Small business start-up – Why you need a business plan

Anyone who is starting up a business or plans to set up and run their own business needs to have a business plan. Many people think they only need to have a plan if they are going to be seeking funding either from a bank or an institution or an investor, and as such they either leave it to the last minute or just put on paper a few ideas that they think will impress an investor or figures that they think the bank or institution would like to hear or see.

This is a real mistake. A business plan can be a unique opportunity for someone to actually focus on the reality of their own business and having a business plan, model or template allows them to gauge the reality of their business in a way that simply wishful thinking will not.

There are many online draft business plans or templates available all of which have a fairly similar plan which if followed will give the entrepreneur or business owner a unique insight into the reality of their business.

A business plan should essentially have a cover sheet, an executive summary, a table of contents and the actual document itself which should include the business, financial data and any supporting documents that might be of value. This business plan can of course be used also if funding is being sought. The body of documents should focus on the nature of the business and how the thinking behind the business has developed and is developing. There needs to be a description of the business both short-term and long-term. There needs to be analysis of what competition there is, where that competition comes from, and what the weaknesses of the competition are or where you as a business owner have an entry-level advantage over them.

There needs to be some sense of how or where you intend to market or advertise your business. This will include a number of free or paid options available both online and in the real world. Social networks are a rich source of marketing but this needs to be done well and have time spent on them. Word-of-mouth recommendations from satisfied customers or clients are important and can help spread business. Knowing who's going to help you with your business, by which personnel either paid or unpaid is important. Specify who is involved in a business and what role they have and whether they are paid, voluntary or whatever their role.

Have as much financial data available as possible. Have a specific note of loan applications, overdraft applications or any other approaches you have made the kind or pending for any funding. Have a balance sheet that is easy to update at any point. Have a list of capital equipment and expenditure as well as a list of suppliers both to and from you. If available have a profit and loss statement that is clear and unambiguous even if not audited. It is a good idea to break down the profit and loss statement as well as any yearly summary you may have into a level of detail that can easily be assimilated. This might mean giving monthly breakdowns, or quarterly breakdowns if it is more appropriate. Cash flow is or was a hugely significant issue in any business, and if you are looking to set up or run a business, having an estimate of what your cash flow is and isn't will be ready helpful.

Have your business plan include other supporting documents can help make sense of the business. It is difficult to be prescriptive about what these documents should be, but they should include any tax or legal documents that support the nature of the business all the business itself. This can include insurance documents, leases or sub leases, tax returns either by yourself or any principles involved in the business. Copies of any franchise agreements of these are relevant as well as copies of licenses and any other legal documents that may be relevant.