To stay operational a business must be profitable, or at least have the potential to become and remain profitable after it has recovered its startup costs.
Investors (bankers) will only invest in a business if they can clearly see an opportunity to make profit. One well-prepared document is essential to introduce a business idea to bankers, investors, and business support groups: a business plan.
A business Plan is a complete description of a business and its plans for the next one to three years. It explains what the business does (or will do if it's a new business); it suggests who will buy the product or service and why; and it provides financial forecasts demonstrating overall viability, indicates the finance available and explains the financial requirements.
The financial element of the business plan is fundamental. The other key areas are details of the promoters; how the company is to be managed, how production is to be organized and controlled; and a sales and marketing analysis.
The plan should anticipate the questions anyone considering risking their money in a business should ask. It should detail the promoters' backgrounds, management skills and technical expertise. Any areas of management that are not within the experience of the promoters should be addressed as to how the gap will be filled, such as by an accountant or marketing consultant.
It should explain what the product or service being proposed is, detailing how it differs from what is currently on the market, or, if it is a totally new concept, why it will appeal to people at all. Competitors should be listed and briefly described, with an emphasis on where the opening is for the new business. The pricing policy is also vital, both for competitive reasons and for the way it will affect the financial projections.
The results of marketing surveys will describe the likely customers, as well as details of principal competitors and the share of the market the new company is likely to achieve. The results of any product testing or measurements of market reaction should be detailed, and reflected in projected sales. Plans for selling, distribution, and promotion of the product should be fully costed.
Plans should indicate where the production is likely to be sited and what processes will be used. The supply and terms for raw material, the equipment needed and the availability of trained staff are important factors, even plans for quality control. There should be profit and loss projections for the first year in business, along with cash-flow charts indicating the biggest areas of exposure. Back up information about the likely speed of payment within that industry is important, as is the general size and credit-worthiness of likely customers.
For most businesses, the business plan will be the main method of convincing prospective funders (bankers) that the business proposal is viable and that the proprietor has the commitment and determination to succeed. It is important therefore to take the time to research the content carefully and to present it professionally.
Your business plan should be presented in a form that can be quickly and easily understood. The main part of a business plan normally needs no more than eight to ten pages supported, if necessary, with more detail in appendices. Your plan will then be manageable, and a working document in which you, and potential funders, can find the management information you need.
Think of your business plan as a marketing tool - in this case marketing yourself to prospective funders. It needs to be honest, but it should present you in the best possible light. It should be easy for busy people, such as bankers, to read and assimilate quickly the required information.
Financial projections are the backbone of the business plan and these are based around the expected sales income from the product or service, and the expected costs of production, including overheads. It will normally include a cash flow forecast, a forecast profit and loss account and a forecast balance sheet.
The plan must show how much it will cost to establish the business and how that money is to be raised. An important aspect, on that every prospective investor will want to know first, is how much the promoters themselves will be risking, who else is likely to invest, and whether there are to be a lot of borrowings.
Our officers can advise you on how to prepare your business plan. Templates are available for both new and existing business. Our officers can help you to understand and read your financial forecasts which can help you to take informed decision to set up your business and make it grow.