It never ceases to amaze me how many small businesses spend a small fortune for a business plan which is three inches thick and of no practical use for their business.

All too often business plans are full of fluff, filler and (excuse the frank language) just plain crap that is designed to justify a consultant’s hefty fee. These are business plans that the owners won’t use or refer to again.

What a waste. Not just in consulting fees, but in the opportunity to improve the business.

Having spent years in the insolvency industry and then as a business advisor it has become apparent that there are 3 Critical Factors that a business needs have right, in order to ensure its success. The absence of any one factor will see the business struggle to achieve its potential or perhaps even fail.

The 3 Critical Factors are…

  • Marketing
  • Production
  • Financial

A relevant, useful business plan needs to summarise each of these critical factors in just one page rather than detailing every facet in minute detail which will become irrelevant the following week when the market or an underlying assumption changes.

A lengthy spreadsheet detailing every expense item and projecting a certain profit or cashflow always looks good but as soon as a contract is lost, a supplier increases prices or some other variable changes then the projections are no longer valid and the whole business plan is shelved.

Before I get hung, drawn and quartered let me clarify that projections and costings are important, but not as part of the business plan.

A business owner needs to be able to succinctly answer 6 questions for each Critical Factor:

  • Who?
  • What?
  • When?
  • Where?
  • Why?
  • How?

Obviously there will be detail behind each of the answers but a business plan based on the above approach will provide a focused vision of the business and its objectives and therefore will:

  • Remain relevant for longer;
  • Be referred to more often by the owners; and
  • Be easier to communicate to stakeholders

Because it gets used and referred to ongoing, it is far more valuable business tool than a 30-page business plan.

If a business owner is unable to answer the questions in each area and communicate his vision in three pages, it is unlikely he or she has grasped or visualised the Critical Factors that are fundamental to ensure business success.

There is no need or benefit in outlining Legal, HR or other peripheral issues if the three fundamental cornerstones of the business cannot be succinctly communicated. These peripheral issues only serve to  distract from the core business pillars.

Very few people will be a master of all 3 Critical Factors. A focused business planning process will identify areas where expertise and experience should be sought to add value and guide the business.

Once the 3-Page Business Plan is completed, then more detailed operational plans can be prepared by the relevant people to execute the plan.

In my next post I’ll outline the suggested structure for each page of your business plan.