What is a business plan and why you need one

Just this week a news story has circulated focusing on the success of Pink Boutique – how a £90 start-up came to turnover £25million.  A true rags to riches story that seems to demonstrate how anyone can start, and succeed, in business. But these are few and far between, with many start-ups failing in their first year. Accountants Avanti have considered what sets the successes apart from the failures and found that a key element to the success of a business is drawing up and implementing a business plan.

Your Business Plan

In a nutshell, your business plan should set out your business objectives and how you plan to achieve them. This could include timescales to achieve your goals. It should have some flexibility to allow for industry changes and business developments. Use your business plan to periodically assess if you are on target for your goals and to understand what needs to be done to get you there.

Structuring Your Business Plan

Some businesses will require a very detailed plan containing the minutiae details for achieving their goals. But these are very individual and personal documents and the depth of detail will depend on you as a business owner, your type of business and your circumstances e.g. do you need funding?

A business summary will summarise your goals, and your USP.

What do you do? You should outline what your products or services are and who are your customers.

A financial forecast gives you the projections for your business. This is a valuable tool for your business and while it sets out forecasts for sales, cashflow and costs, to be comprehensive it should also cover profit and loss statements and a balance sheet. Periodically this should be reviewed, and updated for a clear overview of your finances.

A Marketing plan is a more in depth look at who your customer is and how you get them to buy from you – this is unlikely to be ‘everyone’ so take the time to think about who you are selling to, how you sell to them, and how you reach them. Again, you can use this to form a comprehensive marketing strategy which must be assessed on a regular basis to see what is working for your business and what is failing to generate leads.

The Plus Points

Funding

Whether you need funding before launch or once you are established to purchase large equipment or premises, your success could rest on your business plan. It is therefore important to invest some time and research in this document. Banks and investors will want to have a clear idea of your forecasts, where their  money will be spent and above all that it will be paid back. The business plan can give them the overview they want.

Growth

Without a clear plan, you’re diving into the unknown with every decision you make. Having a business plan to refer back to and evolve will act as a chart of your progress. So even when you feel like you’re getting nowhere, you’ll actually see exactly what you have done. As such it makes you accountable.

Structure

When you start up, there is so much to do, and so little time. How do you know where to start? Use your business plan. If your plan has been written with care and detail, it will allow you to schedule your tasks with appropriate timescales. Take each main part and break it down into bitesize pieces – this makes daunting elements much more palatable when everything rests on your shoulders. Tackling smaller parts of  a bigger goal will mean that you are always moving in the right direction.

Sidestep the pitfalls

By combining your goals and cash flow forecasts, regular reviewing of both your business and external factors (eg industry change), competitors behaviour and market shifts this will give you a greater overview of the health of your business. Understanding this in turn leads to an ability to sidestep the pitfalls, and plan your business behaviours accordingly.

If you’re struggling with forecasting, or understanding how your business plan correlates to your current business position why not speak to a member of the team at Avanti. From forecasting to management accounts, Avanti help move you and your business  forward.