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The Benefits of Having a Business Plan

There are three key reasons to create a business plan. The first is that it helps you to plot your business' future, the second is that it will help you to determine what you hope will happen to your business in a specified time frame, and the third is that it gives you a chance to calculate how you are going to achieve your goals.


What are the Benefits of a Good Business Plan?

Writing a business plan allows you to assess the facts and figures of your business proposal while identifying what is needed to satisfy it. A well-developed business plan will initially:

  • provide direction for your business and assist you in creating the action needed for your business,
  • assist you and your employees in focusing on what is important,
  • reveal your commitment to investors, banks, employees and colleagues,
  • assist you in identifying problems as soon as possible so that you can tackle them efficiently,
  • enable you to set targets and assess your success, and
  • assist you in attracting appropriately qualified staff.

Creating a business plan is an ongoing process, and you have to keep reviewing the contents of your plan on a regular basis. A current plan makes it easier to persuade interested people to invest money and time in your business.

What Should Be Included in Your Business Plan?

In order to write a good business plan, you will need to be able to answer the following four questions:

  1. What are your business objectives or mission statement?
  2. What are you intending to achieve with your business?
  3. How do you intend to achieve your business objectives?
  4. What is your intended budget?

Purpose

At the beginning of your business plan you should explain the reasons for your business' existence and point out what you would like your business to gain as well as how to produce a profit.

Business Objectives

You will probably have a number of different objectives and some will be of greater importance than others.

Be specific by detailing precisely what you intend to achieve. For example, in your first year you may want to get 10 new orders every month. If this is your intention, you should be ready to take action to ensure you meet this objective.

Of course, in the first place your objectives should be attainable both in a certain time frame and for a set amount of sales. Any strategies you follow should be based on your own market research so that you are targeting the right market. Lack of market research may point you in the wrong direction.

Certain Factors That Should Not Be Dismissed

Other factors that you should consider including in your business plan include the following:

  • Potential customers and possible competitors
  • The current condition of your market and the economy
  • How trade operates in your particular business sector
  • Your suppliers
  • The type of staff, equipment and facilities you will need
  • Emerging technologies that may have an effect on your market

Assess Your Business' Strengths and Weaknesses

By assessing your business' strengths and weaknesses, you will be able to produce a well-rounded business plan.

Appraise Your Strengths

  • Why should customers purchase from you and not your competitors?
  • How does your business perform in relation to your rivals?
  • Do you have a unique method of promoting your product that is better than your competitors?

Appraise Your Weaknesses

  • Are there any potential customers who would buy from your competitors and not you?
  • Is there anything your competitors can do that you can't?

Opportunities Open For Your Business

  • What opportunities are available for your business? Do you make the most of them?
  • What likely changes could have an adverse influence on your business?

Budget

Business success is dependent on making a profit, so anyone you encourage to invest in your business will study your budget.

Forecasting Your Cash Flow

Cash always enters and exits a business. This means that in your business plan you need to include a forecast for your cash flow covering 12 months ahead. This ensures that your business will stay in the black. Your forecast should include the amount of money coming and going from your business and who you will have to pay.

Usually, money that comes into a business would be from investments or sales, which will include any capital you may have paid in. Money going out would be for equipment, stock, wages or taxes.

Work Out Your Profit

Profit is money remaining in a business after expenses and taxes have been paid. You should include a two-year profit forecast in your business plan. Compile figures showing your profit and cash flow on a monthly basis, and indicate the areas where income is coming from and what you are spending.

Don't forget to add possible contingencies so that unforeseen costs are accounted for, and don't be too optimistic about your business success and profit level to begin with.

Also include your 'close of business' plan. If you are hoping your business will grow and you will then sell it, this should be included in your business plan.

Writing a summary is a good way to start a business plan. This enables people who are interested in your business to gain a quick look at what your business is all about.


How to Structure Your Business Plan

Your business plan must be written in concise and clear language that is not only well researched but achievable and free of clumsy jargon. You can make a start even if you do not have the finer details at your fingertips.

When creating your business plan, it should be set out in four sections, as laid out below:

  1. Your present situation. Describe your business including a description of the products or services you intend to provide and how well your business has been progressing.
  2. Your future vision and when you expect to reach your targets.
  3. Your strategies for realising your targets.
  4. Who is doing what and when?

Each section should include the role of:

  • your staff,
  • your profit and cash flow,
  • your current position, and
  • the profile of your business.

Do not go into too much detail about your projected figures as they are subject to fluctuations more than, say, staff movements. If you find that writing your business plan is a cumbersome process, you can get some help from specially prepared software programmes.

The Benefits of Software Programs for Writing a Business Plan

Software can help to easily create sample budgets and revenue forecasts. It can help to target business goals for cash and product turnover and form expense budgets that may help business growth.

Financial Reports

Financial reports can be compiled for your business needs so you do not need to worry about completing complex Excel spreadsheets. Strategies are offered in a simple-to-follow process, making it easier to form a useful business plan quickly with extremely professional outcomes.

The software can manage the performance of your business using a simple-to-use dashboard that indicates your business’ key metrics, and there is no need to handle clumsy Excel formulas.

You can also create a professional single-page pitch as an investor presentation, which takes just a few minutes and can be shared easily.

The One-Hour Business Plan

Most business owners view writing their business plan as an arduous task that has to be done. If you think about it for a minute, your business plan could end up helping you sell your product to the world. Fortunately, a good plan can be written using just a single page and is as valid as a bound 70-page document.

The following example is a 10-point, one-page simplified business plan:

  1. A single sentence describing your business
  2. Why there is a need for your product
  3. A product description, which could include product photos
  4. Who your competitors are and why you offer a better product
  5. What your target market is
  6. What the cost of producing a single product is and your price tag
  7. How many products you will sell in the coming year
  8. What your marketing channels are for your product
  9. Any milestones you want to achieve
  10. A brief one-sentence description of yourself and why you are best suited to run your business

Why Business Plans May Be Refused Funding

Your business plan is typically the first impression you make to potential investors. You may have a great product, an excellent team of workers and a customer base, but this does not mean you will get funding.

Investors look through scores of business plans annually, seeking out possible investment opportunities. Sometimes potential investors go on recommendations from trusted sources, but often business plans are the only material available.

In your business plan, you should avoid using expressions such as, “the business has so far gained fantastic returns with limited investment” or “the business is unparalleled in the industry”. These will just be seen as fluff by potential investors as they will judge how successful a business is and if investment is worthwhile.

Some early-stage business owners firmly believe that they should explain in their business plan how their product suits different markets.

However, the majority of investors like to see a business strategy that is more focused, particularly with new companies, and prefer to see one good product that will satisfy one particular market and is distributed using a strategy that has proven its worth.

What to Include

Business plans that do not include marketing, sales and distribution strategies will not be successful in getting funding. You need to explain what tactics you have used to generate customer interest, get pre-orders or secure sales and how you intend to proceed in the future.

Potential investors are the judges of the facts you present about your business. The main emphasis should be on solving the business' problems, your solutions, the size of the market, how you intend to sell your product and what methods you will use to keep ahead of any competitors.

You should not focus on other products, markets and other distribution channels. Your core product and selling strategy comes first.

What Is Crowdfunding?

Crowdfunding has become very popular in the last few years. It is when businesses promote their product to get it up and running by raising financing from a large number of people.

Crowdfunding sites like Indiegogo and Kickstarter often revolve around simple rewards which are exchanged for cash to back a project. These rewards are usually cheap items like a t-shirt bearing the logo of the company. This kind of funding is most appropriate for “smaller” funding targets that can be met within a deadline of 60 days. Most funding for Kickstarter crowdfunding projects are for about £8,000.

There are certain factors you need to address before applying for crowdfunding, including outlining your requirements and goals and whether your project is for a business, a cause or an artistic endeavour.

A Crowdfunding True Story

A recipient of Kickstarter, a crowdfunding platform, thought that being awarded £100,000 to launch a new product seemed a very good start indeed. The first downside to this was a call from the tax office which said that crowdfunding payments are taxed, which meant an unforeseen bill of £20,000.

Later, the recipient paid out £7,000 on a website to showcase his product and a further £40,000 on product development. He had a paltry £6,000 remaining for the marketing of his product.

Unfortunately, the end result was poor decision-making regarding spending—he had no cash left for the proper launch of his product.

This is the reality for many business owners who have sought funding in this way.

Crowdfunding Becomes Public Information

Global exposure is a downside of crowdfunding because when putting in a request, everyone can see your business idea and some unscrupulous entrepreneurs could take advantage of you. Despite this risk, many aspiring business owners go to the main crowdfunding platforms and seek funding.

How LegalNature Can Help You with Your Legal Form Needs

LegalNature can help you with all of your legal form needs. Let us help you get started today. Click here to create your business plan now.

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