Business Planning

Business Planning

Starting a business

Exiting a business

  A fundamental part of a successful business is a thorough and detailed plan. They are especially important for start-ups as they offer the owners an opportunity to properly structure their vision and analyse all the various aspects of running a thriving business.

  When starting up a business, the owners will certainly at some stage encounter a bank manager when asking for a loan, or when building up a long term relationship with a supplier or customer. This is when a business plan will be invaluable as it helps to convey your business strategy and sell your ideas to those that need to be convinced. Business Plans are not only necessary for start-ups. Already functioning companies will also benefit from a constantly updated plan as no aspect of running a business is ever completely fixed, adjustments will have to be made to adapt to changes in the environment. Constant evolving is what encourages businesses to grow.

   

 Components of a Business Plan

1. Executive Summary

The first part of the plan should be the executive summary. This is often described as the most important part of the plan as this is where the business overview is judged. Details about the idea of the business, as well as its background and ownership structure should be included here, with particular emphasis on what experiences you already have in this industry and competences that will help you to achieve.

 Clear Business objectives and a Vision statement are also needed to sell why you will be a success. Specifics on why your products/services will be popular in the location you are wishing to set up in, will back up the objectives for the short term, medium term and long term. Describing how you will promote your business through advertising and an online presence will also go far to show that the company will be competitive and will complement the business development strategy.  Having an opportunity in the market is needed to prove that you can compete and meet the objectives you have set.

2. Financial Summary

 Along with the objectives, it is necessary to create short, medium and long term forecasts of sales and cash flow. This needs to be supported by reasons for an increase in sales, such as advertising or gradually increasing the amount of customers, who were previously using a competitor. Attention to detail cannot be understated here, as assumptions made are not sufficient, they need to be supported by some form of evidence (see Market Research further down the page). If there is projected growth, how and why is it going to grow? Funding requirements and expected returns are also needed especially if convincing others to invest or provide finance.

 Reports in graph form are needed to visualise the figures that are being suggested. These can be put in the appendix or in the financial summary. The reports, showing data for the next three years are:

-        Projected Cash Flow

-        Projected Profit and Loss

-        Projected Balance Sheet

3. SWOT Analysis

  Standing for Strengths, Weaknesses, Opportunities and Threats, SWOT Analysis is a very useful way to highlight strengths of the individuals in the business and the business itself, as well as opportunities, such as a growing market, which can be exploited to maximise the potential of the business.

  The analysis can also determine weaknesses which need to be addressed and can help with dealing with unexpected issues in the future. When analysing threats it is important to understand the competition to your company, and so to create an individuality which help to put you ahead of your rivals, while improving anything needed so to not be seen as inferior to the others. Knowing about their strengths and weaknesses will act as a guide to direct you. Comparing sales and marketing will also show what customers look for in that product. 

4. Market Analysis

  Market Analysis will complement what has been written in the executive and financial summaries. Research must be completed in order to do this, such as analysing the population of the local area and the location in which your business will actually be. Research into the industry and trends your business will be part of is advisable to support reasons for why growth will occur. Analysis of competing products will also help in the SWOT Analysis.

5. Exit Strategy

 All companies need an exit strategy in order to benefit the best interest of the company and the individuals that run it. Often a Best case strategy and a Worse case strategy are used in business plans, so to be thorough in detail. A worse case strategy could often mean ceasing after a year if profits are not close to as projected, this would keep costs to a minimum. A best case strategy could involve stepping back to give an experienced managing director the opportunity to expand the business further, if you have taken it as far as you believe you can.

6. List of Costs when starting up

  For business start-ups it is important to include all direct costs, overheads, fixed assets, loans and grants when producing a list of the total costs for the initial start of the business. This can be compared with any capital you already have and any investments you have already made. This section is particularly necessary when applying for a loan.