Business Planning – a Guide

Running your own business can be extremely demanding, with so much to worry about, it’s easy to get engrossed in day-to-day problems and forget the bigger picture. However, successful businesses invest time to create and manage budgets and business plans and regularly monitor performance.

Business planning allows you to focus on the objectives, targets and resources that need to be employed to help your business grow. A structured plan can indicate areas requiring focus and improvement and can also assist in giving you greater confidence in your decision making process.

To prepare a plan you need to focus on areas including:

  • Projected sales and how you will achieve these
  • Direct cost of sales (ie cost of materials, direct staffing etc)
  • Your marketing strategies
  • Your fixed costs or overheads
  • Staffing and management requirements
  • Estimated taxes
  • Likely capital expenditures
  • Key performance indicators
  • Cashflow predictions

You can use previous year figures as an indication of future trading however you must ensure that all areas of income and costs have been considered and that your assumptions are realistic and likely to reflect reality.

Once you have prepared your budget you can use it to test the assumptions you have made and to test likely outcomes if for instance sales are 10% higher or lower than estimated. Testing your assumptions is a critical step in the business planning process.

When preparing your business plan it is essential that you do not over complicate its structure and that you make it as easy to monitor as possible. The business plan is just the start of the cycle planning is most effective when it is used as part of an ongoing process allowing you to act quickly where necessary, rather than simply reacting to events after they’ve happened.

Business plans are essential for your own business use to understand how the business will achieve its objectives however it is also essential when raising external finance to fund future growth.