The Importance of a Business Plan – Part 2 Sep 15, 2023

In Part 1 of this series you learned all about the importance of business planning, and a few of the key components of a proper business plan:
– Executive Summary
– Industry and Market Analysis
– Marketing Strategy
– Financial Projections

Today we’re going wrap things up by diving into operations and management, risk analysis and contingency planning, the appendix section, along with common mistakes and best practices when writing your plan.

If you haven’t read Part 1 yet, please check it out first before continuing on.

Operations and management

This section is designed to explain your business model and how the business will operate. You’ll create a clear structure of the necessary processes and procedures that will help you deliver your product or service to the marketplace.

This is why it’s crucial to understand your business model, as the processes will change depending on the model. Will you be service oriented, retail, manufacturing, e commerce, or possibly tech-based?

A few areas of operational activities include: research and development, manufacturing and production, inventory management, logistics, as well as human resources and internal company policies which I’ll expand on more here.

Human Resource needs

You’ll want to describe what your company’s human resources needs are. Will there be employees now, or later? Will there be contractors or subcontractors? What about benefits plans? Other costs to consider in your financial projections if you are hiring employees are CPP, EI, and vacation time/pay. These are costs that add up quickly so you want to make sure you understand this in detail.

Internal company policies

And understanding of your internal company policies will help your business meet the requirements of the many key stakeholders in your business (for example CRA, suppliers, customers, employees, etc). Many businesses who fail to comply or even to simply understand these requirements can lead to a failure of the business – which is quite common.

Internal company policies will describe a wide-array of activities such as if your company needs to charge GST or RST, describe any industry specific requirements (WCB, workplace health and safety training), will there be credit and accounts receivable? If you have identified key suppliers, who are they and what are their credit terms? Who will handle financial records? You’ll want to identify any key insurances, permits, licenses, and rules and regulations required for your business operations.

Risk analysis and contingency planning

All businesses carry risk – both internally and externally – and it’s up to you to understand where it might present itself to the best of your ability. You don’t want to leave this up to chance to find out and then to react in a moment’s notice. Plan for all scenarios so you can respond appropriately rather than react.

A PESTEL analysis can help identify external risks and threats.

Internal risks can include:
Your management team, customers, compliance, cash management, employees, product costs, financing needs, and more.

Once your business risks are identified you can begin to create a contingency plan to mitigate the risks.

The purpose of a contingency plan is to allow your company to get back to its daily operations efficiently and effectively after an unforeseen event. It protects resources, minimizes customer inconvenience, and identifies specific responsibilities for each staff member.

Appendix

Lastly, you’ll want to include an appendix section in your business plan.

An appendix organizes your business plan concisely in one centralized place. It includes additional information that doesn’t fit neatly into your business plan but supports everything in more detail. The information should be easily referenced and organized.

For example: marketing materials, designs, contracts, primary and secondary market research, organization charts, licenses, etc.

Common Mistakes

Analysis paralysis

Getting caught up in details and specifics early on while failing to execute is a common trap owners fall into. In the beginning of your business, you need to capture just the right amount of information that will help you take action, and then make informed decisions based on your knowledge AND experience. This is why a business model canvas (which I’ll touch on briefly later) can help you articulate your business idea quickly in the beginning, and then allow you to go deeper into specifics as you move along your venture’s journey

When it comes times to fully articulate your plan, one of the common areas people become the most overwhelmed with is financial projections. It’s imperative that you seek help and guidance if you need it. Don’t give up simply because you don’t understand. Successful businesses are usually run by owners that seek help when they don’t know something!

Not revisiting and updating plan

It’s very common for business owners to get a plan put together during their initial stages to prove viability and secure funding. Only later to fail to update the document based on the ever-changing internal and external forces that impacts their business. A business plan is a living document! You should make time to revisit your plan often. Create a scheduled cadence to update your plan so you can feel confident in your knowledge and execution moving forward. For some that might be monthly, where others it could be quarterly or annually

Confirmation bias

Business owners are incredibly passionate about their ideas and goals. Of course they want their businesses to be an overwhelming success – and rightfully so. But a common mistake is business owners leveraging a business plan to showcase 100% optimism. Rather than being cautiously optimistic, they use every point to reinforce why their business is free from practically all risk. This is actually counter intuitive as lenders know that’s not realistic. When you play naïve and don’t highlight the possible risks with a plan to overcome them, you show that you haven’t based your plan on logic and reality. Leverage your SWOT, Pestel, and 5 Forces frameworks!

Plan is not based on market research and customer needs

Building off the point above, you want to make sure your plan is based on real data – not on your assumptions. Make sure you do your research and collect valid data and information specific to your industry, and convey this information in a manner that supports your business honestly.

Executive summary is written first and inflates the businesses worth

An executive summary should be written last – taking a few key points from each area of your business plan. It’s the overview of the plan, and helps your reader prepare for what’s to come. It should be clear and concise, as to best capture their attention. Be factual and objective. The language should the strong and positive. Be polished, brief, and to the point. And tailor it to your audience.

Poor structure and organization

How the actual content of your business plan is laid out can influence the perception of your business. When showing your business plan to key stakeholders, it’s important to write and organize your plan clearly.

Here are a few tips to ensure your business plan is comprehendible:
– Check your grammar and make sure there aren’t any spelling mistakes
– Avoid run on sentences.
– Don’t use acronyms without descriptions
– Write in the third person, writing from your business name’s perspective
– Organize your business plan clearly with proper sections and an appendix
– Ensure your references are easily accessible
– Be specific and provide examples and evidence. Know what you’re talking about and back up your claims!

Best Practices

Start general then get specific

It’s easy to get overwhelmed when you try to write the “perfect”, full 20–40-page document. But your focus in the beginning stages of business is to do the work and get feedback on your product and service. You’re trying to find product-market fit. You can have an awesome business plan, but if you haven’t built your product and put into the hands of your ideal customers, there isn’t really a business.

Now, this doesn’t mean you shouldn’t have a plan! By now you know that’s not a good idea. So, what should you do? Be proactive and plan but start general. A tool like the Business Model Canvas (which I’ll share in resources later) can help you get your idea out quickly. Once you’ve got this laid out, diving into the details and refining things becomes much simpler.

Review and update your plan regularly

Remember, a business plan should constantly be revisited and adapting. Don’t just write one, secure your funding, and then leave on the shelf to collect dust. Keep it close by and refer and revise it often.

Consider all possibilities – the good and the bad

When writing your plan, you can’t just be focused on everything going well. That’s a false reality. Instead, your plan should consider options that address your businesses key threats. The golfer’s motto of “the more I practice, the luckier I get” can apply here. You can “practice” making various decisions based on the multiple scenarios you’ve consider. All of this will help you make more proactive, calm, and clear decisions in the future.

Get outside opinions

There are so many amazing mentors, and resources out there. Use them! It can be hard to spot mistakes when we are so head down and invested in our own vision. We need to avoid any biases we hold and get a better look at our business landscape as a whole. Outside perspectives help with this.

Additional Resources

– Futurpreneur Canada Business Plan Template
– Business Plan template for entrepreneurs

For a deeper dive into effective business planning and hands-on guidance, consider the Business Planning Program! With personalized support and access to industry experts, you will leave this program equipped with the tools and knowledge for business strategy success.

Learn more

This article was written by Paul Keefe.
“As a WTC Winnipeg Business Advisor, I’m happy to help in any way I can. Don’t hesitate to reach out for guidance on your business journey, challenges, or any related matters.”

pkeefe@wtcwinnipeg.com

WE HELP MANITOBA BUSINESSES