Business planning
There is no substitute to having a well thought out, realistic and structured business plan when starting up a new business. It is the key to the long-term success of any business.
The Benefits of Business Planning
Before you start your new business we strongly recommend that you spend some time preparing a realistic business plan. Businesses are more likely to fail if they do not have a clear understanding of their strategy and objectives. Writing a business plan allows you to focus your mind on exactly what your new business will offer; who you will sell your products or services to; how you will market yourself; and also enable you to understand your competition. For a start up business, writing a business plan can expose any shortcomings or potential problems on paper enabling you to make the necessary changes before you start. A business plan is also a useful tool to persuade others to invest time, money and effort in your business.
Most business plans for start up businesses are based on 1 to 3 year projections. You should ensure that your business plan is as accurate as possible and that you have clearly defined goals which should be SMART (specific, measurable, appropriate, realistic and time-scaled). Once written, your business plan should be an evolving document that you update as often as required to reflect any important changes to your business model and to ensure that you remain focused on your objectives.
Our business planning guide will show you how to prepare a professional, working business plan.
Download Jersey Enterprise Business Plan Guide (36kb)
Financial Forecasting
Your business plan should also include a set of financial projections. Your financial forecasts typically should be for your first 3 years (sometimes 5 years) of trading with your first 12 months forecasts having the most detail as this should include your start up costs. Your financial forecasts shouldn’t be overly optimistic (your business plan will benefit from you being able to show that you’ve considered worst-case scenarios) and should include the assumptions behind your projections.
When preparing your financial forecasts you should carefully consider how much money you will require and how you plan to repay any borrowings. You should also carefully consider what your operating costs (‘expenditure’) will be versus your sales figures (‘turnover’). Your expenditure should include the costs of sales (‘direct costs’) which put simply is the cost to you of producing your product or service, which should include raw materials, stock, direct labour and subcontractor costs, as well as your overheads (‘fixed costs’) which should include premises, utilities, staffing costs (including social security contributions) and other business expenses.
A cashflow forecast shows your cash balance and monthly cashflow patterns for at least the first 12 to 18 months. Preparing a cashflow forecast will enable you to show that your business will have enough working capital to survive month by month.
A profit and loss forecast calculates the amount of profit you should expect to make by deducting your total costs (the costs of producing goods and services and your operating overheads) from your projected sales.
Download our cash flow and profit and loss forecast templates which will allow you to produce your own financial forecasts.
Download Cash Flow Forecast Template (38kb)
Download Profit and Loss Forecast Template (32kb)
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Other pages you might like to browse:
Setting up a business
Marketing your business
Funding your business