Numerous statistics show that having a business plan can benefit those looking to start or expand their business. Creating a business plan can enlighten those with little understanding of business management skills and how the process works. While numerous textbooks and templates are available on how to create a business plan, I have found that these are not always helpful for the novice who still requires guidance. Getting help from an expert can be beneficial, but financial investment can be a barrier. One approach to overcoming the investment challenge is to seek out experts who take a flexible approach to assist clients with their business planning. Consider attending a seminar or workshop where you can get all the help you need on the spot from a qualified expert working in a group. Many small businesses have used this approach to avoid the cost of consulting fees. Another option is to enroll in a distance learning course that includes online support from an expert, ensuring you complete your business plan as a core outcome of the system.
Some of you may not have considered this before. Remember that there is always a solution to every problem. My company provides flexible support to anyone who needs to put together a business plan. We offer group coaching, seminars, consulting, and online courses. You can even download a free business plan template from our website or buy one of the best books on business planning ever written, titled ‘My Business Is My Business’ Learn How To Earn A Fortune – endorsed by Mark Victor Hansen, Co-Writer of Chicken Soup For The Soul and International Bestselling author.
Business plans are typically required for:
1. Business startup – when you want to start your own business.
2. Business development and growth- when you intend to enter new and existing markets with new or existing products.
3. Raising business finance- when you plan to raise capital for a new or existing business.
Here is a synopsis of how to create a financial plan that is directly related to a business plan:
To forecast sales income/turnover, use the following formula:
A. Estimate the total number of goods and services the company expects to sell each month over the next 12 months. Remember to be realistic, as new businesses rarely begin with a high sales volume. In the case of a new business, you will need to set a low sales volume to reflect the time spent advertising and promoting the services or products to generate leads and sales.
B. Make an educated guess about the selling prices of goods and services. Once again, ensure that the selling prices reflect what the market is willing and able to pay. This is most likely a reflection of market competition (the number of suppliers versus the demand for goods and services) and market purchasing power (i.e., how much money consumers have to spend on goods and services).
C. To determine the monetary value of each month’s sales, multiply the selling prices of goods and services by the estimated sales volume. Remember that if a company offers a variety of goods and services, the value of each must be calculated separately.
D. For voluntary sector organizations that rely on grants, donations, and fundraising income, you must make assumptions about the type of grants expected and the monetary value of gifts based on your market knowledge. Similarly, it would be best to assume how many fundraising events the company expects to hold and how much each event will generate. Donations can be accepted based on historical trends or best estimates based on the strategy used to create them. Whatever method is used, the assumptions must be realistic to reduce the risk of overstating income. Remember that government policy (taxation rate, regulation, public sector spending priority, etc.), the health of the economy (unemployment, interest rates, inflation rate, etc.), and the business relationship with its sponsors/broader community will ultimately influence many aspects of the income generated- so keep an eye on these factors.
To forecast expenditures, use the following formula:
E. Assume the type of resources required to generate the sales income specified in “C” above. In this case, resources may include staff (variety), building (size, location, etc.), office furniture and equipment (computers, fax, phone, heating, insurance, etc.), and so on. It is up to you to determine exactly what resources are required.
F. Based on the assumptions on sales volume, assume the level of resources required to deliver the plan, as stated in “E” above. For example, you must specify the type of staff you need, the number required, the kind of computers or machines required, and the number required.
G. Assume the prices of the resources required to deliver the sales volume (as stated in “F” above). Remember that resource prices must be realistic and evidence-based. An unrealistic price level will degrade the quality of the financial plan by making it unfeasible (i.e., not achievable). Remember that the prices of some resources tend to rise in lockstep with general inflation, whereas others grow at a rate lower or higher than the general inflation index. As a result, you should avoid making broad inflation assumptions (i.e., price assumptions).
H. Calculate the resources needed to produce the goods and services by multiplying the prices of the resources by the volume of the resources, as described in “F” and “G” above. You have determined the value of the various types of expenditure you expect to incur to deliver the business plan at this point. However, it is worth noting that the spending will differ in nature. So steps must be taken to carefully categorize expenditure into “Revenue and Capital Expenditure” to ensure correct accounting treatment when producing the “Income and Expenditure Forecast (Profit and Loss Statement), “Balance Sheet Forecast,” and “Cash Flow Forecast.”
When we look at a worked example, this will become clearer. For now, let us define “Revenue and Capital Expenditure” briefly. Capital expenditures result in the purchase of tangible goods such as buildings, computers, or furniture. Almost the entire purchase price of capital items is shown in the balance sheet at the time of purchase, with only a portion of the expense shown in the profit and loss statement to reflect the reduction in the value of the items or the value of the capital item
consumed during the fiscal year. Revenue Expenditures are expenses that do not result in the purchase of tangible goods. They are typically consumed in the fiscal year in which they are purchased and are fully reflected as expenditure in the profit and loss statement or income and expenditure statement. Please read our “Introduction to Financial Statements” booklet to learn more about this. This booklet is jam-packed with practical examples, and explanations are explicitly written for non-finance professionals.
Because business planning is a management tool, it must be used continuously within your company.
Sheila Elliott is a business and personal development expert. She founded Business Services Support Limited and wrote My Business Is My Business- Learn How To Earn A Fortune.
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