In terms of business development, business owners should play to their ability and strength. There are different ways to start a new business. You should set up your business with a proper plan, no matter what type of business you are planning to start.
Those companies that have a proper written and formal strategy are 16 percent more effective than those without a business plan, referring to the research reported in the Strategic Entrepreneurship Journal. Based on this report, entrepreneurs in the UK need all the support they can get, as 50 percent of start-ups will fail within five years.
Therefore before starting your business ensure that it includes a business plan that will increase the chance to succeed.
What do you know about a business plan?
A business plan refers to a written document that illustrates everything it contains to know about your business. It defines each and everything from business goals and strategy, to products, marketing strategies, projected finances, and logistics. You can refer to your business plan as the blueprint of steps required to look and operate to run your business. It should also contain where your business is coming from and where you would like to expand your business.
What is the importance of a business plan?
Writing down everything you know about your business will help you to get a better idea and feel for your new business and the expectations you should set. It also provides you with the opportunity to set short term and long term goals and come up with various pathways to measure progress. Also, reviewing your business plan will permit you to rectify errors you have made during planning your business. Therefore it has a crucial impact on your business development.
On the other hand, it is important because, at the time of funding, investors will always ask your business plan to see before they are willing to extend your funding. Your business should have a clear direction to gain a small business loan, i.e. government agencies or high street banks will always ask you for your business plan. You should illustrate exactly how a proposed loan will be fitted into your business plan. You have to show every single spending and prove there will be some return on investment.
What does your business plan include?
There are several key items that your business plan must include to illustrate your company's overall viability.
- Your business plan requires you to include a quick pitch.
- It should include an executive summary that concisely outlines everything a reader can expect to find inside your business plan. It should never exceed 2 pages.
- It should include details about customers. For example, what age group or demographics do you anticipate will be likely to become one of your customers? More importantly, you need to outline why those individuals would likely buy your goods or services.
- You should also include a section in your business plan about how much money your company will make. To secure funding, you will be required to adequately explain your income expectations so that you can illustrate a positive return on investment (ROI). The effective way to do that is to add in a cash flow forecast.
- A cash flow forecast estimates the amount of money you are expecting your business to bring in and payout in a specific period.
To create a cash flow forecast, you will need to record:
- Revenue: This includes all of the money that will come into your business from sales, equity, or other investments. Most revenue sections include around 3 to 6 items. By adding all these items together, you will get your company's net income.
- Expenses: This includes all of the money that you will require to spend to run your business.
- Net cash flow: This is included in the final section of your cash flow statement. You can get it by subtracting your total expenses from your total income. If this figure is negative, it means you are expecting your expenses to be greater than your revenue across that period. If the figure is positive, it means you are expecting to make a profit.
Points to be noted: The amount of money you charge for your product must exceed that item's production cost, and should also, include enough to cover some of the overheads you will require to pay to keep your business up and running.
How to structure your business plan?
Once you include all the items you figured out, the next step is to structure it. You can structure your business plan the way you want. That is deciding what you want to add and what you want to leave out is totally up to you.
Following are the structured business plan of the majority of businesses:
- Executive summary and elevator pitch
- Your products or services
- About you
- Market research
- Marketing strategy
- Your market and customers
- Operations and logistics
- Competitor analysis
- Cost pricing and strategy
- Your back-up plan
- Financial forecasts
You do not necessarily need to structure all the 11 sections in your business. You can create different sections to make your business plan unique. But this is the most trending order used by most UK businesses.
Your completed business plan is a concrete blueprint for the future of your company. It demonstrates the story of where your concept originated from, how you plan to accomplish your goals, and what will happen when you do it.
Your business plan is where everything begins and how you can finally begin to transform your career dreams into a reality.