Business Plan Myths
Sep 22, 2008
Now could not be a better time for business planning. Sales are all over the map and who can predict what they will be next month? This is the reason to have a business plan supported with monthly financial projections. There is not a better way to stay on top of your business as the business climate changes. It is called being "proactive" rather than reactive. I have worked with dozens of companies over the years and the ones that are no longer around or have experienced cash flow problems did not stick to these two fundamentals (planning and projecting). Why didn't they plan? Why do so many companies avoid it? Here are a few of the top unscientific reasons companies do not.
Other companies do not have one: Many successful business owners do not have a formal plan because they are caught up in myths of business planning, have not been exposed to the process or think it is too complicated. However, realizing it or not, they are practicing many of the components of planning by prioritizing, setting goals, tracking specific plans, delegating assignments, projecting sales and expenses, and tracking to budgets. Planning is a great tool to manage your business by and it cannot be overlooked. Planning will minimize risks and unknowns. It will build systems where you can track goals, hold people accountable, and it will bring the management team together, not to mention you will create teamwork. It is a great way to get input and buy-in toward company objectives too. Do not refuse to plan because you do not think your business needs a complicated and formal plan.
It is hard too hard to do...it takes too much time: The top myth in business planning is that the plan has to be a formal and complicated document with narratives, market analysis, flow charts and graphs. Little did they know, a good business plan does not need to contain it all. A good business plan will contain as much information a company thinks it needs to operate the business successfully. Formal business plans are generally used for raising outside capital or applying for loans with the bank. What we are saying here is companies need a plan to run their business. This plan will need to be constantly reviewed, tracked and changed by management. However, this does not mean you can take short cuts by ignoring the industry and the market leaders. The best plans are plans that work for you. This is what your business needs to do to be successful. For some companies, it may only be sales forecasting and tracking. For other companies it is as easy as a making a list of key strategic plans. However, for most companies, it includes these items plus a detailed expense budget including key assumptions the company can track.
Plans change and you cannot change them: The reason for having a plan is to monitor and track your progress. A company needs to know what was done right and wrong. It needs to review the differences between "plan and actual" to manage the plan more effectively. The most important aspect of your plan is to write down your assumptions so you can compare them monthly. Changing your plan, your assumptions and projections is alright. The industry will change and customers have different plans as well. The beauty of having a plan is that you will know the future of the business and what you need to do to get there. If you do not have a plan in place you will not know what changes to make or how those changes will create profits and cash.
Only start-ups use business plans: Having goals, prioritizing, monitoring progress, and holding people accountable is for all companies. Businesses trying to obtain bank loans or trying to attract savvy investors need the detailed plan. However, every business needs to plan. Do not deny your company the benefits planning provides. Develop a business plan! Monitor the plan! Change the plan! Planning and financial forecasting is a fundamental component of management and a successful business.