finance companies and banks require a plan of business written prior to set up financial support for a new business. All medium and large companies inevitably prepare a financial budget for the coming year. This should tell everyone that not producing a written business plan is the first mistake everyone starting a new business could do.
Starting a new business without a business plan is close to taking a blind walk in the dark with no road or map to follow. It should not come as a surprise to learn that the majority of new start-ups therefore fail within the first two years dashing the hopes and dreams of many budding entrepreneurs.
The benefits for a contractor in the production of a detailed comprehensive business plan when some-one is considering starting a new business lie strongly in the thought process that goes into production this plan rather than the ultimate plan itself. New start-ups should consider a business plan as a roadmap to get the show on the road.
A well thought out business plan written for a small business must contain details of how small business is going to start. A typical plan might include a brief summary of the new company with sections on sales and marketing, operations or production, purchasing, personnel and a financial section evaluating these plans and put real numbers on the written text.
short synopsis should briefly describe the main business and mention each of the main ingredients of the plan to achieve the goals. The rest of the business plan should support that synopsis and should be factual rather than a sales document.
The sales and marketing should include an analysis of potential and forecasting sales, competition and how sales will be achieved. Identify the sales channels that will produce sales and why they will produce sales. The sale section must specifically indicate the volume of sales of each product at least the first year and the price at which each product will be sold and noted the sensitivity of all the elements to unexpected events.
Section operations and production depends on the type of business and will vary depending on whether the new company start providing services, retail and manufacturing. The production section is essentially a detailed picture of the vehicle that will be used to generate the products to be sold.
Purchasing include an analysis of how the products to be sold are sourced. The volumes should be identified and specifically identified sources with an actual cost of purchasing all the major elements specified not guessed.
The staff would include the names of those involved in brief details of their knowledge, qualifications and previous experience. The personnel section would also have details of those yet to be recruited if the work involved will be critical for the new company.
The financial section of a business plan should contain a forecast profit and income statement preferably every month for the first year at least with perhaps a summary of the second year. In addition to the income statement a statement of cash flows taking into account the capital introduced and stock levels should also be produced.
The sales and production figures or purchase, including the volume and prices contained in the report should be reflected in the financial report. Each major critical assumption in the plan should be submitted to an analysis of financial sensitivity that considers all potential risks at levels of volume and price.
The process of developing a comprehensive plan of the company that has been well studied has significant advantages in itself. If the company has been researched and thought before the new company starts there is a much higher can it succeed and suffer fewer negative surprises once the actual work of generating sales and profit begins.