Why You Need to Make a Business Plan

Whatever you decide to do, it is a great idea to come up with a business plan, even if this is only for yourself. There are many pro-forma plans available online, and they will lead you through completing the plan, see for example the very useful business plan section on the Gov.UK website.

The business plan will help you by:

• Helping you to understand yourself, by writing your ideas down and committing them to paper, you can see whether they make sense;
• Helping you to understand what makes your business unique and why people would want to choose you above anyone else;
• Helping you to understand the market in which you operate, by understanding your competitors and any financial or other barrier to entry;
• Helping you to understand your cost base, for both your fixed costs (premises, administration, tools of the trade) and variable cost (of the things you make or buy to sell, or the time you charge out for services);
• Helping you to understand what you need to do to make the business a viable concern, to do to reach ‘critical mass’;
• Helping you to understand how you will manage the expected growth of the business and plan for this, including planning for consequential changes in tax compliance;
• Help you to plan for and understand how you wish to exit the business, either as a sale, succession to a relative or partner, or just winding it up and realising the assets. This is called an ‘exit strategy’.

Many small business owners review their business plan every few months, using it as a tool to benchmark their business. The process of updating the plan and including into this your experience and newly acquired knowledge from running the business makes the plan better, stronger and more useful; you will have a better idea of where you are going and how you are going to get there.

Usually a business plan will contain the following broad sections:

1. Executive summary (a one or two page summary of your plan);
2. A description of your business;
3. A description of your products and services;
4. Your sales and marketing strategy;
5. Description of your business operations;
6. Details of your management team;
7. Business development;
8. A financial summary, including cash flows, income, profit and borrowing projections; and
9. Details of your exit from the business.

Many people commission a business plan for a specific purpose, often when raising money from a lender or investor. A business plan like this often needs help and support where a lender or investor requires you to produce a spreadsheet model of your business so it may evaluate the business viability as part of the lending or investment decision.

Even if you need help with the accounting, the business plan is still your document; it is your business and nobody has a better idea of your own vision than you do. This is your plan, it’s what you are going to do and how you’re going to make it happen.

By working through your business plan, you will ask and answer difficult questions and through this get to know your business better. You will also have a clear idea about how you will exit your business, what it will take (because most of the time you can’t just walk away from it), and what you will get when you leave: either by a sale or realising assets.

To find out how I can help you or your business, please drop me an email Miranda@MJY-CA.com.

(I will be adding links to the business plan ‘contents’ list to explain what each section means in more detail).