How can you formulate an idea, create a business and then run it if you haven’t got any specific plans to work from?
Creating a business plan is no easy task. It can be made simpler and more effective by working through it with an advisor. Ultimately getting your thoughts down on paper will prove invaluable for obtaining start-up funding and thus will support the potential future success of your enterprise.
The purpose of a business plan
A business plan is used to help manage a company, by stating the business’ aims, how they will be achieved, setting the objectives and their timescales. The plan will also help summarise what the business is about, why it exists, and its goals for regarding future growth.
Your business plan will serve as a key point of reference for investors, partners, employees and management to gauge progress against objectives.
A business road map
A detailed plan will help you as the owner to manage your business more effectively. Writing down and illustrating both your ideas and strategies will establish a course of action, like a road map. This will give you something to monitor and assess against the progress you start to make.
Business owners should look to work with a finance specialist on this task, even at an early stage. Why? Well, an experienced professional advisor will have helped many early stage businesses. Given how close a good accountant is to the operations and strategic direction of a company, they’ll be able to draw upon their experience of what’s worked and what hasn’t with previous clients.
This means they’ll be well placed to help you with your assumptions. Remember, you want your business concept to be as well thought through as possible. Having a fresh set of eyes reviewing your ideas from a different perspective could make all the difference to your business model. A finance specialist will know what success looks like, and what’s required to achieve it.
Developing a clear plan and strategy will help to focus your mind. This provides you with clarity as to how much needs to be invested at each stage of the business lifecycle. You’ll then know when you’re going to need cash injections based on your forecasted cashflow.
Understand what to focus on
As a business owner, where should you be focusing your energy and concentration? It’s a common question. The early days of starting out can be very chaotic. There’s so much to think about, implement and develop. It’s an emotional roller-coaster of excitement and sharp shots of anxiety. Amid all this and with a growing to do list, you can lose track of what’s a priority.
By writing a business plan, you’re defining exactly what your organisation is today and what it intends to become tomorrow. This coherence concerning the purpose of your business and your direction of travel is invaluable.
Your plan should describe your ideal customer profile and include their needs and wants. Then expand on this as to how your products or services address their requirements. How are you going to market to these potential customers? What approach will you adopt to make sales and generate revenue?
These are vital matters to address early on. Growth primarily comes through new customers and achieving repeat, loyal custom. This then determines your progress towards profitability. By mapping this all out on paper you’re giving yourself yardsticks to work towards.
Supporting your business’ growth will require an injection of funding. That’s unless you have an extremely cash generative business model. Often you probably won’t have enough customers providing the cashflow to finance the next opportunity. You’ll have a working capital requirement and thus need investment beyond the reach of your business.
If you approach potential funding sources, they’ll want to assess your income statements/profit and loss statements, and business plan. If you’re still at the concept stage, or haven’t begun making sales, then their decision will rest solely on their belief in you and your business plan.
The financial statements help prospective lenders and investors understand the history of the organisation to date. Whereas the business plan provides them with a view of your future direction. They’ll look for many things in your plan. Ultimately their interest will focus on whether the expansion or development of your business will generate sufficient cash to operate effectively while also fulfilling debt obligations.
Unless you’ve done this before, and know what you’re doing, then you’re probably going to need the help of an accountant. They’ll work with you to model the level of cash in the business. This will then act as evidence to potential investors and financiers.
Manage business operations effectively
Managing your cash position is fundamental to the long-term future of your business. There’s a common quote that “most businesses fail because they run out of money”. This means they’re no longer able to pay their debts when they’re due. You should reference your cashflow projections in your business plan regularly. The timing of your investments thus needs to be considered against your projections and statements.
Ensure you work with your accountant, in the creation of your business plan and continue to monitor the performance of it. Well thought through ideas, combined with a shrewd strategy, and carefully planned projections will improve your chances of long-term financial survival and growth.