A business plan is your roadmap to success.

Small businesses are an important driver of economic growth and employment opportunities in South Africa. According to the Small Business Institute, small and medium-sized enterprises (SMEs) contribute over 50% of South Africa's GDP and employ approximately 47% of the country's workforce.

However, starting and running a small business can be challenging, with many businesses failing within the first few years. The failure rate of small businesses varies depending on the study and region, but a commonly cited figure is that around 50% of small businesses fail within their first five years of operation. Taking it home, a report by the Small Enterprise Development Agency (SEDA) in 2020, said about 70% of small businesses in South Africa fail within the first five years of operation. It is bad globally, and worse locally.

Starting a business is challenging and risky. Succeeding at business is the exception, not the norm. And so, when you enter into this journey your most likely outcome is that you will fail. It is best to accept this reality than try to fight it. To increase your odds of success - you need a strategy. You need a plan of action. What is really interesting, is that with a plan – you can greatly improve your odds of success. Look at this table:

This is from the Palo Alto Software study in the United States (US). As previously stated, in the US the overall failure rate for small businesses within the first 5 years, is 50/50. And in South Africa, it is 70/30. We do not have a study in South Africa to compare what the success rate is for businesses with or without a business plan, but we can be sure, that the results in South Africa are much worse compared to the US. But let us talk a bit more about what the table above tells us.

The table shows that businesses with a plan have an 80% success rate compared to only 50% for those without one. Similarly, the failure rate for businesses with a plan is 20%, compared to 50% for those without one. These numbers clearly demonstrate the value of having a business plan. They also prove this old adage to be true: “failing to plan, is planning to fail.” But be careful, having a plan does not guarantee success – it only increases your odds of success. And you need every bit of an advantage you can get.

So, what is a business plan? A business plan is a document that outlines the company's goals, strategies, and operations. It provides a roadmap for how the business will be started, run, and grown. Having a business plan helps you stay focused, identify potential problems, and make informed decisions. And you want to make informed decisions because you want your business to grow.

No one starts a business with the intention to remain small. We all want our businesses to grow and serve our needs in a changing environment. When you have a child, your plan is not for them to remain infants for the rest of their lives. We desire growth not just for ourselves but in all that we do. We want to see things improve, we want to see things get better and that is why we bother trying. But growth, and by that, I mean sustainable growth, doesn’t happen by chance. It takes deliberate action inspired by deliberate planning.

It is not just small businesses that fail either. Large businesses also fail. A report by the Boston Consulting Group (BCG) found that between 2000 and 2014, about one in five public companies globally had experienced a major financial setback, such as bankruptcy, restructuring, or a significant drop in profitability. The report also noted that the average lifespan of companies listed in the S&P 500 had declined from 67 years in the 1920s to just 15 years in 2015. Think about it, large businesses have greater resources and market power compared to small businesses, yet they are not immune to the risks and challenges that impact their long-term viability. The ability to adapt, innovate, and manage risk effectively is key to the success of large businesses in today's dynamic and ever-changing global economy. If this is important to large businesses – it is much more important for you with your small and vastly limited enterprise.

You need to know where you are going. You need to see what opportunities and threats lurk in the woods. And you need to plan how you will deal with them. What tools and resources are you going to need? What kind of person must you be to overcome those challenges and take full grasp of those opportunities? You plan this in advance. You will be careful to see that I am not talking about banks or potential funders here – I am talking about YOU.

The plan is not just to get funding from potential sponsors or investors or lenders. Don’t get me wrong – a business plan greatly helps in these efforts. Yet primarily, the plan is for you to know what you are doing and why you are doing it. Knowing this puts you in a very positive psychological state. There is less anxiety and more confidence that you have thought things out; and you are ready for what is coming. Being in this state is crucial for your success going forward. You are less likely to quit when the going gets tough. And it will get tough – remember the odds – you are more likely to fail than win on this journey. And you will face many failures and setbacks along the way. Having a clear vision for where you are going will keep you moving as it will justify the hardships you are facing. And when you quit – you have failed.

Your business plan is not final either. It keeps evolving. Why? Because you and your business keep evolving. When you start off, you are less experienced and know little about your business and the market. And with each day of operations, your experience and knowledge of the business keeps improving. This means your business plan has to keep evolving and growing with the business. Your strategies, your goals, opportunities, and threats keep changing. The environment keeps changing. Drafting a plan and leaving it under your pillow will not work. The plan is a working document. You keep looking at it to remind yourself of your goals and strategies, but you keep updating it to align with the reality you are facing. Large businesses invest a lot in annual and regular planning activities. Of course, they have many resources and they can delegate this into their different departments. Not you – you don’t have all these resources. But if big businesses are doing it and it works for them – you must also get into the game. Remember no matter how large a business is, if it fails to keep itself relevant to the present days realities – it fails. And so, it must keep planning and looking into the future. Just as you should.

The business plan is the vision of the future you want to create. And of course, God directs the steps, but you need to have the vision. Simply doing will not help you. You will be like most business owners who are simply busy being busy, and not productive. You want to be productive. And if you don’t know what the difference between busy and productive is – you are most likely BUSY. At best, you will have a profitable business that never grows. And at worse, you will be part of the 80% who will not be in business in the next 5 years.

You don’t want to be a small company forever now do you? Join us as we build sustainable, profitable, and growing business enterprises. Businesses that we can leave for our children’s children. But even better – remember - SME’s are crucial for the economy and tackle unemployment directly. When your business grows and is profitable – it can have huge benefits for the country. We have one of the highest inflation rates in the world, and have one of the worst unemployment levels in the world. South Africa, Africa – needs your business to succeed.