A business plan should provide an indication of the vision and ultimate goal for a business, and offer a frank assessment of its current position before considering how best to bridge the gap.
It focuses management’s attention on the ‘bigger picture’, and gives a framework for future direction and decision-making, in contrast to the usual day-to-day firefighting.
The scope of the plan will typically include a succinct commentary on products, the market, customers, and resources, but might also include a SWOT analysis (strengths, weaknesses, opportunities and threats).
A key part of any business plan comprises the financial projections. The absence of detailed projections and/or projections with errors can completely destroy your credibility.
Conversely, a well presented, robust set of projections prepared using sensible assumptions can give the funder a good deal of additional assurance, particularly if it includes ‘what-if’ analyses addressing downside risks.
It is said that ‘cash is king’. However, a set of financial projections should usually comprise an integrated profit and loss account, balance sheet as well as the cashflow, and is often prepared for a period of two to three years.
Most projections are prepared on a calendar month basis, however for some sectors, e.g. travel, the low point of cash in the business can be mid-month rather than end of month, so some thought is required regarding how best to present such information.
Many businesses just use a spreadsheet product such as Excel to provide the platform for developing the projections. There are some third party packages available to assist – these may provide some short cuts but they do not always provide the required level of functionality or flexibility.
Either way, the phrase ‘rubbish in rubbish out’ has a particular resonance when preparing financial projections, so do check the plausibility of the numbers which provide the starting point to the projections.
Some business owners may decide they do not have the time, knowledge or inclination to prepare these projections, in which case professional assistance may be required. Check that the adviser – even if it’s an accountant – has the right experience.
