Finance companies and banks demand a written business plan
before putting up financial support to a new business. All
medium and large companies inevitably prepare a financial
budget for the coming year. That should tell everyone that
not producing a written business plan is the first mistake
everyone starting a new business might make.
Starting a new business without a proper business plan is
akin to taking a blind walk in the dark without no road or
map to follow. It should not come as a surprise to learn
that the majority of new start ups consequently fail within
the first two years dashing the hopes and dreams of many
budding entrepreneurs.
The benefits to an entrepreneur in producing a detailed
comprehensive business plan when some-one is considering
starting a new business lie strongly in the thought process
that goes into producing that plan rather than the ultimate
plan itself. New start ups should regard a business plan as
a road map to get the show on the road.
A properly thought out and written business plan for a
small business should contain the details of how the small
business is going to get started. A typical plan might
include a short synopsis of the new business with sections
on sales and marketing, operations or production,
purchasing, personnel plus a financial section evaluating
those plans and putting real numbers on the written text.
The short synopsis should briefly describe the main
business and mention each of the main ingredients contained
within the plan to attain the objectives. The rest of the
business plan should support that synopsis and should be
factual rather than a sales document.
Sales and marketing should include an analysis of the
potential and forecast sales, competition and how the sales
will be achieved. Identify the sales channels that will
produce the sales and why they will produce the sales. The
sales section should specifically state the volume of sales
of each product over at least the first year and the price
at which each of those products will be sold and note the
sensitivity of all items to unexpected events.
The operations and production section is dependent upon the
type of business and will be variable depending on whether
the new start up business was providing services, retailing
or manufacturing. The production section is basically a
detailed picture of the vehicle that will be used to
generate the products to be sold.
Purchasing would include an analysis of how the products to
be sold would be sourced. Volumes should be stated and
sources of supply specifically identified with a real
purchase cost of all major items specified not guessed.
Personnel would include the names of the people involved
with brief details of their knowledge, qualifications and
previous experience. The personnel section would also
include details of people yet to be recruited if the work
to be performed is going to be critical to the new business.
The financial section of a business plan should contained a
forecast profit and loss account preferably each month for
the first year at least with perhaps a summary of the
second year. In addition to the profit and loss account a
cash flow statement taking into account capital introduced
and stock levels should also be produced.
The sales and production or purchasing numbers including
volume and prices contained within the report should be
reflected in the financial report. Each major critical
assumption within the plan should be subjected to a
financial sensitivity analysis that takes into account all
potential risks to volume and price levels.
The process of preparing a detailed comprehensive business
plan that has been properly researched has significant
benefits in itself. If the business has been researched and
thought through before the new business starts there is a
much higher can it will succeed and suffer fewer negative
surprises once the real work of generating sales and profit
begins.
----------------------------------------------------
Terry Cartwright, accountant and CEO at DIY Accounting,
designs Accounting Software at
http://www.diyaccounting.co.uk/ providing accounting
solutions for small to medium sized business in the UK with
payroll software at
http://www.diyaccounting.co.uk/payroll.htm for up to 20
employees
No comments:
Post a Comment