New business start-up
Preparing a business plan
The start of a New Year is a time when many people think about becoming their own boss and setting up in business. If you are contemplating doing the same, follow our guide to taking your first steps, beginning with a carefully prepared, in-depth business plan.
Planning means:
- Taking prudent, calculated risks rather than blindly reacting to events
- Making the best use of available resources
- Setting a path to achieve the lifestyle you want
Always set out your plans in writing, however roughly, because this forces you to define your ideas clearly.
Planning to plan
Consider:
- What information you need to assemble
- The initial decisions to be made
- The sales and marketing options open to you
Define your business
Examine your business ideas critically and check these against your initial perception of the marketplace. Identify the key features of your business.
- Analyse its strengths and weaknesses
- Consider opportunities open to you and the threats you could face
Identify your niche
You need to scan your market. How can you best achieve profits?
- Identify the features of your key goods or services
- Identify the advantages you have over competitors
- Identify your ´USP´ (unique selling proposition)
Prices and profits
Identify the relationship between prices and profits. Most businesses price low to maintain turnover, but the additional profits from higher margins can often outweigh any loss of turnover.
Marketing strategy
Marketing involves deciding how to reach customers, maintain marketplace intelligence, secure additional customers and generate further revenue. Prepare a detailed marketing plan.
- Determine how you will attract potential customers
- Design the message and the medium required to evoke a response
Capital expenditure and liquidity
Consider the financial resources you will require. Review the capital expenditure needs of the business and alternative ways of meeting this expenditure while retaining adequate liquidity.
Financial forecasting
Put together financial forecasts from your business plan. These should cover both the projected revenue and the estimated expenditure that will be incurred in running the business:
Revenue
- Take into account turnover
- Make full use of marketing survey data
- Convert forecasts into targets
Expenditure
- Identify and estimate fixed costs item by item
- Calculate variable costs on the basis of projected revenues
Profits
Forecast the level of anticipated profits from the assumptions made to date about the business. Carefully plan your reactions to different scenarios, such as a competitor price war, or whether your production facilities could cope with a large order. What would be the effect on your cashflow?
Funding
Review funding provisions for the business in the light of the capital and cashflow requirements. The review should include:
- Identifying assets and liabilities, including money owed to you and stocks held
- Drawing up balance sheets based on the forecasts
- Identifying how much of the cash needed can be financed from profits or trade creditors. The remainder needs to be provided either by you or by borrowing
Management information
To achieve the best results, you will need to monitor your performance against the plan.
Consider the key information you need to manage the business, and hence the systems that will provide this:
- Plan to monitor revenues and costs
- Plan to manage cashflow
- Plan to manage people
Updating the plan
You will need to decide when the plan should be updated and how this should be done:
- Short-term problems may require immediate revisions
- The year-end review of results will help in amending the plan
Don’t neglect to review your target marketplace continually
If you would like to find out more, please email or contact us for further information.
Levels and bases of, and reliefs from, taxation are subject to change.
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