A Business Plan has two parts.
The first part is the narrative plan: A description of what you expect your business to achieve and how you will accomplish these goals. It starts with an outline of where you are today, and includes a description of your destination, and how you will get there. In plain terms, the narrative plan is a road map for the journey ahead.
The second piece of the business plan is the financial projections. These typically include:
- An annual budget which shows your revenue and profit projections
- Forecasted Balance Sheet , future expected asset growth
- Cash flow projections
- A Capital Budget that reflects the capital investments needed for the business to perform on its plan
Many companies create an annual budget, a forecast of revenue and expenses, and call this their business plan. It’s important to recognize that the narrative business plan leads this process. Without the narrative plan, you have no foundation to make financial projections. (Other than repeating last year’s numbers and fudging in an arbitrary growth factor.)
There are several other reasons for writing a narrative business plan. Firstly, to inspire your employees to deliver on a specific set of performance metrics, or goals. We all like to know how we are doing, from the CEO to the sales team, the service reps or the admin group. The business plan provides the reference point to measure progress.
Secondly, to improve and strengthen teamwork and cohesive- ness – people enjoy working with teammates to reach a goal, to achieve something worthwhile, doing it together, celebrat- ing their successes, learning from their mistakes.
Finally, and most importantly, writing your narrative business plan will help you to better understand your business – you need to truly understand your business if you want others to understand it and be engaged with you in achieving extraordi- nary results.
A well managed business plan will put you back in control of your business. With clarity and control comes peace of mind, not only for the owner and leadership team, but for all employees; that feeling, throughout the whole organization, of knowing where you are, where you’re going, how you are
going to get there, and how each individual can contribute on a personal level.