The Importance of Writing a Business Plan
A business plan is an essential tool to direct your efforts: it is a roadmap to success.
Anyone who is working independently benefits from writing a business plan. In fact, a business plan is not only a tool to attract funding from a third party (bank, business angel, private investor etc) but also to facilitate the process of working out how to achieve your goals.
A business plan is a roadmap to success: you have to define what you want to achieve, how you want to achieve it and by when.
Each step needs to be explained and justified and some good old number-crunching is necessary (ask for help if this is not your bag. However, sometimes learning things from scratch is enlightening, albeit time-consuming).
Work out how much it is going to cost you to run your activity and how much money you can realistically make in a year. When it comes to “predicting the future” ie to work out how much money your activity can generate over the next 3-5 years, your guess is as good as mine. Nobody can predict the future but let’s face it – investors (and yourself too) expect to see some growth.
A key word is “innovation”: keep thinking up new ideas on how to improve your products and services. There’s a lot of talking of “competitive edge” and “keeping ahead of the competition”. This type of language is a bit negative – it has an element of competition and not of collaboration. You can use your creativity to think up new ways to partner with other providers, go on training courses to improve your skills, learn more about social media and engage with your public by asking questions about what they want from you. The possibilities are endless.
An extremely important element of a business plan is cashflow. Whether you like it or not, cash is king. In a nutshell, what you earn must be higher than what you spend. It’s just this simple. Use a spreadsheet or accounting software and ask for help if you don’t have the necessary skills. However you can’t ignore that, as soon as you decide to work for yourself or start a business, you no longer work for yourself but you work to pay overheads like staff (for example, subcontractors) and suppliers (for example, web hosting).
Finally, a good plan should explain how you came up with the figures and predict possible risks and external factors that could affect your business. Again, no crystal ball required here: just read newspapers and subscribe to newsfeeds to learn about current regulation and trends.
An average business plan can be anything from 10 to 20 pages but a bank manager can be happy with a three page executive summary and cashflow projections.
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