This is a question that is asked regularly. The author has discussed some of the reasons for a business plan in previous articles. However, there are additional reasons for creating them. So, why is it crucial to possess a business plan?
To initiate a business, a certain amount of startup capital is essential. The capital requirements vary, with some businesses demanding more while others require less. For certain businesses, all that is needed might be insurance and a vehicle (as in the case of a tradesperson, for instance). The vehicle is typically financed by a finance company, and the insurance costs are quite reasonable, resulting in lower startup capital.
Conversely, some enterprises might necessitate substantial investments for equipment and leasing a facility, which includes legal processes and additional capital for cash flow. Some businesses also seek loans from institutions such as banks. This is where a business plan becomes crucial. A well-constructed business plan significantly enhances the likelihood of obtaining a loan. It is important to emphasise “well-constructed” because utilising a downloadable business plan template, which often resembles more of a questionnaire, reduces the chances of loan approval even more than having no plan at all.
These template-based plans can convey a sense of incompetence. Would one be willing to lend money to an individual who presents such a plan?
Defining Long-Term Business Objectives:
This encompasses the exit strategy for the business. Does the entrepreneur intend to manage the business, dissolve it upon retirement, pass it on to descendants, or possibly build and sell it?
Regardless of the chosen exit strategy, a comprehensive plan should outline short-term, medium-term, and long-term goals required for an efficient journey towards the chosen outcome.
The short-term phase spans approximately one year.
- When crafting a business plan before commencing operations, this section should incorporate startup procedures. For instance, is a loan required? If so, how much and from where?
- Is the business being established as a limited company? The rationale behind this choice or its absence should be explained.
- Are premises necessary? If so, where, and what is the estimated cost?
- Is staff recruitment required? What about insurance?
- When does the entrepreneur plan to take breaks from business operations?
Numerous additional points are integral to this section, forming the cornerstone of the business.
The medium-term perspective spans approximately one to three years.
- This phase might encompass decisions to relocate to larger or smaller premises. The fluid nature of the business should be noted, as the business plan should adapt as circumstances evolve.
- To what extent, if any, is business expansion planned during this interval?
- Will the business require new or different equipment to accommodate its growth?
- Is diversification being considered?
Again, numerous other aspects could be included in this section.
This phase covers a timeframe of three to five years.
- Is this the period for executing the exit strategy?
- Are there ongoing short and medium-term goals to achieve?
- With several years of operation, is it appropriate to analyse the trading history to identify inefficiencies and potential cost-saving measures?
Creating the Business Plan:
Engaging someone to craft a business plan should be a collaborative effort rather than a solely outsourced task. The individual seeking the plan should be actively involved throughout the process. At Kidwells Business Solutions, maintaining client engagement is a fundamental principle. The company has a demonstrated track record of aiding clients in achieving their objectives, including securing financing from lenders that were previously unapproachable and negotiating leases for properties.
For a comprehensive discussion on the various aspects that contribute to business success, interested parties are encouraged to contact Kidwells Business Solutions.