Before I begin to explain how to go about writing a business plan I think it is important to understand why a business needs one in the first place. The analogy I like to use to help explain writing business plans is how you go about planning a trip. Even if the trip you are planning is to somewhere in the country in which you live and on the assumption that you have not been there before you would probably need to use a map. Also, assume that you do not have a satnav.
Without a map it would be very difficult for you to get to your destination, however, I am not saying that it would be impossible, because you could ask your way there. However, without a map it would take you a very long time to get to where you want to go and your journey would be extremely inefficient!
Therefore, if you look at a business plan as your company map which is there to direct your business to where you want it to go. The plan should be a step by step guide to help you along the way.
I always like to break my plans down into 12 months hence (short-term goals), three years hence (medium-term goals) and six years hence (long-term goals). By looking forward to your longer term goals this will help you to work out your medium-term goals and therefore what you need to do over the next 12 months in order to achieve your medium-term and long-term plans.
For example if your present turnover is say £250,000 per annum, which represents the income from 500 customers spending on average £500 each per year. Lets assume that by year six you want to have a turnover of say £750,000. This means that you need to increase one of a number of things, two of which are your average spend and/or your number of customers.
On the assumption that your average spend remains the same your customers would need to increase by 1000 over the next six years. Which means that over the next 12 months your customer base needs to increase by 167, which would equate to an extra turnover of £83,500 in the first year of your plan.
You then need to write a plan of how you increase the number of customers by this amount – for example where to increase advertising spend; introduce a customer referral system; improve your website search engine optimization (SEO) etc. If you want to look at other ways to grow your business, take a look at the Increase Profit Software – this will give you the 6 ways to grow your business.
This increased turnover and number of clients will impact on a number of other areas of your business. For example, it may well be that your premises are big enough for the present level of business and even the increase over the next 12 months. However, it might be that by increasing your business three fold in six years will mean that you not only out grow your existing premises, but also that you will need additional employs to run your larger business.
All of these aspects need to be incorporated into your business plan and scheduled, as to when they will happen so that you can adequately plan for things.
Once you have prepared your business plan you will then need to prepare a cash flow forecast to demonstrate how the revised cash flows of your business will pan out over the coming 12 months and following years. The added importance of preparing cash flow forecasts is to review whether or not your revised future plans require and bank funding.