Business planning
Planning for growth
Business plans can have a number of functions.
- For inclusion in funding applications
- For control over your business on a monthly basis
- To understand future resources and to allow proper financial planning
What is a business plan?
A Business Plan is a summary of how a business owner intends to organise his entrepreneurial endeavour and implement the necessary activities to get there. This is a form of statement of a set of business goals, the reason why they are believed attainable and plan for reaching those. The Business Plan is a document that will formalise the business owners plans for the future both in financial and written terms. Any Business Plan would include a description of sales sectors along with the plan for each of these sectors in the future. The plan would analyse gross profit margin and salary costs required to get to the required sales figures. The Business Plan would also include analysis of overheads, usually based on historical over heads adjusted for strategic requirements in the future.
For inclusion in funding applications
Banks and financial institutions are looking at historical performance along with the
business owners intention for the future. A business plan will be a fundamental requirement of any bank or financial institution when applying for funding.
The Business Plan would consist of a profit and loss, balance sheet and cash flow forecast. Through these 3 elements the future funding requirements would be ascertained for presentation to the bank or financial institution.
For control by business owners
The Business Plan sets out the business owners intentions at the start of the financial period. The Business Plan would be input into the accounting system of any client then the monthly management accounts could be compared to the forecast figures and variance analysis provided. This will allow the business owners to track against his target. Without a Business Plan entrepreneurs tend to have a short memory and accept the current financial position rather then striving for the sales that he or she set out at the beginning the of the year. This will also allow cost control as any negative variances against costs would be flagged and the business owners could use this as a cost reduction tool if costs start to spiral.
To understand future resources
The Business Plan will ascertain anticipated sales and cost levels based on the assumptions provided by a business owner at the start of the year. This will allow a staffing level forecast along with any funding required as a result of growth. This will allow strategic decisions to be made such as a recruitment drive to get required staff levels or consideration of cost cutting exercises to ensure that profitability levels remain at a satisfactory level.
Summary
In summary a Business Plan should be prepared on an annual basis by all businesses. This Business Plan should be tracked on a monthly basis in order to ensure that sales levels are in line with expectations and costs are kept under control. The Business Plan becomes particularly crucial when applying for bank or financial institution funding which will also include grant applications.
