Anyone can start a business with a vague idea of what they want to do and a few marketable skills. However, to truly make it in business, you need to know what you’re doing. How you are going to not only create, but also develop your business and make it a success. This is where a business plan comes in.
What is a business plan?
A business plan is a sort of report, which lists the objectives of your business (what you want to do and what your ultimate goal is) as well as how you plan to achieve this. It doesn’t have to be a completely formal document, as it is only for yourself and any staff you might bring in later, and it shouldn’t be set in stone. The best business plans leave space for tweaking and changes later on, as you start to get a better understanding of the industry you are working in, what’s working with your business and what isn’t.
A business plan not only helps you to be clear on what you want to do, but it also offers a document you can look back on to see whether or not you are reaching your goals, to help you to decide how to move forward.
A business plan should have:
- A summary of your business. This will include your mission statement and any ultimate goals that you have. This is where you will think about what makes your business different from others, and what it is you want to bring to the market.
- What you do. What is your product? What services do you offer? What products and services would you like to offer as time goes on?
- An operational overview. This is more technical and is for you to think about how you are going to provide a consistent product and service to your customers. This is truly important as it is what you and your staff can refer to, to ensure that customers enjoy the same product and service every time they use your business. It is this reliability that will keep them coming back again and again.
- A financial plan. This will include a cash flow forecast, sales forecast, costs (employees, equipment, products), profit and loss statements and an overall balance sheet so that nothing about your finances is overlooked and you can pass this over to an accountant with ease.
- A marketing analysis plan. This will answer questions such as: Who is your target audience? How are you going to target them? How are you going to sell to them?
- Milestones and achievements. At the beginning, this section may feel a little bare, but that is the joy of updating your business plan as you go along. You will get to see your milestones and achievements reached and get a good gauge of how the business is performing overall.
Advantages of having a business plan
Is necessary for financing
A business plan helps you to show banks and other financiers that you are serious about your business, and that you have put enough thought and attention into your business that you are likely to succeed. A majority of businesses will fail in their first two years, and lenders want reassurance that you aren’t going to be one of them. If you approach a lender without a business plan, and aren’t able to communicate clear and researched ideas, chances are that you will be rejected for credit.
Helping your company to evolve
A business plan is important at the inception of your company, but it is just as important as you go along. If you set yourself realistic goals, you can be achieving them fairly regularly, helping you to understand your success. It can feel frustrating at the beginning of a company, when everything is taking a long time to get anywhere, but with a good business plan you can keep track of the progress that you are making. Later, when you are hiring staff, your business plan can act as an overview that helps them to integrate more quickly.
Sets priorities
It is tempting to try to do everything at once, when you set up a new business. Excitement about what you are doing and a wish to get everything you need into place as soon as possible can mean taking on too much. With a set list of the tasks that need to be done, and achievements that you want to make, you can allocate time and energy to the right tasks at the right times. Seeing your tasks written down will help you to prioritise, and set a structure that will help everything to come together later on.
When putting together your business plan, think about where you want to be in a year’s time and then come up with the things that you need to do to get there. Once you have this information, break it down into smaller, achievable chunks and before you know it you’ve just set out your own daily schedule without even noticing. Don’t forget to use this to delegate, if you have staff, to make it more likely that you will hit your targets.
Helps you to predict problems and form solutions
A business plan helps you to look to the future in a realistic way, working out how you are going to reach your goals, but understanding your limitations. A cash flow forecast means that you can see the honest truth about your financials and can start thinking about action plans for improving them. If you keep your business plan updated, you can spot negative trends early and correct them before they harm your business.
Keeps you accountable
Setting goals and timelines helps you to see where you were hoping to be by this time, and keep working towards that. It is far too easy to become stagnant if you have no real plan, once work starts coming in and you feel that you are doing well enough. Referring back to your business plan ensures that you don’t lose sight of what you were trying to achieve from the start.
Further information and help
Setting up in business is both an exciting and a nerve-wracking time. It usually involves juggling many balls at once and keeping to lots tight deadlines. With so many opportunities for things to go wrong it really is vital that you produce a business plan. It acts as both your operations manual and your business bible and by having a well-researched and realistic plan you are all set for business success.
For help in all business creation and taxation issues please call us on 01473 744 700 or email us on contactus@aag-accountants.co.uk to find out how we can help.
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