Every business that is aspiring to success should be operating in accordance with a business plan.
It might be a simple 1 pager, or it might be a larger plan with a range of sub-plans, but having a plan is critical to making sure that you are on the right track, using your resources effectively, are making the satisfactory progress towards your goals.
And, as we said in our recent article, the changing lending landscape in Australian Agriculture means a well-developed business plan is an absolute minimum going forward if you are looking to access external funds from a bank or investor (which is vital given the nature of agricultural businesses).
A business plan shows that you have carefully thought through the opportunities and risks of doing business, and have crafted a game plan that makes sure your business delivers the results that it needs to.
At its absolute core, it can be a tool to lower the risk of your business, but importantly it lowers the perceived risk by another party. In the case of the bank, it gives them a greater degree of comfort in investing in your business. In the case of other parties such as family members, they might be investing sweat equity – in other words their time and effort – in the business, and want to know it is worth it.
How to structure your plan
Every business plan is different, because they are used for different purposes. However, your business plan can generally be condensed simply into 4 parts:
- Where are you now?
- Where do you want to be?
- How are you going to get there?
- How will you evaluate your success?
This short guide will give a brief overview of each of these.
This article here also give you some tips of things to consider before you start developing your business plan.
1. Where are you now?
The first part of the plan is to undertake a stock-take – where are you now?
This has important implications for your business planning process, as your current situation will provide a baseline on which you are to build your business. It also provides some context and boundaries around what you can realistically achieve, over certain timeframes.
This should include things such as:
- People: what skills, resources, and ‘people’ assets do you have? What current management capability do you have?
- Operations / Production: What do you produce? What is your current capacity? Why do you produce it?
- History: A brief overview of how the business got to where it is now may also be useful.
- Intellectual property (IP): IP is, in essence, your knowledge (and what’s been created from it). It is generally quite unique, and is one of your most valuable business assets.
- Financials: What is your current financial position? This will have implications for how you plan to fund your business plans.
A great tool to also support your understanding of your current position is a SWOT analysis. The SWOT stands for Strengths, Weaknesses, Opportunities, Threats. Strengths and weaknesses are generally internal of the business, and opportunities and threats are often external of the business.
You can set it up like this:
2. Where do you want to be?
Being really clear on where you want the business to ultimately end up is extremely important. While the other parts of the plan are the more ‘meaty’ and tangible parts (and funnily enough where most people spend their time), this part of the plan should realistically be given the most attention, as fundamentally everything else in the plan will fall out from it.
This is really about the Why: Why are you doing what you are doing?
A clear direction means that the actions you take today are done in pursuit of a bigger goal or objective. You will remain much more focused and motivated as you develop your business, and will be much more likely to succeed.
Developing a business plan, or embarking on a business development process that is not aligned with a bigger objective, will inevitably send you UP the garden path and DOWN a few dry gullies. There is a good chance you will waste time, effort and money.
ABDI refer to this as your Vision (long term, overall goal), supported by the Steps-to-Change (incremental goals along the way). First work out what you ultimately want, and then break it down into more manageable bite-size chunks, and put in the place steps over time to achieve it.
“If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.”
3. How are you going to get there?
As we said, this is the meaty part of the plan. This is where you need to make sure that everything stacks up, and the plan is viable.
This is very much about the What and the How: What do you have to do and How are you going to do it?
This component of the plan generally includes a range of ‘sub-plans’, such as:
- Marketing and market analysis: include an analysis of your target market, a customer value analysis (what are your customers’ drivers and values), an assessment of your competitors, and finally what marketing activities you will undertake to connect with your customers
- Production: What operational or production changes need to occur? Over what timeframes will these changes occur? What infrastructure will be required to support the production changes? Are there AgTech considerations that might make things more efficient?
- People or Human Resources: What skills or people will you need to carry out the plan? What lead time will you need to access those people, and what systems will you need to cater for them? And importantly, once you get the right people on board, what will you do to retain them?
- Risk management: An assessment of the risks facing your business is also critical, and should include all sorts of internal and external risks (production, climate, people, government policy, customer preferences, financial and so on)
- Finances: How will you fund the proposal? When does it break even? In order to be a good investment, what money does your business plan need to generate, and over what time frames will this occur? Have you considered all scenarios?
4. How will you evaluate your success?
Now that you have spent the time working out how you will achieve your objectives, it is important to set up some systems to measure your progress along the way.
The old adage “what gets monitored gets managed” holds true here, because if you don’t have visibility over your business performance, it won’t get managed and will likely fall short of the mark, or even worse completely derail.
This system will make sure you are hitting your targets, and if not, you can tweak and change what you are doing, to make sure things get back on track.
This might include routine reviews with your accountant or business advisor, holding regular advisory board or formal management meetings, or even setting some dates for ‘strategic holidays’ to get away with the express intention of doing a business review and stock-take.
And as a rule of thumb, your business plan should always be updated by 31 May each year to set things up for the incoming financial year.
Looking to create a business plan?
If you’re looking to get the ball rolling on developing your own business plan, this is one of the topics covered in ABDI’s new ‘Elevate’ business management program.
Build a business that’s easier to manage, set up for growth, and rewards your hard work. All without having to leave your home.