Writing a good business plan is not only the first step towards the Converting concept to reality but also the most important one.
- Business Plan
- Concept and Background
- Business Strategy
- Financial planning
- Market size and rate of growth
- Market Research
The Business plan is the first real contact that the new business will have with potential founders,
And not only will it say a lot about the business, but its presence will also say a lot about Management and yourself.
For any new business,
Most important is Founder’s, Are at Least as interested in the management team as in the business plan.
The Plan will demonstrate how clearly the managers have through their business idea and how methodical and detailed their Approach to the business is likely to be.
Summary of your Business Plan
Each of them must be connected in detail in order to develop a convincing business plan:-
Concept and Background
Define your business concept and, if the business already exists, provide a history.
Describe the Industry (size, major participants, growth potential, barriers to Entry, outside influences, etc).
If you focus your business on a differentiated segment of the industry, describe that sector More thoroughly.
Demonstrate that a market exists for your product/Service in the general market or market niche
That you have Identified, estimate market share, assess competition, and Outline your competitive advantages.
Define the unique selling proposition (USP) of your business offering.
Describe the product or service and advantages over existing providers, outline future development, and Detail any patent or intellectual property issues.
Outline Production/delivery issues and expected future requirements And premises. Identify the role of future research and development (R&D) and innovation in growing the business.
Demonstrate a deep understanding of the market and business in the proposed strategy.
This should be Demanding but realistic.
Outline areas such as capital expenditure and staff recruitment. Profile the customer groups to which you will be marketing your products or services,
Define Your business proposition, your channels to market and how you will gain sales.
Timed action plans are usefully and Include in your plan with help of Management team.
Identify key management and their roles, Outline their backgrounds and skills.
Identify any weaknesses In the team and how they will be addressed.
Key directors and Managers will be expected to demonstrate their financial Commitment to the project.
Include the CVs of key managers as An appendix to the plan.
Demonstrate careful thought in the financial projections and the assumptions but be concise (use Appendices where necessary).
Provide external corroboration of forecasts and assumptions where possible, and for an Existing business include historic accounts.
Factors you need to include are:-
*Profit and loss forecasts for three years – monthly for Year 1 And quarterly for Years 2 and 3; Cash flow forecast – again monthly for Year 1 and quarter For Years 2 and 3; – Preformat balance sheets
– opening statement and at each Year-end;
– Capital expenditure plan for each year.
You should also add a sensitivity analysis which shows what happens if your assumptions are varied,
For example:- If only 80 percent of Budgeted sales are achieved; if margins are shaved by 5 percent; if Fixed expenses are increased by 10 percent.
Choose your alternatives carefully to include corrective actions that may lessen the Unfavorable impact of change.
Of the formal financial planning documents, the cash flow projections are the most important.
They will define funding requirements and assist prospective investors and lenders to evaluate the financial risk and the viability of the business.
Having developed The assumptions on which the plan is based, it is sensible to write the Cash flow projection first,
from which the profit and loss estimate Can be readily extended.
The only elements of the profit and loss Account
which are excluded from the cash flow are depreciation
Which is a non-cash expense item, and provisions for Bad and Doubtful debts,
future taxation or other liabilities which do not occur during the period of the cash projection.
Market size and rate of growth
The research you carry out to answer the question –
‘Who will want To buy the product or service I plan to sell?’ should also provide You with insight into the future outlook for the market you seek to Enter.
Desk research will establish the size of the market nationally, Regionally, and locally, regionally its historical rate of growth.
If your product or service is intended for a sub-market of a larger Market
In which there are alternatives, you should research the Wider market as well.
For example, if you are planning to open a Keep-fit center, the market which you are addressing is not just the Established market for keep-fit centers but the broader leisure
The market of alternative sports and exercise, including home users of Keep-fit equipment.
Evidence that the rate of growth in the use of Fitness centers nationally exceeds the growth in sales of exercise Equipment to home users would strengthen your view of starting Up.
The converse would be a deterrent.
You should also investigate the characteristics of the local market
Where you are planning to set up your business in comparison with The national market.
For example, if you were planning to open a Fitness center and you find out that the authority has a Forward plan to build 10,000 new starter homes,
while a new telephone call center is about to open bringing 1,500 new jobs to the area, then you might uprate the opportunity.
Alternatively, if you find that the local population is aging, a New fitness center
Opened last year and the largest local Employer is in liquidation, you would probably look elsewhere.
Market Research for Business Plan
Your marketing process should begin long before you start trading Your new product. This applies as much to Microsoft’s latest Software as to the new hairdressing salon on the high street.
They Must both establish if there is a market demand for new products, And what exactly the demand is for; they must conduct market research.
The difference is that Microsoft has rather larger Marketing resources than the hairdresser.
Established businesses have a huge advantage over start-up Businesses in carrying out market research.
They have an Enormous exposure to market sentiment and reaction every day Through their current business activities.
Added to this are their Database of past and current customers which they ought to be able To analyze and, should they wish, use to contact for views an Opinions.
Their current data to build up likely market information of Different geographic areas or market sectors.
The brand-new start-up company is unlikely to have any of these Resources readily available to it, and while discussion among like-
Minded competitors is often a lot more open than you might Expect,
you will not be able to handle databases and customer views by Your future competition!
As such, the prospective businessperson Must try to build a picture of what the market for the intended Product or idea is currently like, and whether there is sufficient demand for the concept with its benefits.
This can be done by Collecting either brand new data directly from the marketplace
Specifically for your own purposes (primary data) or data already Gathered by others that you can shape for your own use (secondary Data).
Two sets of people are interested in your cash management –
you And your backers (both potential and existing).
The latter group will be analyzing your accounts with some standardized ratios so that they can compare your business with the others they may invest in or lend to.
Clearly, it is in your best interest to make sure that your Business has cash ratios that will be satisfactory to these people.
There are a variety of ways that you can arrange your business to achieve this.
At this stage, however, it is useful to know what the ratios are, and More critically to gain a good understanding of how they operate.
The most frequently used, and therefore important, statistics is The current ratio.
This compares your current assets against your Current liabilities to give a figure that shows how many times the Former will cover the latter.
Current ratio = current assets/current liabilities.
The figure is expressed as a ratio, such as 2.6:1.
This example means, That your current assets are 2.6 times greater than your current liabilities.
What does this mean? Not a lot by itself.
There is no overall Ideal figure you should be trying to achieve.
Each industry Sector within an industry will have different sets of ratios.
The more Risky your business is, the more susceptible to market changes, the Greater the first figure should be.
In an ideal world where you have Little risk and you can project with certainty what is going to happen In the future business cycle, the nearer 1:1 you get the more efficient Use of capital you are achieving.
Thus we reach the first dilemma Your backers want you to get the highest return with ‘their’ cash as Possible, but without exposing them to an unacceptable level of risk.
This is something of an impossible task to achieve consistently to Everyone’s satisfaction, as different people (and therefore different Bankers) have different levels of risk aversion.
A business plan is a very important strategic tool for entrepreneurs.
A good business plan not only helps entrepreneurs to focus on the specific steps necessary for their to make business ideas succeed, but it also helps them to achieve both their short-term and long-term objectives.
A document setting out a business’s future objectives and strategies for achieving them.
A business plan is a very important strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs to focus on the specific steps necessary for their to make business ideas succeed, but it also helps them to achieve both their short-term and long-term objectives.
Lack of planning – Businesses fail because of the lack of short-term and long-term planning
A summary of company growth, including financial or market highlights. A summary of your short- and long-term business goals, and how you plan to make a profit
As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit.