How to write a business plan for small scale business?

There are two primary purposes for preparing a business plan. The first is external, to secure funding that is very important for the growth and development of the enterprise. The second is internal, which is to support the strategic and corporate development of the business. In this regard, it is also useful for setting the strategic direction for the organization and its decision makers to achieve its objectives within the time frame of the plan which could be two to three years. A good business plan also provides the organization with an operational framework that could give it a competitive advantage.

However, when it comes to small and medium enterprises, the core issue lies in deriving more sales and that’s what the management is clearly interested in.  Therefore the business plan for small business if it is designed for internal consumption should focus on maximizing sales and the rest of the activities should focus around it. These activities can be digital marketing, process improvement, supply chain optimization etc. What we need to provide them is a business plan that is completely aligned with their operations, financial capability and most importantly doable. Small enterprises cannot do a jump start towards expansion or invest great amounts of money to advertise. Therefore the small business plan that they need should be completely tailored to their requirements.

As part of my research for this blog, I found out an article by United Nations Conference on Trade and Development that outlines the guidelines for Small and Medium Scale Businesses.  There were 4 key points that were highlighted in that article which I thought is very relevant to our discussion today.

Action Plan in the short term by breaking down the complex tasks of starting a business into many smaller and less cumbersome tasks, each of which is assigned a due date, person (s) responsible, and detailed action plans for achieving them. For existing businesses, it enables greater focus on dealing with issues in an organized, coherent and systematic manner.

Roadmap for the medium to long term because once the business has started, a business plan can be an invaluable tool to help managers keep on track and moving in the direction set for the organization. Without a plan, it is very easy to lose focus in running of day-to-day operations of the business and also help others to understand the vision of the enterprise. It serves as the roadmap to achieving the objectives of the organization.

Performance Tool, a short business plan serves as a performance tool because it is an operational instrument which, when properly used, will help the management of the enterprise to set realistic goals and objectives for performance as well as providing a basis for evaluating and controlling the future performance of the organization.

Business Promotion Tool, a business plan is a business promotion and marketing tool which often assists the management of the enterprise to persuade investors and lenders to provide financial support for its activities. The business plan enables them to understand the current activities and future direction of the organization and the goals, objectives and strategies developed to achieve performance.

In this complex world of business, sales still happen on trust and faith that consumers have on a product. This is all the more true for small businesses or brands. Therefore small business consultants should help businesses to establish new relationships with dealers, distributors and customers. Small businesses should also work on improving their existing relationship and increase their sales volumes.  

Digital marketing is the most important tool that small businesses should use extensively. It is an inexpensive way to market your products and helps to reach a wider audience very successfully. The business plan should include key steps of digital marketing such as the channels, budget and possible service providers as this can help to get the digital plan running quickly.

With Government support for SME’s at all time high not only in India but other regions globally, SME’s should not shy from raising capital. This helps them to improve product quality, spend some additional funds on marketing and improve their customer support system.  Developing a business plan by Small and Medium Enterprises is very important because it serve two purposes. First and foremost, it will assist in running the organization with a clear vision, mission and objectives, thereby serving as the roadmap. It will enable the stakeholders, shareholders, management, staff and even customers to understand the business and serves as the instrument for performance evaluation of the various units of the business which will greatly enhance the chances of success. Secondly, financial institutions or other lenders will not be willing to invest in the organization without the ability to demonstrate a business plan that shows the pathway to successful operations.

A business plan for a small business will need to be very practical and touching every area of the business operations. A small industry operates very differently from a large set-up. Owners have multiple roles and to raise volumes and revenue requires immense effort. Therefore, the business plan should underline all challenges faced and take a logical step-by-step approach to how the business can be scaled-up.

If the plan is for a new business, the investment and resource requirements should be broken down in a granular manner to ensure that it acts as a guidebook not only for investors but also as a business roadmap. However, the important aspect is to also show the business roadmap in the short to medium term. Scaling-up at a logical pace remains a challenge for small businesses but with adequate Government support and support from multiple financial institutions this is becoming reasonably easier.  

Another important factor that we have to analyze is the risks involved in running a small business. We have seen the damage that small businesses suffered due to the ongoing pandemic. Though it is difficult to put a number to the lost business but the impact has been significant. Therefore, whenever we are drawing a plan for a business, there has to be a contingency fund either in the form of debt or equity that has to be available quickly.

Manufacturing and service industries function very differently and the complexity of running a manufacturing industry is much more than a service industry. This is because manufacturing industries are dependent on a long supply chain, extensive labor force, more susceptible to fluctuation in price of raw materials etc. Therefore, a business plan for a small scale manufacturing industry should consider all these aspects. On the other hand a service business plan needs to take into account the number of manpower, technology etc.

A business plan is a moving document and once it is done it can be updated as you move along the different stages of the business. This is because markets change, financial position of the company changes, technology changes etc. Therefore, entrepreneurs should ideally revisit their business plan atleast once in a year and see whatever updates need to be made. This will help them to reassess their position and take the right steps needed for the business.