Producing a Successful Business Plan To Start A New Business
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Finance companies and banks demand a written business plan before putting up
financial support to a new business. All medium and large companies inevitably
prepare a financial budget for the coming year. That should tell everyone that
not producing a written business plan is the first mistake everyone starting a
new business might make.
Starting a new business without a proper business plan is akin to taking a
blind walk in the dark without no road or map to follow. It should not come as a
surprise to learn that the majority of new start ups consequently fail within
the first two years dashing the hopes and dreams of many budding entrepreneurs.
The benefits to an entrepreneur in producing a detailed comprehensive
business plan when some-one is considering starting a new business lie strongly
in the thought process that goes into producing that plan rather than the
ultimate plan itself. New start ups should regard a business plan as a road map
to get the show on the road.
A properly thought out and written business plan for a small business should
contain the details of how the small business is going to get started. A typical
plan might include a short synopsis of the new business with sections on sales
and marketing, operations or production, purchasing, personnel plus a financial
section evaluating those plans and putting real numbers on the written text.
The short synopsis should briefly describe the main business and mention each
of the main ingredients contained within the plan to attain the objectives. The
rest of the business plan should support that synopsis and should be factual
rather than a sales document.
Sales and marketing should include an analysis of the potential and forecast
sales, competition and how the sales will be achieved. Identify the sales
channels that will produce the sales and why they will produce the sales. The
sales section should specifically state the volume of sales of each product over
at least the first year and the price at which each of those products will be
sold and note the sensitivity of all items to unexpected events.
The operations and production section is dependent upon the type of business
and will be variable depending on whether the new start up business was
providing services, retailing or manufacturing. The production section is
basically a detailed picture of the vehicle that will be used to generate the
products to be sold.
Purchasing would include an analysis of how the products to be sold would be
sourced. Volumes should be stated and sources of supply specifically identified
with a real purchase cost of all major items specified not guessed.
Personnel would include the names of the people involved with brief details
of their knowledge, qualifications and previous experience. The personnel
section would also include details of people yet to be recruited if the work to
be performed is going to be critical to the new business.
The financial section of a business plan should contained a forecast profit
and loss account preferably each month for the first year at least with perhaps
a summary of the second year. In addition to the profit and loss account a cash
flow statement taking into account capital introduced and stock levels should
also be produced.
The sales and production or purchasing numbers including volume and prices
contained within the report should be reflected in the financial report. Each
major critical assumption within the plan should be subjected to a financial
sensitivity analysis that takes into account all potential risks to volume and
The process of preparing a detailed comprehensive business plan that has been
properly researched has significant benefits in itself. If the business has been
researched and thought through before the new business starts there is a much
higher can it will succeed and suffer fewer negative surprises once the real
work of generating sales and profit begins.
About the Author
Terry Cartwright, accountant and CEO at DIY Accounting, designs Accounting
http://www.diyaccounting.co.uk/ providing accounting solutions for small to
medium sized business in the UK with payroll software at
http://www.diyaccounting.co.uk/payroll.htm for up to 20 employees
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Article Published/Sorted/Amended on Scopulus 2008-03-07 07:10:31 in Business Articles