Ask the Experts: The Importance of Business Plans

A business plan is a summary of the aims of your business and how you are going to achieve them. The more time and effort you put into planning before you actually start will massively improve your chances of success.

The level of detail that you need is dependent on the size and complexity of what you intend to do. You might make one for your own guidance or you might have to produce detailed projections of Profit and Cash Flow for a bank or business loan. And, it goes without saying that you should involve your accountant in this process.

Planning around cash is very important. Remember, it is possible to have lots of orders, be very busy, and then run out of cash because customers don’t pay you on time.

Once you are up and running you should monitor your actual results against your plan. The standard method is to produce monthly or quarterly management accounts. These will show you where you stand and help you decide on actions to take to keep your plan on track. You should modify your plan to take account of changing conditions.

Some questions to ask yourself when you are starting a business are:

• What are you going to sell - describe the product/service?
• Who are your potential customers?
• Who are your competitors?
• How much demand is there for your new business?
• Do you need business premises?
• Could you save money and minimise risk by starting at home?
• Do you need staff and how many?
• Include marketing costs.
• Summary
• Create a plan to help you clarify what you want and how to achieve it.
• Monitor your plan and measure profitability and deadlines to ensure you are on the right track.
• Forecasting and monitoring Cash Flow is essential for the wellbeing of any enterprise.
• Revisit the plan if you want to develop a new product or service.