How to Develop a Business Plan

Introduction
Most successful organisations have a clear vision or sense of purpose. They also have well defined objectives to aim for and a way of measuring their performance. These are the vital ingredients of a Business Plan. Some of the benefits of business planning are that it: Forces people in the organisation to stand back, and review business performance and the factors that are affecting the business Encourages people to consider strategic options and make informed decisions Improves communication and builds commitment by involving people throughout the organisation Can be captured in a single document and communicated to everyone involved.

Definitions
Business Planning is a process that identifies where the organisation wants to be and by when, and shows how it will get there from where it is now. A Business Plan is a document that captures the outputs from the business planning process.

Key steps in business planning

The key steps in creating a Business Plan are:

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1. Setting a vision for where you want to be

2. Gathering and analysing information about where you are now

3. Setting performance objectives and making plans to close the gap

4. Planning how to monitor progress.

Learning Resources
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1. Setting a vision for where you want the organisation to be

The core of your Business Plan is your vision for the future. Steve Jobs founded the computer company Apple on the basis of his vision of a computer in every home. Although your vision statement can be aspirational, your staff, customers and other stakeholders must share and believe in it. People will have different images of what could be in the future, and so listening and consultation are key skills in developing a vision. Organisations often set guiding principles on how they will work towards their vision by producing a mission statement. The mission statement establishes the direction and purpose of the organisation. It indicates the values and beliefs of the organisation and it lays down guidelines for the way in which the organisation carries out its business. To create a mission statement, consider the following questions: What business do you want to be in? When Parker Pens tried to define their business, they thought their customers were buying pens to write with, and that their competitors were selling other types of pens such as cheaper biros. Market research showed that most fountain pens are bought as gifts. Their competitors were not makers of other pens but manufacturers of other gifts, for instance, leather wallets. What is your distinctive competence or source of competitive advantage? The Warrington Guardian, for example, competes against national newspapers in the region, but its distinctive competence is in reporting issues that affect the residents in Warrington. What are your values or beliefs? Its obviously important to understand where your organisation will compete, but its equally important to consider how you and your staff are expected to behave. For example, the Body Shop was founded on the principle of producing cosmetics that do not harm the environment or animals. To be useful, mission statements need to provide enough detail to guide the preparation of the Business Plan. Finally they need to be an accurate reflection of your organisation - statements that your staff and customers recognise and are committed to achieving.

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Instep (UK) Ltd. - Learning Resources 2005

2a. Gathering information about the organisation

The information that you need for business planning will come from both inside and outside the organisation. A lot of it will already exist. For example your sales records will give you excellent data on the buying patterns and desires of your existing customer base. Your sales team will be able to tell you about customer service levels. The following list is not exhaustive but offers some ideas on the type of information you might need: Products and services - Do they meet the needs of your customers? - What about price, service levels and quality? - Which are the most profitable? - Which have an expanding market share? Markets - Which market segments are more profitable? - Are existing markets saturated? - Are there new market opportunities for your products? People and their skills - Do you have the right people and skills to deliver your vision? - Do they know what is expected of them? - How effective is your management team? Resources - Do you need additional equipment or premises? - Are there new developments in technology you can take advantage of? - How effective is your supply chain? Customers - Who are they and what do they want? - What is their image of you and what is it based upon? - How do they compare you with the competition? - Which customers have you achieved most with and why? Competitors - Who are they? - What are their strengths and weaknesses? - What is your competitive advantage? - How easy is it for new competitors to enter the market? External factors - What are the economic trends and how might they affect you? - Are there any changes in legislation or political policy that are relevant? - How can you consider the environment in your Business Plan? - Are there any technological advances that might affect you?

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Instep (UK) Ltd. - Learning Resources 2005

2b. Analysing where the organisation is now

The SWOT Analysis is a helpful tool for putting the information into perspective. SWOT is a simple but effective technique to analyse where the organisation is, and to help develop future plans. SWOT stands for strengths, weaknesses, opportunities and threats.

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Strengths and weaknesses are to do with the internal capabilities of the organisation - in other words what it does well and what it does not do well. Opportunities and threats are to do with the business environment in other words, what opportunities exist that the organisation can take advantage of, and what threats should it protect itself against. Lets take an example of a personnel agency that supplies contract printers and typesetters to in-plant and commercial printshops. The business has been successful and is finding it difficult to meet demand for its services. SWOT Analysis for personnel agency Internal Strengths Know personnel selection practices Know the print industry Strong sales force Good client relationships. External Opportunities Growing demand for contract help No local competition Readily available applicants Business loans available, backed by government. Internal Weaknesses Office too small Not enough skilled labour on books No cash to fund expansion Contract staff need to update skills. External Threats Competition may enter the market Changing technology means skills are becoming obsolete New legislation affects use of contract staff Cannot meet customer demand.

Think about the gap between what the organisation wants to be and where it is now. How can you start to close it? The data from your SWOT Analysis can help you to generate some strategic options. There are four analyses you can make: i. Match your strengths with opportunities. Here the organisation has certain strengths that are appropriate for seizing specific opportunities. It is a very attractive option - largely because it is the least risky of the SWOT matches. When the personnel agency looked for matches, they found that their knowledge of personnel selection practice and the requirements of the print agency (both strengths) meant that they could quickly extend their bank of agency staff by interviewing their applicants.

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Instep (UK) Ltd. - Learning Resources 2005

ii. Match your weaknesses with opportunities. Here there are opportunities in the marketplace - but the organisation does not have the skills or resources to exploit them. The organisation needs to assess just how attractive the opportunity is and balance this with the investment required to strengthen its skills and resources. The lack of available cash (a weakness) to develop the business can be overcome by developing a Business Plan, and applying for a government backed loan (an opportunity). iii. Match your strengths with threats. Here the organisation is threatened in an area where it has strengths. The organisation needs to play fully to its strength so that the threat is countered. The good image and relationship that the agency has with its clients will help it to counter the threat from new competitors. iv. Match your weaknesses with threats. Here the organisation is being threatened in an area where it is already weak. Either the organisation needs to strengthen its area of weakness so that it can overcome the threat or it needs to consider whether this is an area of the marketplace in which it should continue to operate. As the agency is not developing its key contractors, it is vulnerable to the threat that a competitor might enter the market and offer enhanced skills. The best strategy here is to develop the contractor base, but the agency would need to work out how to do this. Now consider which options are worth pursuing? Which: Will have the most positive impact on your business? Can you achieve? Are attractive to your staff and clients, and fit within your mission? Offer the most sustainable source of competitive advantage?

Tel: 08456 047 047 Web: www.traintogain.gov.uk Email: traintogain@businesslinksw.co.uk

Instep (UK) Ltd. - Learning Resources 2005

3. Setting performance objectives

Now its time to get specific. The organisation needs to decide exactly what it plans to achieve in a given timeframe. Objectives are the most effective way to do this. In the Business Plan we are concerned with those at corporate level. Effective objectives meet five criteria: Specific stating specifically what you need to improve in terms of outcomes and results - not the tasks or actions required to achieve them.

CE RMAN PERFO TIVES OBJEC

Measurable, with success criteria that are measurable in terms of quality, quantity, money or time. Agreed with the people who need to achieve them. Consult and involve your staff in the business planning process to gain their ideas and support. If this is not possible, then think carefully about how you will explain the objectives to them. Realistic. Effective objectives should provide a degree of stretch, but if they are totally unrealistic they can be demotivating. Timebound in some way so you can stop and measure how you are doing. Examples: To increase the number of staffed shops from 25 to 75 by converting unstaffed concessions by end of 2006 To introduce an outsize range of jackets, contributing to 10% of turnover, by Autumn/Winter 2006. Objectives need to drive improvements in all business areas rather than being purely financial. Think about quality, people, customer service and the areas that are important to delivering your organisations vision. Do not create too many goals or you may lose focus. Between three and eight is a manageable number.

Tel: 08456 047 047 Web: www.traintogain.gov.uk Email: traintogain@businesslinksw.co.uk

Instep (UK) Ltd. - Learning Resources 2005

4. Planning how to monitor progress

Once your plan is underway, you will need to keep checking how well it is working. Think about how you will monitor progress as you create your Business Plan. Here are some ideas: Define milestones for your corporate objectives Put in place an information system that will deliver accurate and relevant performance data to you so that you can monitor progress Demonstrate senior management commitment to the plan Make sure that everyone understands their role in implementing the plan Reinforce the business objectives at regular intervals so that people dont forget them Let people know what progress the organisation is making. Your business plan should be dynamic. Be prepared to re-define your objectives and plans to reflect changing priorities and the business environment.

A Business Plan and Investors in People

The Investors in People indicators provide a clear framework for the evaluation of an Business Plan. Check the effectiveness of your Business Plan by working through the following indicators and associated evidence. Main Indicator Indicator 1 A strategy for improving the performance of the organisation is clearly defined and understood. The organisation has a plan with clear aims and objectives which are understood by everyone. Evidence: Top managers make sure the organisation has a clear purpose and vision supported by a strategy for improving its performance. Top managers make sure the organisation has a business plan with measurable performance objectives. Top managers make sure there are constructive relationships with representative groups (where they exist) and the groups are consulted when developing the organisations business plan. Managers can describe how they involve people when developing the organisations business plan and when agreeing team and individual objectives. People who are members of representative groups can confirm that top managers make sure there are constructive relationships with the groups and they are consulted when developing the organisations business plan. People can explain the objectives of their team and the organisation at a level that is appropriate to their role, and can describe how they are expected to contribute to developing and achieving them. Once you have established your goals and written the plan, it is important that you review it, so that it is regularly updated (monthly, three monthly, six monthly, or whatever is suitable for the organisation).

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Instep (UK) Ltd. - Learning Resources 2005

Additional Indicators Indicator 2 Learning and development is planned to achieve the organisations objectives. Evidence: Top managers can explain the organisations learning and development needs, the plans and resources in place to meet them, how these link to achieving specific objectives and how the impact will be evaluated. Managers can explain team learning and development needs, the activities planned to meet them, how these link to achieving specific team objectives and how the impact will be evaluated. People can describe how they are involved in identifying their learning and development needs and the activities planned to meet them. People can explain what their learning and development activities should achieve for them, their team and the organisation.

Tel: 08456 047 047 Web: www.traintogain.gov.uk Email: traintogain@businesslinksw.co.uk

Instep (UK) Ltd. - Learning Resources 2005