When Raegan Moya-Jones first came up with the idea for her $46 million baby clothing company, Aden + Anais, she didn’t have a business plan.
“That was quite the conversation I had to have with my husband,” she says.
“He said ‘Where is your business plan?’ and I said, ‘I don’t have one. I just know that it will work’.”
But bringing a venture capital firm on board and taking Aden + Anais worldwide means Moya-Jones is now firmly in the “pro” business plan camp.
“Now that we have investors, me walking in and saying ‘I have a gut feeling about this’ doesn’t fly with investors,” she says.
“Now we have very clear strategic plans for the next four years.”
As Moya-Jones’ experience shows, business plans aren’t just for startups.
A good business plan helps you obtain financing, arrange strategic alliances, attract key employees, and grow your business.
Serial entrepreneur and author Creel Price advocates business plans as a way for business owners to give structure to their thinking.
“Certainly in the financial modelling side, being forced to do a plan means that you start to do the maths and the effort that you are forced to put in up front forces you to be a lot clearer,” he says.
“If you are going for investors it is crucial and it helps you communicate with staff,” Price says.
He says a business plan helps staff feel involved in your business and they can let you know whether your plan is achievable.
“Particularly the typical entrepreneur tends to just assume a lot of stuff, they can envisage things without realising how hard it is to make it happen,” Price says.
Kevin Dwyer, managing director at business consultancy the Change Factory, says without a business plan you are “flying blind”.
“If you are a one man band maybe you don’t need a business plan but if you become more than one person you need a plan,” Dwyer says.
“It makes you think what your business is about. Quite a lot of small businesses don’t know what their business is about, who their customers are and how they can make more money out of those customers.”
Dwyer says business plans are not just for startups and are even more important for established businesses.
“When you are a startup you are usually looking at a nice neat picture of your market, but the world is never like that and it is only once you start going along that you understand the issues you never thought of as a startup,” he says.
Now you’re convinced you need a business plan, how do you actually write a useful plan?
There are a few guidelines to keep in mind and the first is that it should be short and sweet.
Price recommends keeping your business plan to the length of “a double sided one pager” but says “to get to that page there’s a huge amount of work that goes in”.
“You don’t want a door stop, you want a living and breathing document that people use,” he says.
Dwyer recommends starting with your financials if you have been in business for a while.
“Look at your profit over the last few years and sales,” he says. “Get an idea of where you are at, where your major customers are from, any trends in the type of work you have been doing over the last few years.”
Dwyer then advocates spending a day with your staff “doing a bit of blue sky thinking”.
This could involve talking about new products and changing the structure of your business.
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Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
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