Planning is a key to succeeding in business. Although being spontaneous from time to time can be a good thing, on the long-run your business and operations need to be planned out carefully in order to achieve your objectives – and to optimize your results.
And this is where your business plan plays a critical role. It will tell you where you’re heading in the long haul, and provide you with an actionable blue-print (plan) for the presence and near future that helps you in getting there. Updating your business plan periodically (i.e. quarterly reviews and annual thorough updates) will of course be equally important to ensure you are on track and make adjustments as needed.
Here are five compelling reasons why having a solid business plan in place can help your business become even more successful and prosperous.
1. Be proactive as opposed to reactive
When you have no clear plan laid out, your operation tends to be either of a spontaneous or reactive nature. On the long run, neither approaches are good for business. If you’re constantly spontaneous, you’re running on a trial and error basis. If you’re reactive, your competitors will always be ahead of you. You don’t want either scenarios.
2. Optimize your resources to avoid down time
This is very helpful for services-based businesses such as ours (consulting) for example. If our plan tells us that things will be slow between December and February, we can plan and schedule a nationwide research program to make sure our resources aren’t sitting around idle.
At the same time, the project won’t affect our clients’ projects because we know people are busy with other tasks during that time and most like won’t ask us for much work. We can then turn around and sell the research report to generate some additional revenue that helps us bridging this slow period.
3. Cash flow management for prompt payment discounts
If you have carefully planned-out and realistic financial projects, you should not face cash-flow shortages unless extraordinary or unpredictable circumstances prevail.
This will in turn help you in managing your payments schedule, and accordingly support you in negotiating payment terms and prompt payment discounts which can add 2-3 points to your bottom line.
We’ve seen a case in the past where this produced $1 million in additional profits; simply by paying bills within ten days of receiving invoices instead of the agreed-upon 30 days.
4. Buying in bulk
This is particularly useful when you’re in a seasonable industry such as tourism. By reverting to your business plan’s projections, you will know when you need to stock up on inventory or resources and be able to procure those during slow times and in bulk. So rather than placing say 20 small orders throughout the year, you could consolidate those into four large shipments and which come at a hefty discount.
5. Boost your credibility
Having a business plan will take you a long way when talking to banks or lenders. Because they realize that you know exactly why you need their money, what you will use it for, and how you will pay it back, they will be more likely to approve your loan application.
The same goes for potential investors; once they realize that you know where you’re heading with your company – and as such increase its value over time – their appetite to acquire a chunk of your equity will increase, and so will your company’s valuation.
We are of course vivid advocates of the “implementation” part as the best plan isn’t worth the paper it’s written on if not executed in a timely fashion. As the saying goes, plan your work and work your plan!
About the Author
Pinnacle Business & Marketing Consulting is a results-driven boutique consulting firm that specializes in providing clients with practical and pragmatic solutions to their business and marketing challenges.
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