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In the second of a new occasional series, Nigel Fitzpatrick from Business Owners Direct looks at the importance of having a business plan.

Business Plans

A business should always have a business plan; initially this will capture the strategic operational and financial aims of the business, which will be adapted to as your business grows.

Ideally the potential/business owner should write the plan, but write it in the perspective of the audience. What’s the purpose of the plan? Is it for personal use to refer to? Or is it to secure finance or investment? Or simply communicate the future plans of the company? Think about who will be reading the plan and tailor it accordingly.

Do your market research, factors such as the market size, potential growth paths. For example an internet cafe would research the local population, household internet coverage, and predictions on whether it’s likely to grow or decline.

Going into business you have to have a measure and understanding of your competitors, if your market sector is highly competitive is this price led? How will you compete effectively with the existing players?

When writing your plan, be sure all the key areas are covered, include colour charts and spreadsheets.

The numbers will be under scrutiny, all your costs should be documented in full and sales predictions should be realistic and conservative. Preparing a cash flow chart and a break even chart you will be able to establish how many sales you must achieve to cover your costs and also how finance you must raise to start your new enterprise. At the beginning there are always many start up costs, and sales can be uncertain, so make provision for a strong cash flow budget.

As I have previously mentioned a business plan is a vital tool and you should always prepare one before embarking into business, and you should always refer to it in later stages and adapt it as your business grows.

There are templates available on the internet which can help you write your plan, and also help you form you Profit & Loss, Cash-Flow and Break Even charts.

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