New Start Up Small Business Plan

Financial institutions demand a written business plan which combined with suitable security forms the main platform for the financial decisions. Medium and large companies inevitably prepare a financial budget for the coming year which is effectively the business plan and against which actual results are compared to constantly monitor financial performance.

Starting a new business without a proper business plan is a mistake. The majority of new business start ups fail within the first two years which is not necessarily due to the absence of a financial plan but having one and enforcing the proposals certainly staves off some potential failures.

The benefits to an entrepreneur lie strongly in the thought process that goes into producing the business 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 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 include an analysis of the potential and forecast sales, competition and specifically 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 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. Good plans will also include financial sensitivity of all items in relation to unexpected events.

The operations and production section is dependent upon the type of business and if the business is 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. Research into this area when drawing up the plan could well identify alternative sources of supply to reduce costs further.

Personnel would include the names with details of their experience and qualifications. The personnel section would also include requirements of personnel 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 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 price levels. This is important to enable the risk factors within the plan to be assessed and also impresses potential lenders.

Simply 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.

Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs both Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies