Introduction
Among the 5.2 million SMEs operating in Pakistan, only a small fraction has a formal document outlining their business plan. This absence of structured planning, coupled with our failure to promote the culture of using a structured approach in business planning, poses a significant barrier to the performance, growth, and scalability of the majority of SMEs in the country. Therefore, it is crucial to advocate for SME owners to formally develop business plans, emphasizing the positive impact it can have on their businesses.
What is a business plan?
A business plan is a formal written document that outlines a company's mission, goals, the strategy for achieving those goals, and the standards and timelines for measuring progress. It serves as a roadmap for the business, providing a comprehensive overview of the organization's mission, market, products or services, target audience, competition, financial projections, potential risks and operational plan.
Why to have a business plan?
Here are some key reasons why a business plan is important for an organization:
- A business plan helps articulate the company's mission and vision, providing clear guidance and direction for the organization. It defines the purpose of the business and sets a path for achieving its objectives.
- It serves as a communication tool, both internally and externally. Internally, it helps align the team with the company's objectives, and externally, it communicates the business strategy to stakeholders, investors, and potential partners.
- A business plan involves strategic planning, helping the organization identify opportunities, challenges, and the most effective ways to achieve its goals. It forces management to think critically about various aspects of the business.
- Through financial projections and budgeting, a business plan helps in effective resource allocation. It allows the organization to plan and allocate resources such as capital, personnel, and time in a way that supports its strategic goals.
- The process of creating a business plan requires organizations to identify and assess potential risks. This proactive approach allows for the development of risk mitigation strategies and contingency plans.
- For startups and growing businesses, a well-prepared business plan is often crucial for attracting investors. Investors want to see a clear and realistic plan for how their investment will be used and how the business intends to generate returns.
- A business plan includes measurable objectives and KPIs. This allows the organization to track its progress, evaluate performance against goals, and make necessary adjustments to stay on course. Research indicates that companies with a well-defined business plan tend to demonstrate strong performance.
Components of business plan
A typical business plan includes the following key components:
- Executive Summary: This section briefly summarizes the business concept, mission statement, key objectives, and highlights of the plan.
- Business Description: It provides an overview of the business, including its history, structure, legal form, and location.
- Market Analysis: It examines the industry and market in which the business operates. It includes information on target customers, market size, trends, competition, and the business's competitive advantage.
- Organization and Management: It describes the organizational structure, key team members, their roles, and relevant experience. You may include an organizational chart.
- Product or Service Line: It details the products or services offered by the business. It highlights unique features, benefits, and any intellectual property.
- Marketing and Sales: It outlines the marketing and sales strategies. It includes details on pricing, promotion, distribution, and sales forecasts.
- Financial Projections: It presents financial forecasts, including income statements, balance sheets, and cash flow statements.
- Appendix includes additional information, such as resumes of key team members, detailed market research, SWOT analysis, risk analysis and any other supporting documents.
When should it be developed?
It must be developed at the early stages of the business, especially for startups. However, it's not a one-time activity; business plans should be revisited and updated regularly to reflect changes in the market, industry, and internal factors. It's a dynamic document that evolves with the business. Organizations may also create specific plans for different purposes, such as a marketing plan or a financial plan, which can contribute to the overall business plan.
Online Resources for developing business plans
Suggestions
The organizations such as SMEDA, BOI provincial investment departments, business/trade associations/bodies (including chambers) and financial institutions should support the existing SMEs to develop their business plans. Key recommendations are:
- Implement training programs to enhance the business planning skills of SME owners. Workshops, webinars, and online courses can provide valuable insights into creating effective business plans.
- Provide SMEs with access to templates, guides, and other resources that facilitate the business planning process. This can include online platforms or government-sponsored initiatives offering tools for plan development.
- Establish business advisory services that offer personalized guidance to SMEs. Experienced advisors can assist in crafting robust business plans tailored to the specific needs and goals of each enterprise.
- Allocate funds to support SMEs in hiring professional assistance for business plan development. This can include subsidies or grants for engaging consultants, accountants, or business planning experts.
- Facilitate the adoption of technology tools that streamline the business planning process. Provide subsidies or incentives for SMEs to invest in software and applications that assist in market research, financial forecasting, and plan creation.
- Collaborate with universities and vocational training institutes to integrate business planning courses into their curriculum. This would ensure that future entrepreneurs and existing SME owners have access to educational resources.
- Tailor support programs to the specific needs of different industries. Recognize that business plans may vary based on the nature of the SME, and provide industry-specific guidance and resources.
- Facilitate networking events where SME owners can connect with experienced entrepreneurs, industry experts, and potential mentors. This can create a supportive environment for sharing insights and receiving guidance on business planning.
- Provide SMEs with access to up-to-date market information, industry trends, and competitive analysis. This can help them make informed decisions during the business planning process.
- Introduce incentives for SMEs that incorporate sustainable and environmentally friendly practices into their business plans. This aligns with global trends and can enhance the competitiveness of these enterprises.
- Establish mechanisms for monitoring and evaluating the impact of business plans developed. This feedback loop can help refine support programs and ensure their effectiveness.
- Set up dedicated SME support centers in chambers and other trade bodies and TVET institutes where entrepreneurs can access resources, attend workshops, and receive one-on-one assistance with business plan development.
References
- Hyder, S., & Lussier, R. N. (2016). Why businesses succeed or fail: a study on small businesses in Pakistan. Journal of Entrepreneurship in Emerging Economies, 8(1), 82-100.
- Kraus, S., Harms, R., & Schwarz, E. (2008). Strategic business planning and success in small firms. International Journal of Entrepreneurship and Innovation Management, 8(4), 381-396.
- Nkpaah, M. S. (2016). The effect of business plans on business performance a case of selected SMEs in Ghana (Doctoral dissertation).
- Perry, S. C. (2001). The relationship between written business plans and the failure of small businesses in the US. Journal of small business management, 39(3), 201-208.
