Is your business plan like a xmas jumper?

There are many reasons to write a business plan. Maybe you’ve had a great idea and want to check that it makes sense. Perhaps you want to borrow some money, or get external investment to scale-up? Maybe you’re trying to exit and need to attract potential buyers.

Whatever your reason for putting together a business plan, my guess is it took you many hours and the financial forecast ended up far more complicated than you ever thought when you started the process.

A study published in 2010 found that “business plans are particularly helpful at increasing the growth performance of … ventures launching a new product or service.”[1]

All too often, however, the business plan and financial forecasts are put together for somebody else’s benefit, and once the initial objective has been met (loan secured, investors on board), they are put in a cupboard, stuck in a drawer, or left languishing on that cloud drive you rarely ever look at.

The act of writing the plan is just the first step. If the plan isn’t reviewed, referenced and refined, much of the effort may well be wasted.

And if you’ve got external funding, either as a loan or investment, there will be other people who want to know how you are delivering on your forecast.

The challenge business plans present is they sit in isolation to everything else that happens in the business. You may have a myriad of tools tracking all the numbers and the activity, and updating the plan with this information to see how you compare is often manual. Added to this most business plans are put together as a forecast, with no thought on how to present a comparison with what happened.

For scale-ups, who will invariably need future rounds of funding, and will have to pull out the plan and update it in the future, the concern is the original plan will become out of date, irrelevant and isolated from the day-to-day operations.

Let’s face it, the majority of business plans are like the Xmas Jumper you received on Xmas day and which languishes, forgotten in a drawer for the rest of the year.

The trick is to consider how you will record progress against the plan, and build this in upfront, ensuring your plan is integrated within the business rather than isolated.

[1] Burke, A., Fraser, S., & Greene, F. J. (2010). The multiple effects of business planning on new venture performance. Journal of Management Studies, 47(3), 391-415