Developing a business plan and financial projections does not have to be a difficult task, the simple business plan tells a story.
Starting a business without a plan is like setting out on a journey without knowing your destination
Don’t be put off by thinking you have to create a massive fifty page document, any plan is better than none, so keep it simple.
Purpose of a Business Plan
To help you appreciate the importance of a business plan and financial projections, we’ve set out below a number of reasons why they are necessary and the type of business situation they can be used for.
- Support a loan application to a lender
- Raise equity funding from investors
- To test ideas to see whether they make sense without incurring any cost
- Define the business model by changing assumptions
- Define goals, targets and objectives for the business
- To create a road map for the business
- To attract talented people to your start up
- Analyse strengths and weaknesses
- To focus and inspire employees towards the goals of the business
- Increase productivity and sharpen competitive edge
- To show the impact of selling part of the business
- To grow the business without causing problems such as overtrading
- To show the effect of a new product or service
- Define agreements between founders
- Value the business for purchase or sale
- To avoid underestimating required capital and resources
- To counteract emotions and provide a reality check
- To allow actual performance to be monitored against plan so weaknesses can be corrected
- Forces the owners to think ahead
- To test out assumptions on paper before committing finance
- Assess needs such as, equipment, people, and finance for the business to operate effectively
- To estimate whether the the break even position is achievable given the available resources
The time invested in preparing a business plan and financial projections will pay for itself many times over, so get started by reading our tutorials on the contents of a business plan and how to make financial projections.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.