THE BUSINESS PLAN

The business plan is an indispensable method of keeping your business focused and keeping it under control, guiding you into the future. The main part of your plan must only be deviated from if it is absolutely necessary and if this is the case you must discuss any business changes with your bank manager and members of the board.

When you start up a business it is usual to produce for your bank manager a business plan and a cash flow forecast so that he can judge whether you are a worthwhile investment and also give you advise if your business venture will be viable. The details for the first year of the business plan should be accurate as this is important when a new business needs to plan ahead into the future, to give an assessment of any downfalls that may occur during this time, and enable you to plan ahead and resolve these matters.

What should I include on my business plan.

  1. An outlook on the targeted market, its size and potential for growth and how many customers are likely to use your service.
  2. Find out what sort of charges are being made for the services or products that are currently available on the market.
  3. How much the costs incurred will be on the products/services of your business, to include provision on any future cost increases that may arise.
  4. The amount of profit the business is aiming for.
  5. How the business will be managed.
  6. Plans for growth and expansion.
  7. Possible plans for a change in direction of business if any of your ventures do not prove to be successful or they are not reaching their expectations.

CONTENTS OF TYPICAL BUSINESS PLAN

For the front cover you need to state the business name, address and telephone number, also any directors/partners. On the cover state the nature of the business, what its role is and list the contents of your business plan.

FIRST SECTION

The businessThe business

  1. Description of your business
  2. Its service and product
  3. The market
  4. Competition
  5. The business location
  6. Details of loans needed and details of the application for them.
  7. How the business will be managed.

Financial DetailsFinancial Details

  1. List of funding for business and where their sources are.
  2. Starting equipment needed
  3. Balance sheet
  4. Break even chart
  5. Income forecasts
  6. Profit and Loss statements for the first 3 years, of which the first year will be written for every month and the following for very quarter.
  7. Cash flow forecasts.
  8. Any balance sheets from existing businesses to include tax returns and income statements for the past 3 years.

CASH FLOW PROJECTION

This is an attempt to anticipate the inflow and outflow of money from the business in the coming year, to assess the estimated bank balance at the end of each month in order to make provision of the need to arrange bank loans if any during times where the business is short on cash funding. Also the Cash Flow Forecast is a way of looking at how the business is operating and performing. Any information taken into account for the drawing up of the Cash Flow Forecast should be studied carefully because the timing of receipts and payments may vary for example some debtors may only pay for their goods three months after a sale date.

On the Cash Flow Forecast where the bank balance is overdrawn is marked in brackets.

MARK SCOTT TRADING AS DATA COMPUTERS

This is an example only January 19-1 commence trading. Capital £1,350.
Purchase ‘base stock’ of computers beginning of January, cost £1,100 payment on purchase January 19-1 commence trading. Capital £1,350.
Purchase ‘base stock’ of computers beginning of January, cost £1,100 payment on purchase

Estimated Sales 

January         £600
February       £900
March           £1000
April             £1100
May              £2100
June             £1300

(higher sales figures for May as attending Trade Fair)

Sales will be for cash. Computer Shops will be allowed one quarter of each months sales on one months credit.

Purchases will be at cost price,(50% of the selling price) Stocks will be replenished during the month which the sale is made leaving the month end closing stock as always £1 000. Example Trading commences in January using Base- Stock with a cost of £1 000; in this month the selling price of goods is £600 with a cost price of £300. Data Computers will then purchase new stock for £300 to give a month end closing stock of £1000.

All purchases(apart from initial stock) will be from suppliers who will allow one months credit.

£300 per month will be spent on advertising and paid for on purchase. The Trade Fair will cost £300 for the stall in May. Sundry expenses will be £110 each month to include January, February, and March, and for April, May and June Sundry expenses will be £160. Office equipment in January is £600 payment on purchase. Once business is running there will be £100 per months drawings for Mark.


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Last updated: January 07, 2002.