A start-up business should prepare a business plan to map its progress to profitability.
For start-ups the sales forecasts are critical – particularly how the new business will attract customers. Next, the plan will specify the resources (people, equipment and money) required to achieve the forecast sales, including realistic timescales to achieve significant milestones such as when the business will start trading. This information will be the basis on which the financial forecasts (Profit & Loss Account, Balance Sheet and Cashflow forecast) are prepared. Once completed, the plan can be used to monitor the performance of the business.
As a business grows, the first business plan can be used to prepare annual budgets and updated financial forecasts for the year ahead. A business plan is next required when considering raising finance.
Finance providers require considerable information in support of loan applications, such as financial forecasts, historic annual accounts and management accounts. A business plan should provide a vision of the business’ future, how it will grow and why the finance is required and how it will be paid back.
But it’s when a business wants to sell shares in the business that a full business plan will be most required. The business plan must be exciting but credible and offer evidence of growth and future prospects. The Executive Summary must have a wow factor. It should clearly describe the business proposition and contain a summary of the financial figures, up to five years ahead, including the amount of capital sought. Potential investors will want to examine the details supporting the business plan. So be prepared to back up key assumptions.
The skills learnt and the perspectives gained preparing the first plan will help with growing the business, raising finance and, who knows, one day potentially the sale of a successful business.
X-Forces Case Study:
David Smith, CrossFit Spitfire and former RAF Armaments and Explosives Management specialist;
“The main challenge that I have faced so far, especially in the set up stage of the business, has been having to engage and manage a number external organisations such as estate agents, landlords, solicitors, local councils, equipment suppliers, tradesmen and clients. Especially to tie everyone down, all together, in a time scale that meets the business plan whilst ensuring the books balance.
“Having a good well thought through business plan has helped with this significantly, whilst maintaining the belief and confidence that it will work. Without the support and guidance of X-Forces this whole venture simply would not have been possible. Sharda (my business advisor) has been able to guide me through the creation of my business plan from day one, all the way to the point of securing the funding required to make the business become a reality”
For more information about CrossFit Spitfire and David’s Story read more at www.crossfitspitfire.com
Register for X-Forces’ start-up and business planning support today through our website, www.x-forces.com or by telephone. Help for businesses can be obtained from ICAEW’s Business Advice Service. This is a free straightforward discussion with an ICAEW Chartered Accountant. Further information can be found at www.businessadviceservice.com
Article by Clive Lewis, ICAEW in conjunction with X-Forces.