Is your business plan a living and dynamic document that keeps your business on-track? Watch our 'Business planning' video and ensure that you’re taking the essential steps to successful business planning.
Whether you’re a start-up or a seasoned professional, developing a business plan can boost your confidence and make a significant difference in achieving your business goals. Having a business plan is like having a roadmap. It helps to clearly identify a pathway for your business, as well as pointing out opportunities to explore, roadblocks to overcome and helps get you back on track when circumstances change.
This video will showcase the difference that a business plan could make for your business, and then will guide you through developing and maintaining your plan. With the right tools at your disposal, you may be better placed to gain a competitive advantage.
We’ll help you learn how to:
- identify your personal vision for your business.
- develop a set of tactics to realise that vision.
- implement a review process to maintain your business plans’ relevancy.
This video may be helpful for anyone who:
- has recently started their own business, or is looking to start one in the future.
- is an existing business owner or manager who has never developed a business plan before.
- is an existing business owner or manager who wants to refresh an existing business plan.
- is an individual who is looking to develop business planning skills.
Hi, I’m Rob Lockhart from Westpac’s Davidson Institute here to talk to you about Business Planning. Why? It’s been my experience that while business owners usually have a very clear vision of where they want to take their business, rarely do they have a plan on how they are going to get there, and rarer still is actually having it written down. But to my way of thinking a business plan is essential to achieving your business goals and getting to your chosen destination in better shape.
So, this video provides some guidance on completing a business plan to help you and your business be more successful.
In this video, I’m going to explore the concept of business planning, work through the basic reasons for planning, some of the key things that you should consider including in a business plan, and how to ensure your plan remains relevant. Specifically, I’m going to cover: • The benefits of planning. • What to include in your business plan, and • Reviewing your plan.
Let’s start by looking at the benefits of planning … and there are many. For me, much of the value actually lies in what you discover or learn during the planning process as well as the benefits gained from having a written plan. As Peter Drucker, renowned management author, says, “The best way to predict the future is to create it”.
By spending some time examining your business and the environment it operates in, then forecasting where you would like to take the business, how you are going to do that, and what may happen along the way, you are able to make much more considered decisions and have a greater likelihood of achieving your goals. The more effort you put into creating the future you want, the greater chance you have of achieving it.
So, what are the benefits of planning? Firstly, it clarifies your key objectives. A key question for any business owner is “What are you trying to achieve?”. A common response to that question is – “make more profit”. But what does that actually mean to you? Are you looking to create an empire for your children’s future or perhaps just enough for you and your family to enjoy life right now?
Profit though isn’t the only reason people are in business – for some, it’s about sharing their skills or passions, for some it’s about being independent, for others it’s the opportunity to right a wrong or make the world a better place. Whatever it is, developing a business plan will help you to dig a little deeper and identify what it really is that you are looking to achieve and will help you to articulate that to others who have an interest in the business.
A business plan also helps to clarify the way forward. It helps you to plot a pathway and gives you a clearer idea about how long it will take, how much money is required to make it happen, and what you might expect along the way. This has the advantage of helping identify when you are getting off track so that you can find your way back to your chosen path sooner.
Finally, a business plan clarifies the key measures of success, or what success ‘looks like’ for you. For some it may mean doubling your profits next year, for some it may mean being recognised with a ‘Business of the year award’, or perhaps it’s being able to leave the business in capable hands while you take a well-earned break.
Regardless of what success looks like for you, a business plan helps you to clearly define that success, and it helps to keep you on track towards achieving what is important to you and your business. In the simplest of terms, a business plan answers the ‘who’, ‘what’, ‘where’, ‘when’, ‘why’ and ‘how’ questions about your business.
Knowing the benefits is an important step in the process. However, the most common question from business owners about planning, is “What should I actually put into the plan in the first place?”. Before we get into the framework that I am going to show you, to help answer that question, let me also say that a business plan does not have to be a huge document. Your business plan should be as long or as short as works for your business.
It’s about being able to articulate what it is that you want to achieve and how you are going to do that.
It stands to reason that the more complex the business is, the more in-depth planning will be required, however, it’s still about what works for you and your business.
There are lots and lots of different templates on the internet that can guide you through completing a business plan. They often include sections entitled: Marketing, Finance, Operations and so on, and may come with detailed instructions or questions to answer. At the Davidson Institute, we encourage using a simple framework called the ‘7P’s of planning’ to help guide you through the planning process.
The 7P’s are: Purpose, Product, People, Place, Price, Promotion, and Performance. Let’s take a closer look at each of those elements of your business and how they can be incorporated into a business plan. The first P is for Purpose. The Purpose of a business should be at the centre of every single decision you make. So, it’s important that you very clearly articulate what your Purpose is, otherwise it can be easy to lose sight of what you are doing and why.
Logically, the purpose of any business is to generate profits for its owners. However, businesses are rarely set up with the sole aim of generating a profit. More often than not, when going into business, the business is being created and run by someone who has the drive to achieve something specific and is using the business as a way to do that.
When describing the Purpose of your business, ask yourself questions like: • What is the reason that the business exists? • Why this type of business, and not another? • What is the specific outcome that the business is trying to achieve? And why? • When I leave this business, what will I have hoped to have achieved? And why?
Recording the purpose of your business in your business plan helps keep it clear and at the centre of everything you do. Each and every action taken in your business should have the sole focus of helping to achieve the Purpose. Ok, to help you achieve your Purpose there are a number of ‘tactics’ or ‘tasks’ that you will need to undertake.
The first we are going to consider addressing in your business plan is your Product, which of course is the goods or services that your business sells. When detailing your product or service in the business plan, there are 3 key areas to address:
Firstly, the technical specifications. This is the detail around exactly what your product or service is. What does the product or service do? What are the components that go together to make it? How big is it? How much does it cost? What colour is it? All of those sorts of details. Secondly, production and distribution. How do you actually make the product or provide the service? Where do you source the product or service from? What is the process to get the product on the shelf?
Then, what is the process to get it off the shelf and into your customers' hands?
Thirdly, and most importantly, what benefit does the customer get from purchasing your product? Does it solve a problem or satisfy a need? Does it save time or provide convenience? Or does it improve your customer’s image? By identifying the customer benefits and why they purchase this product from you allows you to continually improve your product and helps to effectively market your product.
The next P to be addressed in your business plan is People. This is about the People that you need to operate the business and achieve your Purpose. The time that they invest, the skills that they need, and how they help in the process of making your product or service available to your customers.
The first step when thinking about the People that the business needs, is to think about all the different jobs that need to get done – whether that’s opening the doors of a morning, keeping your computer records, building the furniture, fixing the cars or cleaning the office.
I find a good place to start this process, even if you are a one-man-band, is with an organisation chart. The chart should show all the jobs that need to get done. These jobs can then be grouped together to create roles which then allows you to identify what skills and knowledge are necessary to perform those roles and then select or develop the right people for those roles to help achieve your Purpose.
When describing People in your business plans, ask yourself questions like: • What are the jobs that need to get done? • What types of people will get the job done? • What skills do they need to get the job done, and how can you develop them if there are any skill gaps? • Do you have a succession plan for your people? Such as, where will you get replacements from, how will you train them, and how long will it take to train them?
These questions, of course, are just scratching the surface but will give you some guidance on how to get started. The next P to address in your business plan is Place. The choice of location can have a significant impact on a business’ success. Choosing the right location increases the chances that a business will be profitable. Choosing the wrong location, however, may put the business at a serious disadvantage.
The Place is also about the resources you need to distribute your products and services into the market. It may be a physical location such as a shop front or warehouse, or it may be a virtual location or website. When addressing Place in your business plan, ask yourself questions such as: • How do you get your product or service to market? Do clients come to you, or do you go to them?
• Do you require a physical structure such as a warehouse or shopfront? Or can you operate from a website and manage at home? • What attributes does any physical structure require? This is things such as electrical cabling, staff amenities, car parking, and so on. • Is there room for growth? Or the flexibility to change?
We also recommend thinking about your Place from these 3 perspectives. Firstly, access to customers. Does your place need to be close to or easily accessible by your customers? Are you a ‘destination’ that requires parking? What hours do you need to be open for your customers? Secondly, access to labour. Does your business need particular skills or a large volume of labour? And if so, is your Place able to access those requirements?
Are there costs or incentives associated with being located in an area that can provide the labour you need? And thirdly, access to your suppliers. How easily accessible are your supplies and what costs are associated with that?
While the Place you currently operate from may be dictated by cost, tradition or other variables, it is still worthwhile to consider it from these perspectives. This way you can highlight where your current place may be deficient so that you can implement plans to make the most of what you have. Remember your Place, and how you use it, should always support you achieving your overall Purpose.
The fifth P that you use to help achieve your Purpose is Price. One of the most challenging decisions that a business faces is how to price its products and services. Poor pricing decisions can undermine the strength of a business. If the price is too high, customers won’t buy the products; if the price is too low, there is a risk that the business will not be able to make enough profit to be viable.
Your pricing strategy as defined in your business plan is about achieving a balance between how much you charge for your Product, how much of it you can sell at that price, and costs associated with that volume of product. Getting that balance right is about maximizing your profitability.
Setting your prices should take into account what it costs you to produce and sell your Product, but just as importantly, how your customers perceive its value. While you need to be competitive, make sure you're not missing out on sales and profits by keeping prices low and undervaluing your Product.
The sixth P to be addressed in your business plan is Promotion. Promotion is about how your business connects with people and how they respond. While it includes every single interaction you have with a customer or potential customer, whether that’s phone calls, the attitude of your sales staff, or even the layout of your invoice, it’s predominantly how you market your business and the products and services that you sell.
There are 3 main areas to look at with regard to marketing. Firstly, who is your target market? Be specific here. Ask yourself the questions, “Who are the customers you want to deal with?” and “Who are the customers who want to deal with you?” Then get to know them really well. Get to know things like their age, gender, culture, where they live, what type of work they do, how well educated they are, and so on. Get to know what makes them happy, sad, or frustrated.
Get to know what drives their purchasing decisions.
Once you have an understanding of who your target customer is, then you need to consider what the best medium is to communicate with them. That is, where will these customers hear about you? Is it billboards, signage, letterbox drops, the media, or simply ‘word of mouth’ or social media? By understanding your target customer, it should help you understand which mediums your customers engage with, and which will provide the best opportunity to deliver your message.
And that’s the third thing to consider, the message. There are 2 aspects to any message. Firstly, grabbing the customers attention. This will generally be ‘what is in it for them?’. Lead with what your customer wants to hear, not what you want to tell them. The second part of the message is your ‘call to action’. If your Promotion grabs their attention, what do you want them to do? Call you, go to your website, go to your store or office, buy your goods or services.
Whatever your call to action, make it clear, make it easy to understand and make it easy for your customer to act on.
The final P for your business plan is Performance. This is the measurement of whether you have been successful in achieving your goals, and how each of the P’s have helped you to achieve your Purpose. When defining Performance in your business plans, ask yourself questions like: • How do I know if I am performing well? • What are the things that drive the outcomes I am looking to achieve? And how do I effectively measure that?
• Do I have a performance scorecard or dashboard that I can quickly gauge success with? • How do I collect the necessary data to ensure that I can measure performance? Measurements can be either financial or non-financial. Some financial measures could be Sales, Profitability, or even Cash efficiency.
Non-financial measures could include employee engagement, and customer feedback or loyalty. Remember there is no right or wrong type of measure, it’s whatever tells you as the owner of the business whether you are achieving your Purpose or not. The 7P’s of planning is simply a framework for putting a plan together. If you wanted, you could add more things to this planning process, but these 7Ps give you a simple way of identifying what is important to the business in achieving its goals.
But a business plan is not something that is written once and lasts forever. It needs to be reviewed for the simple reason that the market is always changing. There are new technologies that can be implemented that enable us to do business quicker and more efficiently; peoples tastes may also change over time, meaning that what we could sell a lot of today may not be the product or service of choice tomorrow;
even things such as legislation and the general economy change over time and our plans need to adjust.
So, the next logical step is to develop a process of review for your business plan as a simple way of checking if it is still relevant given current circumstances. Planning is more of a continuous journey than a once-off event. To our way of thinking there are 4 key phases in the planning process.
It starts with ‘Setting your objectives’. Here you determine where you want your business to go and how it will get there. Next, ‘Implement tactics’. This is about putting your plan into practice and making it happen. This is the stage where the rubber hits the road and you start ‘living’ your business plan and bringing the 7Ps to life.
Then ‘Monitor progress’. The performance measures that you have set yourself become critical here, as you can start to measure whether your actions are really achieving the goals that you want them to. Finally, ‘Review & Modify’. If things aren’t going as well as you had hoped, then one of two different things may be the problem.
Either the plan needs changing because it doesn’t quite fit what you are trying to do or, alternatively, you need to change how you are implementing the plan. By reviewing the relevant data about how you have performed against your stated goals, you can then make appropriate changes to give yourself a better chance of achieving those goals. This may then lead to a resetting of those objectives and how you implement your tactics, and so the process continues.
So, how often should you plan? Well, as often as suits the business. You may have your daily plans, your plan for the month ahead, or even a comprehensive 5-year plan. At the Davidson Institute, we suggest that it is worth thoroughly reviewing your plan at least annually. This will ensure that you are still working towards your ultimate long-term goals. Then, once a month it is worth monitoring some of the key drivers to see how you are going against your plan, to help keep things on track.
Throughout this video I have covered the benefits of planning, being the clarity it brings to your objectives, your way forward, and knowing what success looks like. We then had a look at what to include in a plan and followed the 7Ps of planning framework – of purpose, product, people, place, price, promotion and performance.
And finally, planning is not a one-off, it is a journey. Set your objectives, implement your tactics and tasks, monitor how you are going, and review or modify in need. Thank you so much for watching our video on ‘Business planning’. I trust you found the information useful and relevant and I encourage you to check out the other resources on the Davidson Institute website to help build your financial confidence.
Can I suggest continuing your learning journey by watching the ‘Optimising business planning’ video? ‘Optimising business planning’ takes a higher-level look at business planning and covers some useful tools that may help make your planning more effective.
Bye for now.