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How to Prepare a Business Plan for a Small Business

Most small business owners prepare a business plan to borrow start-up capital or fund expansion.   Once the loan is approved, the plan is too often put on a shelf and only updated when new funds are needed.   Raising capital is obviously an essential function of any business plan, but a well-prepared plan can provide the owner with many other benefits.  It can help them realistically assess their expectations and  provide a framework for strategic decision-making and performance monitoring during implementation.  

I recommend a rolling three-year plan with yearly updates. 

Use both Strategic and Business Planning Processes

Preparation requires both strategic and business planning processes and it is essential that the owner is intimately involved in both processes.   The strategic planning process ensures that the business is competing in a market in which it can be viable.  It includes analysis of factors both internal and external to the business.   The internal analysis considers the expectations of the business owner, his or her competencies and values and the resources he or she has at his or her disposal.  The external analysis considers customer needs and potential threats from competition or other environmental events.  The strategic plan produced defines the business mission, the owner’s values, the industry and market the business will compete in, who will be its clients, which of their needs will be met and very broadly, what it will have to do to meet them.    It may also indicate that the owners need to modify their expectations and/or develop new skills before start-up.     A strategic plan for an established business may also indicate a need for organisational re-design for small business or cultural change for small business 

The strategic plan is then developed into a business plan which explains in detail how the business will capture the competitive advantage available to it within that market.   It should contain detailed strategies for marketing, operations, human resource management and financial management.

  • The marketing strategy will demonstrate how the business will keep its current customers and attract new business
  • The operations strategy will explain the work of the business - what it will do to provide the products or services demanded by its clients - and the resources it will use to do so. 
  • The human resource strategy will demonstrate how the business will attract, develop, motivate and retain  people (including the owner). 
  • The financial strategy will forecast income from sales and demonstrate how the cost of running the business will be financed e.g. by loans, profits, etc.   


Monitor Performance against the Business Plan

The plan will also include indicators for monitoring performance at monthly or quarterly intervals.  These will not be confined to indicators of the overall success of the business – by the time these fail the business is in serious trouble.  It will also contain early warning indicators that allow corrective action to be taken before the business suffers.

Your business plan should be a living document, consulted each time you make a strategic decision and against which your performance is monitored.

         Learn how to develop your own Business Plan


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Last Updated on Tuesday, 02 November 2010 04:51
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