Why do you need a business plan?
A business plan not only helps you map out what your business is, how it will operate and the markets you’ll target but it will also determine where your profits will come from. “A business plan sets the future direction for your business,” says Lockerby.
“This includes looking at your customers and how their world is evolving, how you can stay connected to them, or how to tap into new and emerging markets.” A business plan is also essential if you want to attract investors or partners which may be necessary for expansion.
Read more: 7 tips for surviving the leap from employee to entrepreneur
Start with a SWOT
Lockerby says completing a SWOT analysis (strengths, weaknesses, opportunities and threats) is the first step to determining where your business will sit in the market. Start with strengths and weaknesses and honestly consider your product, business culture, systems and processes and your brand. “If something is a time suck or a profit suck, call it out,” she says.
“Likewise if you have a real strength (say it’s a point of difference that your customers love), are you doing enough to promote it?” Be sure to focus externally when it comes to opportunities and threats; keep an eye on technology shifts, economic factors or global trends. And always pay attention to your clients.
“Listen to your customers and what they are asking for – a new product might develop, or it can help you cement your point of difference,” she says. “Incorporate feedback from your team, customers and suppliers, and tap into your industry networks to see what is happening – not just in your industry, but those that you are connected to. “Assess the risks, and draft up some mitigation strategies.”
Setting your goals
“Start with the vision for the business, and then work to make the goals tangible,” Lockerby says. “Even if you set one to three big goals for the year, the ‘what’ you want to achieve can then be broken down into the ‘how’.”
It’s important to set fact-based goals such as profit and the hours needed to achieve them as well as what Lockerby calls ‘feeling’ goals – staff and customer satisfaction, as well as your own. “If you are a solopreneur and at the early stages of starting up, think about what the profits from the business is doing,” she says.
“If you are ‘surviving’ on your business, you might need to look at what changes you can make to ‘thrive’. You may need to look at your product and pricing mix to see how you can work smart, and factor in the ski trip to Japan as to what profit you need after tax.” She also recommends setting reinvestment goals to grow your business.
Read more: 5 ways to prepare your finances when starting a business
Don’t set and forget
It’s great to feel a sense of accomplishment once your plan is finalised, but don’t rest on your laurels just yet, says Lockerby. Small business needs to be agile and adapt to changes in the market and customer demand – and the way to do this is to periodically review your plan. Lockerby’s advice is to have short, medium and long term outlooks, and review elements of your plan at different stages.
“At a high level, and for operational components such as your systems and processes, it is good to go through a robust planning process annually,” she says. “If it is financial, you want to be reviewing at least monthly, but if you are launching a program or a product, you may want to review the performance daily.”
Avoid the pitfalls
Not reviewing your business model, being too staid and that time-honoured tradition of getting too busy are all common pitfalls when running your own small business.
“Business owners can’t think that they don’t have to change with the times, especially where technology and emerging social trends are concerned,” says Lockerby. “Don’t put off until tomorrow what you can do today – now is a great time of year to be planning for 2018.”
She says it’s also important to plan for the future you want to enjoy – pay your own superannuation, factor in annual leave payments and review your business model to ensure it is meeting your life stage requirements and expectations.
Read more: How to safeguard your financial future
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This is an edited version of a story that first appeared on Smart Company.