Business plan performance audit - can it be omitted?
A future entrepreneur who has passed all the stages of creating an important document, which is a business plan, must not forget to control its implementation. Well, when starting a new business, as well as running an existing one, the control of the implementation of the business plan (including self-control) plays a fundamental role in achieving success. It allows the organization to properly adapt to the changing market conditions and helps to cope with complex situations, which as a result often gives the opportunity to minimize the company's costs.
Business plan execution control - importance
In practice, the control of the execution of a business plan is undertaken to compare the actual state with the pattern. Its overriding goal is to adjust the company's activities to make it as successful as possible. The role of control, both in an enterprise that has been existing for many years, and in a newly established business, is to observe and evaluate the functioning in a specific place and time. This allows to determine the cause of any irregularities occurring in the company, as well as to draw conclusions necessary to eliminate deviations.
Each properly performed control must have at least some of the following characteristics:
Who should control?
In practice, it has been assumed that the responsibility for the construction and the entire process of creating a business plan for a given project rests in the hands of the owner of the business or the manager managing it. However, it is worthwhile for them to be supported in these activities by specialists in a given field or their own employees - e.g. accountants, analysts, financiers or bankers.
A common solution used by the vast majority of people who do not have experience in this field and the necessary knowledge is hiring an external consultant who will prepare a business plan as part of the order. Although such an offer is not the cheapest, using the knowledge of an experienced person has many advantages. A specialist professionally involved in creating business plans is properly prepared with theoretical and methodological knowledge in the field of their construction, which contributes to high-quality development in a relatively short time. In addition, such a person has an objective, external view of the issues contained in the plan, and thus - ensures impartiality when assessing its assumptions.
A business plan can therefore be drawn up by one entrepreneur, as well as on the basis of cooperation of a group of competent people specialized in specific fields. The second solution, although more expensive, should be preferred by entrepreneurs planning to implement a large-scale project. In this case, we should be dealing with a division of duties and responsibilities for the implementation of a business plan, where:
- the person ordering the preparation of the forecast document is responsible for the selection of the author, price and determination of the conditions for the development,
- the author of the business plan is responsible for the formal aspect and the adopted methodology, the assumptions made, the correctness of the calculations, as well as the timely fulfillment of the terms of the contract,
- the person providing information for the author of the business plan is responsible for the quality of the data provided,
- the reviewer, on the other hand, is responsible for comprehensive control and reliable verification of the business plan assumptions.
Control of the implementation of the business plan and its evaluation
One of the basic issues that has a decisive influence on the success of a project is the evaluation of the prepared document. Controlling the implementation of a business plan affects the quality of activities, which leads to greater effectiveness in the achieved goal, which is most often obtaining the funds needed to implement the project. You cannot create a good plan without checking the correctness of assumptions, the possibility of achieving specific goals and choosing the right methods in the actions taken.
The reviewer should apply the following business plan assessment criteria:
- purposefulness - defining the right means to achieve the planned goals,
- feasibility - assessment of the planned project in terms of the probability and the possibility of achieving the next stages of the plan implementation on time,
- consistency - checking the degree of subordination of subordinate plans to the assumptions of primary - strategic goals,
- operability - understandable, transparent and simple presentation of assumptions to enable efficient implementation and execution of the action plan,
- multivariate - preparation of three scenarios (optimistic, realistic and pessimistic),
- detail - the longer the planning time horizon, the lower the accuracy of the forecast data,
- completeness - descriptions and analyzes contained in the plan must be described in an exhaustive manner, unequivocally,
- rationality - a plan created according to generally accepted norms and standards.
The most common mistakes made when drawing up a business plan
Among the mistakes most often made by people who prepare a business plan, one can mention the lack of transparency in its structure, which may cause problems with reading the most important information by the addressee of the document. Excessively large content can also be troublesome, because the reader may not find information relevant to him among the large amount of redundant data.
Internal contradictions and lack of logic in the presented analyzes and assumptions are unacceptable errors that practically disqualify the prepared business plan. Too subjective observations can also be harmful, which are often a manifestation of the entrepreneur's individual expectations and not a reflection of the actual state of affairs.
When can a business plan be considered correct?
The control of the implementation of a business plan is necessary to check whether it is correct. To be considered as such, it must meet the following guidelines:
- the project is based on solid foundations, confirmed by actual data resulting from the conducted analyzes,
- is easy to understand and provides the reader with a convincing presentation of the basic business assumptions of a given venture,
- the financial forecast resulting from the assumptions made includes the most important elements influencing the success of a given project,
- financial and economic forecasts present reasonable data, i.e. the amount of profit generated, maintaining financial liquidity and profitability analysis, which show the overall profitability of the project,
- contains a broad planning horizon that shows how the company will develop in the future.
A business plan is the basic tool for acquiring funds for starting or developing a business. Therefore, when drawing up an action plan to achieve the intended goals, the entrepreneur must convince potential investors that a given project is worth attention. It will only gain this through solid calculations and analyzes of the market in which it intends to operate in the future. A business plan does not only have to be diligently executed, but it should also inspire confidence in the person who will be responsible for its implementation. The investor should know that the money they spend on a given project is worth it, so controlling the implementation of the business plan is extremely important. The above effect can be achieved with a clearly established company strategy, according to which it will strive to achieve clearly formulated goals.
Accordingly, in order to produce a business plan worth the attention of serious investors, an entrepreneur must put in a lot of effort both before and during its preparation. All arguments should be understandable and show the given investment as profitable, but achievable in real terms.