A business plan outlines your vision for the future of your business. It sets out your business goals and how you plan to achieve them. It helps you understand the steps you need to take to launch, run and develop your business. And it is an important asset when discussing your business with your bank manager, potential investors and customers. It demonstrates that you are looking to the future and you are aware of the environment your business operates in.
Many businesses fail because they don't have a clear strategy and objectives. Writing a business plan forces you to address the details of your own business proposal and clarify exactly what you have to do to make it a reality.
Any shortcomings or potential problems will soon become obvious if you take the time to look at your business idea objectively. In this way you make your mistakes on paper rather than in reality.
A good business plan will:
A business plan is not only for business start-ups. It's an evolving document that should be reviewed regularly. It will always be a useful tool to persuade others to invest time, money and effort in your business.
To help you write your plan, Lloyds TSB Commercial Banking has teamed up with Sage, one of the UK's leading suppliers of business management software, to offer you their Sage Planning for Business software free. Don't forget, you can get some very practical help by downloading a free copy of Sage Planning for Business software see our useful links below.
A good business plan answers four simple questions:
You should be able to sum up your purpose - why your business exists - in a couple of sentences. It should clarify what you want your business to achieve, beyond simply making a profit.
While purpose is general, objectives should be SMART:
You may have a number of different objectives, but they should complement each other and be prioritised.
While your strategy may be flexible and able to adapt to fit changes in the market or the economy, it should always be grounded in thorough market research. You should investigate:
And conversely, weaknesses:
Listing your business' strengths and weaknesses, the opportunities that the market presents and also any threats to your business will help you make sense of your research. (This is also called a SWOT analysis - Strengths, Weaknesses, Opportunities and Threats).
The success or failure of your business rests on its ability to make a profit and anyone thinking of investing in your business will scrutinise your budget closely.
In most businesses, cashflows in and out, and you should include a cashflow forecast in your plan to assure yourself and others that your business will be solvent. This means you'll need to have a good idea of how much cash will come in and go out of your business, where it will come from or go and when.
Cash coming into your business could be from sales or investment, including capital you put in yourself. Cash going out could be on stock, equipment, wages or tax. Show an estimated 12 months' cashflow in your plan.
Then you'll need to show what profit you expect to make. Profit is what's left after expenses, costs and taxes have been paid. You'll need to include a profit forecast in your plan as well - show an estimated two-year profit projection.
Break down your cashflow and profit into monthly figures, showing the main areas of expenditure and income.
Remember to include contingencies in every area to cover unexpected costs. While you need to show confidence in your business, unrealistic projections are likely to do more harm than good. It's safer to be pessimistic than wildly optimistic.
It's not essential, but if you have a plan to build up your business and then leave it - perhaps selling it on - including details of any proposed 'exit strategy' in your plan demonstrates the thoroughness of your thinking.
Start your business plan with an 'executive summary' to provide readers with a quick overview of the whole report. This is best written last.
A good business plan should be:
Don't be put off if you don't have all the information you need from the start. A basic outline can be filled out as more details become available and even a simple financial forecast can highlight any shortcomings in your proposal.
As a basic starting point, divide your plan into four sections:
For each of these sections, consider the following areas:
You may find that a more in-depth plan is necessary, but avoid including very detailed figures as these will be more likely to change and your plan will become out of date. Don't forget, you can get some very practical help by downloading a free copy of Sage Planning for Business software see our useful links below.
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