Business Bullets - Finance

Generally there are two occasions when a Business Plan will be produced for a trading business - we're going to look at the reasons and what you should be including in your plan.

Reason One - The business requires a loan facility or private investment – (some would argue the Business Plan is required "out of necessity")

Reason Two - Large businesses that normally produce a Business Plan as part of their policy and possibly as a legal requirement (1, 3, 5 years) to determine what resources (people, materials, services, assets, finance etc) they will require to achieve their targets.

Over the years I have observed many SME's who will look at producing a plan only when No. 1 above imposes the task upon them. I am sure that most of us have heard the old saying "fail to plan and you plan to fail" and it is absolutely correct.

Of course if you require a loan or funding you will be obliged to produce a plan to clearly indicate how the business will benefit and be capable of repaying over the agreed time-scale. However if you have specific objectives for the business such as growth, increased margins, higher profit, how will you achieve these without a structured plan?

Every business should have a process for planning although clearly some will be a lot more detailed than others. As long as there is a process which can be measured frequently (i.e. at least monthly) this will enable the business to monitor progress and respond accordingly to maintain a focus on achieving the targets set over the longer term.

A typical plan should include the following:-

• Executive Summary
• Business background
• Aims and objectives
• Products or Services
• The market
• Marketing
• Sales
• Financial Plan:-
• Profit and Loss
• Balance Sheet
• Cash flow forecasts
• Opportunities and Threats
• Timetable and Deadlines
• Appendices

In order to prepare a plan as indicated above, SME's should ask themselves some very searching questions. Some questions may not produce easy answers, but surely better to highlight this at the beginning rather than finding out at a later stage.

It is vital that once a plan has been prepared it is reviewed regularly by comparing actual results to the plan and investigating variances, especially any which are adverse. Although a plan normally covers a minimum 12 month period it should be a working document which is updated at any stage to reflect changes whether they are internal or external, driven by competitors or wider economic conditions. This allows your business to respond promptly and take whatever course of action deemed necessary.