In the first of our “Ask An Expert” series, Michelle Kvello – managing director of financial advisory business Lantern Partners breaks down how to write an effective business plan: the components it needs, how often you should rework it and why you even need one in the first place. “I love working with business owners. I love helping them succeed,” says Sydney-based Kvello. “My focus has always been on the forward-looking, the planning, the strategy.” Here is her advice.
I’m Starting a Business. Why Do I Need a Business Plan?
It’s your touchstone. It should give you a high-level roadmap of who you are as a business, your business objectives and how you'll achieve those. It’s easy to drift from your true purpose. A business plan ideally becomes a checking point to make sure you're keeping on the path you set yourself.
So It’s for Me, the Owner?
If you're getting financing from the bank or raising funds, you'll be asked for a business plan, but first and foremost, it’s for you.
Should I Write It Before Launch or During My Business's Early Days?
Doing your business plan before you start is a good way to focus your thoughts. Most people have a particular skill or talent but there'll be aspects that won't come naturally – perhaps the market analysis or financials or sales planning. Doing the business plan, step by step, defines the broader “buckets” you have to work through. An idea will stay an idea until you have a plan.
What Should a Business Plan Contain?
Business.gov.au has a business plan guide you can download. Most banks offer similar. There are also software solutions and books to help guide you through the process. If you’re not sure how to start, seek some expert help or use a product like the Business Toolkit, which has business plan templates, training and access to experienced consultants.
Basics are an industry overview (what the industry does) and market analysis (what's happening within the market and the competition). SWOT analysis [identifying strengths, weaknesses, obstacles, threats] is a very helpful tool. Also: what's your sales and marketing plan? Who are the people you need to run the business? How exactly are you going to operate, particularly if you're in a physical goods business (meaning you're selling a "thing" as opposed to a service): where do you make it? How do you get it from A to B? How and where do you store it? How do you get it to your customers? For highly regulated industries – financial services, food and medical – your operating or execution plan might have a more robust risk section. The financials fit behind all that analysis. You should be able to distil all these things into a compelling executive summary, which you work on last.
Why Write the Executive Summary Last?
It's where you're proving to yourself you understand what your business is, who it's for and why it's going to succeed. If you're presenting your business plan to an external party, it may be the only thing they read. And, quoting Einstein, “If you can't explain it simply, you don't understand it well enough”.
What's My First Step?
The important thing is to start. If your comfort area is marketing or production or the financials, start there and the rest will flow. When I work with clients we usually start with a SWOT, because it raises key considerations to flesh out in the rest of the document.
What Can People Struggle With?
If you're getting freaked out about writing a business plan, a lean version – a strategy on one page – is sometimes a good way to start. There's no perfect template. There's no perfect process. A business plan doesn't have to be a dense business thesis. The great thing about a business plan isn't so much the end document, but the process of doing it – the thinking, the walking away and coming back, the research. You can get relatively cheap reports from IBISWorld on the economic outlooks of specific industries, sometimes very specific niches. Also: you'll get a lot of opinions from friends, your mother, your partner, but you need feedback from someone who's run a business. Don't worry about people stealing your ideas. There are few really original ideas. It's all in the execution and that's where the business plan comes into its own.
How Often Should I Revisit My Business Plan?
It depends how fast-moving your industry is. At a minimum, check in once a year, particularly the financials. A quarterly check-in is a good idea. If your business is having a tough time, it can be helpful to start with a clean sheet of paper and go: “No, really, what are the challenges? What are we doing well? What are we not doing well? How has the external environment changed? What can we take advantage of?”
If I Have to Tweak a Business Plan, Does That Mean It Was Bad?
All businesses have to be nimble. When you're starting out there's so much you don't know. A forecast is your best-guess assumptions based on a set of beliefs you have at a certain point and on research. But as your information refines and evolves, you need to feed that back into your plan. Don't rip up your entire business plan every year. It should be a constant refinement. [And] in a pandemic, you may need to change fundamental aspects.
When the Future's Uncertain, Do You Write Multiple Business Plans?
That's not the time to do a full-blown business plan. You need to be more agile than that. What's useful are more frequent check-ins, more focus on your financials – your cash flow, where you owe money, which clients have issues – and forecasting your worst-case and best-case scenarios.
Why Do I Need a Business Plan if My Business Is Thriving?
I do hear that from businesses that have been successful because they're incredibly flexible. But generally those businesses have a single point of failure. And that's the founder. If the founder falls over, the business falls over. That's dangerous for any business that ultimately wants to sell. Sometimes this process shows the reason you are doing so well is not what you think. And sometimes it teases out points of view from others within the business that can supercharge your business even more.