How to Start Your Business Plan
So you have your idea all mapped out and want to put everything down on paper - yep, you need to write your business plan but where do you start? You know that a business plan is going to help you longer term, map out your ambitions, help you ensure you meet your financial objectives and is critical if you need a loan or bank finance — but where do you start? How do you turn that blank sheet of paper or spreadsheet into something that resembles your plans?
Well this article is aimed to get you going and come up with something meaningful.
We are guessing that you know what you want to do and have seen an opportunity by way of a large customer base with a need you are satisfying with your product or service. Here’s the best way to start your plan.
It’s best to start at the end ! That’s right, start with the end goal of your business idea or dream. Decide for yourself the profits you want to make in the next 12 months, the following year and the year after that. Remember you should look at profits first. For the purpose of this article, we’ll just look at the next 12 months trading (as you must get through this alive otherwise your business is dead in the water in any case ! ) Say the profit you want to make in the next 12 months is £10,000.
Now it’s time to calculate your fixed costs. These are essential costs that you will have to bear whether you sell 1000 units of your product or none at all. These might be rent and rates, web site hosting or advertising. Add all these fixed costs to your profits figure. Say this figure is £4,000.
Next it’s time to look at your product you’ll going to sell. Find the selling price (say this is £10) the direct cost of producing that product (eg: raw materials) (say this is £4) and any other directly associated costs with selling just one products (eg: sales commissions, credit card fees etc) (say this is £1). That means the profit per sale is £5.
To find out how many you need to sell in a year is now simple. Add your profit (£10k) and your fixed costs you need to cover (£4k) and you have £14k you need to produce in sales profit. We know the profit per sale is £5 so you now know that you need to sell 2,800 products (£14k divided by £5) in the next 12 months to cover all your costs and produce the overall profits you want. Can you do it ?
Selling 2,800 units may sound too much at first, but start to break this number down. That’s 233 per month or 54 per week (of course all these are averages and you’ll have seasonal differences, but when you break the numbers down it may seem more managable)
Now you have your numbers and you believe it’s all achievable you’ll need to put plans into action to show investors (and yourself) how you are actually going to achieve these goals. This will mean exactly what you’re going to do. Write down what you will do on your first day in business. Will you be doing some marketing to get customers? Setting up shop? buying product? recruiting staff? etc etc.
The business plan is your document showing the goals your want to achieve and exactly how you are going to achieve those goals. Good for you? Great - any questions.
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Is A Business Plan Worth The Money?
It’s true that every situation is different, but if your business start-up requires:
You won’t get up to bat without one.
Still, far more important than what a good Business Plan gives you, is what it allows you to avoid.
It saves you those sleepless nights wrestling with those cold, dark questions:
Your Business Plan answers these and the thousands of other questions that populate business reality. You can use your Business Plan to chart your course and answer the questions before hand, or you can dodge and dance each day through a business minefield and hope you’ll be talented and lucky.
So what can you do? You can: