owners on documented business planning.   

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