One of the big reasons entrepreneurs and small and medium sized enterprises (SMEs) give when asked why they do not have a business plan, is that they do not have the time. ‘Not having the time’ is of course a convenient excuse. We can all relate to the time pressures that entrepreneurs and SMEs face. What they really mean is that they do not believe business planning is as important as some of the other things they need to get done.
Business planning benefits companies well beyond the 30 page document provided to a bank manager or potential investor. It is much more than this, and entrepreneurs could be better served if they considered its wider uses instead of purely viewing it as a hurdle to be cleared on the path to securing finance. Setting goals and milestones, allocating resources, tracking progress, aligning colleagues behind a unifying strategy, and managing cash flow are some of the advantages of business planning.
After all, business planning is as much about managing your business effectively as it is about the funding the event it is synonymous with. Businesses need to prioritise workstreams, to make people accountable for their actions, and to ensure that teams are operating as effectively as possible by tracking progress against predefined goals. The alternative is too grim to bear thinking about - rudderless businesses with entrepreneurs operating reactively, fighting fires, and losing site of the bigger picture as the bank balance gets smaller and smaller. It is important to step back and keep an eye on the bigger picture so as to plan accordingly and ensure the things that need to be done are consistently being prioritised.
Given the very nature of most entrepreneurs, this can be pretty challenging. Entrepreneurs are typically bursting with energy, just about managing their ‘to-do lists’, and rushing from job to job. Emails are responded to efficiently, time consuming trips are undertaken to meet prospective partners, and their websites are tweaked to perfection. Pausing so they can reflect on a business plan seems like the last thing they should do. After all they are in ‘bootstrap mode’ and can survive the three or four months it will take to get the cash coming in. In reality, they are in ‘research mode’. Or as Steve Blank describes: "A start-up is an organisation formed to search for a repeatable and scalable business model." Reframing a start-up in these terms makes business planning all the more relevant as a business model is essentially a snapshot of the key elements of the business plan. Hence, they should be constantly be tested in the search for a commercially viable opportunity that they can fulfill. A business plan is the most efficient way to manage the process.
SMEs are already up and running so may have no obvious planning event on the horizon. Increasing numbers are solo-entrepreneurs with no employees and demands on their time can be significant with none else to delegate work to. Efficient business planning will help them manage cash flow, prioritise activities and also help ensure they can proactively plan for growth. Even if they are cash flow positive and profitable, planning can help ensure they are aware of broader changes in the external context, where they should be concentrating their efforts for growth, and what key activities they need to concentrate on in the foreseeable future.
The key to all of this is to have a clear picture of what the business plan is required for when starting out. If the purpose behind the business plan is to raise finance, then a business plan as a 30 page document with extensive charts, graphs and financials is a good starting point. But if the purpose is to better manage your business, the plan can be tailored to your specific requirements as a means to set SMART Objectives, to manage performance, cash flow and to align resources behind a common goal. In these instances, we are talking about planning and, given the consumer of the plan will be internal; the plan can be much shorter and less polished than one for external circulation.
With a clearer sense of the wider benefits of business planning, it is likely that time will indeed be made for planning, with the narrative moving away from reactive ‘fire fighting’ to a stronger strategy for achieving key business goals.