So you have decided to set up a company and have hopefully sought advice on what business structure to form. The next step is to write a business plan...or is it?
As you embark on a new business venture, you will be advised by many people to prepare a business plan, as a matter of priority. . The business plan is the strategy of how you intend to make your company a success. No matter what form your business takes, you will be advised to prepare a business plan. As a firm who acts for start-up companies of all shapes and sizes, there is good reasoning for doing so. However, despite popular belief, a business plan doesn’t necessarily have to be an intricate analysis of your business proposals.
A business plan can take many different forms and vary in length.
For example, a tradesperson looking to set up on his/her own business, as a sole trader, will not see the benefits from spending any great length of time composing a business plan. However, a tradesperson is more likely to benefit from a document outlining a strategy as to how he/she expects the company to grow from its humble beginnings.
A business plan should highlight the target market of the company and the key business objectives. It should also have a financial forecast, if only to allow you the means to compare your position at the end of year one. A business plan of this nature gives the new business owner a simple breakdown of the business so he/she can focus on what they started the company for. The business plan will also provide an invaluable benchmarking tool after the first year of trade, to assess the company’s performance against the initial expectations.
On the other hand, a start-up company that is looking for an investment from venture capitalists or from a bank will be required to produce a detailed business plan outlining every intricate detail of the proposed business. The same rule applies in that it should contain details of key customers and the key business objectives, but it should into further detail by explaining the purpose of the company and provide a detailed analysis on products, competitors and the target market. It should also contain a detailed cash flow forecast as well a three year Income Statement (Profit & Loss) forecast. Other financial information, such as asset valuations and security (where necessary), should be explored.. Perhaps most importantly, when raising finance for a start-up business, a business plan should include an exit strategy on how and when the potential investors can expect to see a return on their investment.
Four Important Rules to Writing a Business Plan
1. User focus – adapt your business for its intended user i.e. Potential investor vs. yourself
2. Outline functional strategies – this will help plan for success in the future
3. Prepare forecasts – these are invaluable to assess progression to improve on prior year performance
4. Tailor Made – every business plan should be tailored to meet your individual requirements
If you require any assistance in preparing your business plan, please do not hesitate to contact us.
“By failing to prepare, you are preparing to fail” Benjamin Franklin