What’s the right amount of business planning for your business?

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A strategic plan can provide a competitive advantage, and many entrepreneurs continue to develop business plans before moving forward with a concept. Considering the opportunities and challenges of your industry, thinking about different strategic actions and sharing your ideas with employees can have a positive impact on the growth of the company.

On the other hand, too formal planning can hurt the performance of small businesses, as formality can reduce flexibility and innovative response. Older sources refer to the rigidity of top-down hierarchies and cite “too much top-down dictation” as a negative factor in business planning. I’ve heard many modern day experts suggest that the time, money, and psychological input might not be worth it, as companies end up straying from the plan to avoid limited thinking.

So where does that leave entrepreneurs and small business owners? How to find this balance between a total investment in a business plan and leaving room for agility and innovation? As the CEO of a company that provides business planning and financial forecasting software, I think there is a tangible answer to this question, but it depends on where your business is at and what circumstances in which it is now. Let’s go through a few examples and take a look at each case.

The first entrepreneur started

For beginning entrepreneurs, writing a business plan can help in many ways. If you’ve never started a business before, thinking about the strategic elements of running a business will help you understand the potential challenges you will face. This process includes taking into account factors such as target audience, business models, pricing, and even personal networking opportunities.

While you may want to engage in more specific planning in the future, it may not be necessary to make exact predictions and outline the steps right away. For starters, I recommend that you create a quick but strategic plan to keep your new business on track.

The startup looking for VC

Startups competing for venture capital funding should create a solid strategic business plan that will not only be practical for future growth, but will also inspire investor confidence. An investor won’t always read your entire plan, but they will expect you to have a roadmap with a full financial forecast in order to answer all questions and prove that you are the right person to implement your idea. business. Many business planning strategists suggest spending a lot of time analyzing previous strategies, applying them to current market trends, identifying next steps, and knowing exactly how you will be using investment funds.

To write your business plan, I recommend that you create a comprehensive plan and financial model, which you can do with the help of a financial professional. There’s no reason to reinvent the wheel and start from scratch: you want to make sure you answer all the right questions and prepare a full financial forecast, including a cash flow forecast that will help you manage your cash usage. funds. When creating a complete financial forecast, there are a few tips and tricks that will make your forecasting easier and save you time:

1. Understand your business’s key performance indicators (KPIs) and use a benchmark report to see what those metrics are in your industry. If, for example, you are starting a SaaS software business, you will need to understand churn rate, average revenue per account (ARPA), lifetime value, ecommerce conversion rate (ECR), and number of new ones. subscribers that you can add each month. . There are industry references for most industries that will help guide you.

2. Don’t skimp on marketing costs. Understand what companies in your industry are spending on marketing, and make sure you are realistic about what it takes to acquire customers. It is important to know your customer acquisition cost (CAC).

3. Use an existing financial model. You can find them for free at Small Business Development Centers (SBDCs) or online. Make sure to check your models and validate that they are financially correct.

4. Last but not least, make sure you set your business goals SMART: they should be specific, measurable, agreed upon, realistic, and time-based.

The growing mid-size business (or one that aspires to grow)

If you’ve owned a midsize business for several years, you’ve probably seen your fair share of challenges and opportunities. To continue growing or adjusting for better performance, I recommend looking at longer-term goals, such as developing a lean business plan for the next five years. By supplementing your plan with data on your past successes and challenges, you will be able to put your business on a path of equal growth and confidence. You should also be open to changing your initial roadmap and being open to the possibility of new ways of doing business. Lean planning can help you define new strategies and adjust them quickly if necessary. When creating a lean business plan you will want to focus on creating a very concise summary that describes your problem and solution, who you are going to target, who your competition are, and how you will reach your target market. through sales. and marketing. You will then want to devote time and attention to your strategic forecasting (as I explained for startups looking for venture capital), which will give you a great financial roadmap for your business and help you. understand the amount of financing you need.

Writing a business plan can seem like a daunting task whether you are a new business owner, looking for financing, or have been in the market for several years. My experience is that running a business blindly without a strategy or plan can contribute to its decline later. On the other hand, writing a business plan will require you to study the market. It will help you make predictions and apply that information to the growth of your business. You won’t necessarily have to follow this plan step by step, but thinking through these details will surely inspire confidence in the future of your business.


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