To protect your finances and help your small business succeed, planning is essential.

For many small-business owners, the family business and family fortune are the same thing. Especially when your business is getting off the ground, it’s not unusual to have most of your wealth tied up in your business. Because your income and savings greatly depend on your business’s profitability, you need to take steps to lower your personal financial risk and support the business’s long-term success. And, when it comes to success, few factors are more important than a thorough and realistic business plan. In this article, we’ll look at the benefits of business planning and outline three smart planning strategies.

A Solid Business Plan Can Reduce Risk and Support Growth 

When it comes to success, few factors are more important than a thorough and realistic business plan.

Short of having a crystal ball, a good plan is your best way to prepare for an uncertain future. Here are some of the main benefits:

• Options
  A thorough plan helps you stay ready for a variety of scenarios, positive and negative.

• Safeguards
  Planning gives you ways to stay afloat if there’s a downturn, such as by bulking up your cash reserves, proactively cutting costs, or diversifying your products and services so you can adapt to market changes.

• A Clear Vision
  Knowing your business’s long-term trajectory can make day-to-day decisions easier. This can help you save time and money by avoiding unnecessary work or spending.

• Greater Predictability
  By reducing on-the-spot guesswork, you can enjoy greater peace of mind and more predictable results.

• Investor Appeal
  To get a lender or investor to support your growth, you’ll typically need a clear, well-supported business plan.

All effective business plans have a few things in common. Good business plans are:

• Practical. They set realistic goals and have specific steps to achieve them.
• Organized. They have a clear structure to support efficiency and consistency from one year to the next.
• Carried out. To ensure follow-through and accountability, the tasks within a business plan should be carefully delegated and supervised.
• Measurable. Plans should define clear growth milestones or other indicators of success. This makes it easier to gauge the effectiveness of the planning, replicate success, and avoid repeating mistakes.

3 Types of Small-Business Planning

Business plans come in many different forms, each with different priorities. Here are the three most important types of business plan for small-business owners.

1. Strategic
   A high-level strategic plan can help you identify how to make your business more competitive, milestones you want to reach, and the steps you’ll take to achieve them. A strategic plan gives you a three- to five-year view of your business, though it’s a good idea to review and adjust your strategic plan annually. Strategic planning provides a roadmap to inform your decisions in the near term.

2. Operational
   While strategic planning defines your vision, operational planning gives you a step-by-step guide to achieving that vision. Operational planning guides the day-to-day activity of your business, identifying ways to boost efficiency, manage costs, improve customer service, and reach other goals in support of your strategic plan. This often happens in conjunction with strategic planning, but you’ll need to review and modify your operational plan more frequently to stay on top of changes in your business and market.

3. Opportunity
   No matter how carefully you plan, there will always be surprises along the way. Unlike the first two types of planning, which are routine, opportunity planning happens on an as-needed basis to help you evaluate and respond to unforeseen opportunities and risks. Whether used to address threats like economic turbulence or to capitalize on new growth opportunities, opportunity planning can help you make the most of your changing circumstances, quickly.

Business planning isn’t a one-time event. Changing circumstances and needs will make it necessary to adjust your plans.

When done right, business planning can help you get a better perspective on your business’s growth and make more informed decisions about where to allocate resources, how to better serve your customers, or when to hire new staff. It’s one of the best ways to stay competitive and move forward with confidence.

Capital Needs

Because growth initiatives often require additional capital, having access to business financing is sometimes a key part of planning. If you have questions or need help managing your business finances, reach out to your financial institution.