A business plan is much like a dinner recipe; it gives you an idea of what you’re going for and clear step-by-step directions on how to get there. Specifically, a business plan is a written description of your business goals and an outline of how you intend to achieve them. Like the meal a recipe helps you cook, a strong business plan is about achieving intended results. The trick is getting it right, like a meal that is cooked properly and seasoned to perfection.

In the early stages of business venturing, the key risk is commercial risk, which is directly related to the business idea itself; will it work?

As a business matures, execution risk becomes more prominent, this is the risk associated with the market and a business’ ability to compete. In this sense, a business plan becomes even more crucial once risks begin transitioning from commercial risks to those associated with execution.

That said, a business plan is still important at all stages of the business cycle; the difference is the nature of the question a given plan addresses. This is why a business plan must be dynamic. It should serve as an interactive tool that evolves over time to account for a company’s performance while identifying any adjustments needed to goals or marketing and operational tactics in response to changes in both internal and external business environments.

In the formation stage of the business vision/idea there are three key questions that need to be considered:

Is this idea commercially feasible? This is all about testing and understanding if there is a market for the product. Will anyone buy it?
Is this idea financially viable? Here we are exploring the cost-benefit and trying to understand if there is money to be made or not.
Is this idea worth it? Finally, we combine all the information we have and decide if the financial benefit is worth the commercial risk.

As we transition from the initial idea to execution, we need to answer this question:

What do I need to do to make the most out of this idea? The key is not only understanding what the marketing and operational requirements are but how they work together.

Writing a business plan is ideal in bridging the gap between the validation and execution phases of a venture because it creates a map that can be referred to in times of uncertainty or when concrete actions need to be taken. This map also serves as a detailed overview of a business that can be used to help recruit talent and attract new customers.

For more mature businesses, a business plan also provides an opportunity for the business leadership team to reflect and assess current operations or explore opportunities further afield. By understanding where their company is in terms of the business cycle, competitors and environmental change, business owners provide themselves with a platform to assess and select the best strategic direction; whether it’s staying the course, a change of strategy or taking on an external opportunity.

The best companies review their plans regularly to ensure they are following their recipe for success. Therefore, your plan should be clear, simple and well-communicated so that you and your employees are able to keep your business on track throughout any expected or unexpected environmental business conditions.

Ultimately, a strong business plan is an invaluable resource that ensures you have a clear path to get through any situation. Best of all, it’s literally in the palm of your hand!

William Galwey