Why write a business plan?

A business plan is essentially the route map that helps you establish a viable new business. It will also be essential if you need to raise finance for your business.

Why write a business plan?

The early years

In early plans, the sales forecasts are
critical. Your focus will be on the business
proposition, research into the potential
market, defining the competition and
developing a marketing and sales strategy.
Next, the plan will identify the resources
(people, equipment and money) you need
to achieve the forecast sales, together with
realistic timescales to achieve significant
milestones, such as the dates of the website
launch, first day of trading, first stock
delivery, etc. This information becomes
the basis of your financial forecasts. Once
completed, you can use the plan to monitor
the performance of your business.

As your business grows

As your business grows, you can use
the techniques and basic information
developed in the first business plan to
prepare annual budgets and updated
financial forecasts. These are usually
focussed on the year ahead. The next time
you will need a business plan is usually
when you’re thinking about raising finance,
often debt finance from a bank.
Banks and other finance providers require
considerable information to support
loan applications. These include financial
forecasts, historic annual accounts and
management accounts. A good business
plan will help persuade finance providers
that you are professional and take financial
planning seriously. The plan should include
sales and market information and how
current sales will translate into the future
sales forecast. In addition, it will identify
why you need the finance and how you will pay it back.