So you’ve started out in business, or maybe want to improve your current business. What do you need? You need a business plan, right? The problem is that business plans don’t work!
What is a business plan?
The official definition of a business plan, as provided by HMRC, is as follows.
A business plan is a written document that describes your business. It covers objectives, strategies, sales, marketing and financial forecasts.
A business plan helps you to:
- clarify your business idea
- spot potential problems
- set out your goals
- measure your progress
You’ll need a business plan if you want to secure investment or a loan from a bank. Read about the finance options available for businesses on the Business Finance Guide website.
It can also help to convince customers, suppliers and potential employees to support you.
So why don’t business plans work?
The reason that most business plans don’t work is simple, they are not fit for purpose. Most business plans are purely geared towards securing investments or loans.
People construct their “business plan” using an excel spreadsheet for 1,3,5 years to get financial and input consistent sales growth (‘cus business always consistently grows!), they then add consistent expenditure (‘cus expenditure is always consistent!) and magically these figures add up prove that the business can afford the finance.
Yay! Well done! You’re now a spreadsheet millionaire!
The problem is that business growth isn’t linear, it isn’t always consistent. They don’t include information about HOW they will achieve the sales growth, they don’t build in any spare capacity.
Can a business plan be fit for purpose?
At Honey Bee Accountancy we totally believe that business plans can work, but only if constructed in a way to achieve goals and they must include information about how to achieve targets.
Our method of building a business plan is that it should START AT THE END. Where do you want to be in 5 years time? Honey Bee Accountancy strongly recommend though, that you look at where you as an individual want to be in 5 years time. We encourage you to look at what kind of car, house, holidays, free time you want. You can then attached a monetary value to this and that becomes your personal target.
The next stage is then to use the business as a vehicle to help you achieve this.
Case Study: John the marketing consultant
John needs £10k per month to achieve his personal goal, the dream house, car and holidays. He sells monthly consultancy packages valued at £500 and needs to achieve an additional sales volume of £500,00.
Wow, HALF A MILLION! That sounds scary! So, let’s break that down into more manageable chunks.
£500,000 over 5 years requires annual growth of £100,000 or £8,333 per month. Now, £8k per month growth sounds a lot more manageable than £500,000.
To achieve the £8k, John needs to sell 17 marketing packages a month. But, we’ve already highlighted business growth isn’t consistent and we all loose customers from time to time. So, let’s take the opportunity to build in some spare capacity and aim for 20 new customers.
So, that scary £500,000 target boils down to just 5 new customers per week – sound achievable?
John knows that when he has a meeting, he can convert 1 prospect into a client for every 2 meetings he has. Therefore, John needs to have 10 meetings per week. John also knows that it take 4 phone calls to prospects to arrange a meeting, so he needs to make 40 phone calls a week.
I know, you’re thinking that 40 phone calls is scary. However that is only 5 calls a day, which sounds far more manageable, especially as the prize is your dream holiday, car and house.
John schedules 10 minutes for phone calls, as they are all warm prospects and 1 hour for a meeting. That means that each week John must schedule 11 hours and 20 minutes to achieve his goal.
So, that scary £500,000 sales growth boils down to just 11 hours and 20 minutes of focused sales work.