Creating a Business Plan For Dummies
If you’re just starting your own business, or even if you’ve been running your business for a while, you need to do more to plan for the financial success of your business than just throw together some figures and a few marketing ideas. To truly build a successful business, and perhaps even one that can function without your input at all, you need a clear idea of where you are, where you’re headed and what you need to plan out.
Make Realistic Financial Predictions for Your Business Plan
Trying to predict business sales, expenses and cash flow is tricky. How can you be sure what sales will be? Will you have enough money to live on while your business grows? How much risk is involved?
Give the financial projections of your business plan a quick health check by asking a few straightforward questions:
Can you survive? For new businesses, calculate how much you currently need to live on (to cover personal expenses). If your new business is going to require your full-time attention, have you budgeted to pay yourself at least this amount each week?
Will you have enough capital? If you need to borrow funds and you’re not a homeowner, can you be sure a bank will be prepared to give you a loan?
Do your figures stack up? Do some research to find some financial benchmarks for businesses similar to the one you’re starting. Compare key percentages between these benchmark financials and your own.
Are your sales forecasts realistic? If you have a service business, break the sales forecast for each month into the number of hours you (or your employees) would need to work. Compare this figure against your wages bill, or against the time you plan to spend working in the business.
If you have a retail, wholesale or manufacturing business, break the sales forecast for each month into the number of units sold. Compare this rate of sales to current figures (if you have them). Again, ask yourself, is this realistic?
Is your business model robust enough? Look at your Profit & Loss Projection and decrease sales by just 10 per cent, and increase expenses by just 10 per cent. In this scenario, would your business still generate enough profit to survive?
Is forecasted growth too pie in the sky? If your sales forecast for this year shows growth when compared to last year, do you have strategies in place to justify this growth (such as extra employees, price rises or additional marketing)?
Building a Business with a Life of Its Own
Just like bringing up a child, the success of your business relies on creating something that can survive independently of you. This way, you end up with a business that’s an asset in its own right and which you can sell at a profit when you’re ready to move on.
Here are some tips for helping create a business with a life of its own.
|Instead of This Kind of Business . . .||Aim for This Kind of Business|
|A sole trader business structure||A company structure|
|A single bank account that you use for both business and personal expenses||Separate business and personal accounts|
|Your involvement every day||A business that continues to operate well, even in your absence|
|A business that relies upon your specialist skills||A business with several skilled employees, and which isn’t dependent on any one particular person|
|A business that’s inextricably tied to your name and personal reputation||A business that has a brand that people trust, but where the reputation isn’t linked to any one individual|
|A business where everybody mucks in and shares responsibility for decisions||A business with clear roles and job descriptions for each individual|
|A business that exists only in one location||A business model that can be copied, and which could be replicated in different locations around the country (or even the world)|
|A business that’s straggling along, with no clear plan for growth||A business with an articulate vision, including goals for the next one, two and five years|
|A business with few (or no) written procedures||A business with procedure manuals and systems in place for all everyday activities|
|A business that is hard to repeat because of the level of capital or skills that’s required||A business that has the potential to be made into a franchise|
Do You Need to Create a Business Plan?
Are you feeling a bit sceptical about the need to create a business plan? Maybe you’re wondering if you can find better things to do with your time. If in doubt, read through the following questions. If your answer to two or more questions is ‘yes’, you certainly do need to create a business plan, and soon.
Is your business brand new, or not started yet?
Do you find it hard to describe in 30 seconds or less what your business does better than others?
Do you have a great business idea but you lack the capital to make it real?
Do you have a unclear picture of all of your competitors and how your pricing, service and product/service range compares?
Have your sales and profitability been in decline for the last 12 months or more?
Are you finding it hard to pay your bills on time?
Do you find yourself lurching from crisis to crisis?
Do you struggle to remember your net profit for the last month, the last six months and the last year?
Does your business belong to an industry that’s changing fast? Do you find it hard to pick what will happen next?
Would you like to retire or sell your business within the next five years?
Do you still feel engaged, excited and passionate about your business?