Last time, we discussed the key establishment costs and expenses when purchasing an existing business to set your expectations of what you are about to spend.
Now, once you've successfully purchased the business, you need to create or structure a business plan that will help you sustain it and facilitate its growth.
As business advisors and Chartered Accountants in Auckland, we specialise in providing business strategy advice to people who are starting a business or purchasing an existing one. We help them understand that business planning is not just to raise finance but also the blueprint for the business' future.
So, what are the components of a detailed business plan?
In drafting your business plan, here are things that you need to consider and include:
This is the very first item in your business plan. It contains the general detail of what your business entails. It should be clear, simple and not longer than a page. The aim of this part is to give the person reading your plan a broad overview of what you are setting out to achieve.
Even though it appears at the start of your plan, normally, the executive summary is the last section you prepare after you've finished doing the rest of your business plan.
The objectives are a detailed description of your business strategy. You should list all the possible objectives or aims that you want to achieve with your business. What is the business of your business? What are you going to do? What is your mission statement?
This is the part where you describe the product and/or service your business is offering. You should provide a detailed description of the product/s or service/s. You should also supply details for any machinery or equipment involved in the business.
This contains the detail of your marketing objectives, projections, and sales forecast. This will also include analysis of the marketplace you will be entering, details of competition, historical information about the industry and channels you will use to promote your products or services to name a few.
This includes both the short term (one year) and long term (three years) financial projection of your company. Make your forward projections as conservative as possible. Don't predict a 50% increase each year if you cannot solidly support it. An impossible financial projection is difficult to believe and take seriously.
This part of the business plan also covers details of the capital required to both start up and run the business and where the capital will be used.
It is recommended to also have projected cash flow and profit and loss statements . These can be complicated to prepare and you usually will need the help of an expert to accomplish this – such as a Chartered Accountant.
Repayment of Loan
If you are trying to present your business plan to a prospective financial institution, your business plan should have this section. In here, you need to disclose how and when you will repay any loans. Your repayment strategy should tie in with your cash flow projections. Remember that banks are unlikely to be interested in proposals from businesses that simply want to borrow money with no indication of how they will repay it.
Security for Loans and Guarantees
In connection with the above, you should also outline the details of any assets which are going to be used as security. You should be able to present that you are viable and that the interest and capital repayments can be discharged during the normal course of business. Financiers will not generally lend capital without adequate security.
An Organisational Plan
This section will include the outline of the management structure, responsibility, and accountability of office holders. This will also include the type of business structure, e.g. company or partnership. You should also list down the names of directors and the company secretary and the location of the registered office.
This section will cover any information or further details needed to back up or expand on any of the above. This can be your company brochures, market research, press clippings, etc.
Preparing a detailed business plan will help you trace the flow and the future of your business. It will also help you acquire outside finances, if you are thinking of getting a bank loan or an overdraft facility. It should also be updated regularly - we recommend annually to ensure you stay on track to achieve your goals and react to changes in the market.
As your business plan is so important to the future prosperity of your business, it is important to have a trusted advisor when drafting and reviewing your business plan. They will review it in terms of completeness, financial soundness, objectivity, logic, presentation and its ability to communicate.
If you are looking for a business consultant or advisor that can help you with creating a plan and strategy for your business, call us on (09) 576 4166 or request an appointment online.
Next on our blog series, we will be discussing about how to market your newly acquired business by creating the most effective marketing plan.
If you want to catch up to this blog series, you may check the previous discussions here.