Key Steps to Developing a Quality Business Plan
By Charles Hopkins
Published 04/20/2006 | Business and Finance
There are many important steps to consider when developing a business plan for your company, but the first step is to fully understand the main uses of a business-plan. The four main uses of a business-plan (BP) are as follows:
A BP is a written document that you can use in your search for external financing.
A BP is a tactical planning and management tool for your business.
A BP is a document showing the capacity of your team to control and manage all the aspects of the company.
A BP brings you new ideas to refine your project by checking and estimating the induced hypothesis.
The necessity of BPs
The drafting or update of your business-plan is essential to the good management of your company. It can be used when searching for a business partner, for obtaining external financing, and for defining some stages of the development of your company, such as:
The creation of your company.
The launching of a new product.
The establishment in a new market.
The transfer, buy-out, or the structural development of your company.
Should you call in a consultant or write the BP by yourself?
You should be the main (if not single) author of your business-plan, because the BP is, so to speak, your own "baby", it is a reflection of your personality; it is by this means that your investors will discover the person with whom they collaborate.
But your project may be too important and you may want to call in a consultant for help and consultation. Even so, you should stay in control of its development!
Tips for developing a quality business-plan.
1. To be credible, a business-plan must be coherent and each parameter in the BP must be based on facts.
2. There are many methods to build BPs, but very few can help you correctly carry out reliable financial projections based on a preliminary commercial engineering and market study.
Indeed, one frequent mistake when building BP's is to first define the target in terms of market share, and then try to "find" the number of customers necessary to fill these objectives! This process should be reversed.
3. In addition, one essential point in a BP is to define concrete policies and measures. This definition aims to gain a reasonable number of customers, based on a sufficient knowledge of the market. The quantitative estimate of this gain must be calculated on realistic monthly and annual increase rates. A well-founded pricing policy then makes it possible to estimate the sales turnover in the years ahead.
The calculation of the costs of the planned actions in your BP are essential and make overall financial projections possible. In short, financial forecasts including those related to the financing of the project must be elaborated from the basic elements of the project. They should be proceeded by a commercial engineering study which projects a realistic estimate of sales.
4. In a BP, the marketing plans as well as the financial forecasts require a basic understanding of how these important elements are calculated. You can use good software some of which is free to faciliate the development of your BP.
5. The last point and certainly not the least significant: A BP is never ended "once and for all". A regular follow-up and comparison between the theoretical BP and the reality of its execution are essential. You can then modify your BP and adapt it to improve performance and achieve your goals.