Each business plan needs to be meticulously constructed in order to be effectively used in the future. This blog will discuss the final steps of a business plan and give you an overall idea of what needs to be done. The three groups that encompass these final steps are the following:
- Financial forecast
Final steps of a business plan: management
One of the final steps of a business plan is defining the management roles within your team. You can achieve this by outlining the strengths and weaknesses of each team member as well as describing their background and experience. Consequently, you will have a clear overview of who in your team is suitable for a certain role, and make the allocation accordingly.
Furthermore, you need to clarify how you intend to cover the key areas in your business, such as production, sales, marketing, finance, and administration.
Lastly, you need to maintain your management information systems in good condition. This includes the management accounts, sales, stock control, and quality control.
How committed are you?
Businesses often further develop and prosper thanks to partnerships and investors. So, if your goal is to attract banks or potential investors, as a business owner, you need to show your commitment to your business. Whoever is willing to put their money into a certain business will surely want to work with serious and committed people. For that reason, it is a good idea to show how much time and resources each of the management teams will contribute, as well as to include the salaries and benefits in your plan.
Under operations, I refer to the facilities and resources your business will have in order to produce, deliver, and sell the product or service to the end customer, such as the equipment and machinery needed to jump-start.
Moreover, make sure you consider any potential limits to production capacity in the final steps of your business plan. What this means is that you need to be aware of the requirements of your business. Let’s say, you are a manufacturer. Firstly, you need to decide on the warehouse i.e. the storage of your products, where and for how long are you going to keep each batch. Then, you will need to provide a list of employee roles and skills required in order to recruit the right people. And lastly, you’ll need to select your suppliers and do that cautiously.
Now, when you are starting off with a business, there are some things you need to consider. For example:
- How soon can you start selling?
- How long will potential customers hold off before they take you seriously and place an order?
- How often will you be able to sell?
- How many days can you commit to selling?
- Do you know how long each lead will take to line up?
- What percentage of leads will turn into sales?
- How much will you be able to sell?
- What will the average sale value be?
- Will most people repeat orders, or will you have to find new customers each time?
- What terms of credit are being offered?
- How much income can you realistically expect each month?
Final steps of a business plan: financial forecast
The financial forecast, as one of the final steps of a business plan, is the aspect connected to your numbers. It gives you a realistic image of what your business is achieving at a particular point in time.
There are three separate sections:
- Sales forecast
- Cash flow forecast
- Profit and Loss forecast
The sales forecast forms the basis for all of the other figures. It breaks the total sales figure down into its components. Namely, the different types of products and services, and the sales.
Cash flow forecast
The cash flow forecast portrays the amount of money that you expect to come into and out of your bank account. Also, it refers to the time frame in which this is expected. The reason why this is important is because you need to be aware of the money you have and the money you are spending since you must make sure you have access to enough funds in order for your business to continue operating.
In addition, this forecast helps you demonstrate the key factors affecting your cash flow, such as the level and timing of sales revenue, wages, costs, and so on.
Therefore, as a business owner, you need to strive towards a cash-positive business. This refers to the moment when more money is coming into your business than it is going out.
Profit and loss forecast
The profit and loss forecast, or also called P&L, is an indicator of how well your business is operating. For a better understanding of the financial state of your business, summarise the annual P&L forecast for each of the first two or three years. As a start-up company, you will also need a projected balance sheet.
In order to create a good P&L forecast you need to list all of the assumptions, such as prices, sales volume, and timing. However, if you are new to this, there is nothing to stress about. Business advisors at banks or your local business support organisation will often assist you with creating your forecast free of charge.
Your cash flow forecast will show how much finance the business needs. Assess your risks to determine whether or not you need to arrange contingency financing. So, if you want a loan, or maybe an overdraft facility, before you apply for them, you need to show how you are going to use these finances. For example what amount will go for buying equipment as opposed to the amount that will be your working capital. As a final step, you must confirm that you can afford it.
In a business, nothing can be 100% certain. So, it’s important to be on the watch-out for any potential risks. Therefore, as part of your business plan, go through separate areas and assess the risk each might involve. For example, what would you do if your main supplier closed down?
Considering such what-if scenarios can be very beneficial for your business. This would mean that, in time, you will be able to arrange contingency fundings to fund your business, or even decide to abandon the project due to its high levels of risk involved. Whatever your decision is, assessing the risk can only ease your way and help you minimise these problems that your business might face in the future.
Detailed financial forecasts, namely the monthly sales, the monthly cashflow, and P&L forecast, should usually be put in an appendix.
A well-written forecast should include the following:
- The profit margin on each product
- Debtor collection period and creditor payment period
- Stock turn
- Interest and exchange rates
- Equipment purchases.
However, there are a few more things to consider when it comes to creating your forecasts. For example:
- Detailed CVs of key personnel (essential if you are seeking outside funding)
- Market research data
- Product literature or technical specs
- Names of target customers
- A list of external data sources used in your research (This will add credibility to the information.).
Final steps of a business plan: present the plan
Lastly, the final step of a business plan is its presentation. The more solid information you can gather for your own use, the better your business plan will be. Nevertheless, there are a few aspects that you need to pay attention to when you are putting the information down. You want the plan to be reader-friendly and understandable for others. Hence, here are 3 simple steps that will help you achieve that:
- Keep it short: most business plans are too long, so it would be advisable to only focus on what the target readers will need to know
- Make it professional: put a cover and include a content page to help your reader navigate through the plan more easily
- Test it: show your plan to friends or business advisors for feedback, or you can even test it by reading it yourself
To sum up, planning is a crucial part of business management. In order to create an all-encompassing and detailed plan follow the final steps of a business plan mentioned above. They can help you improve the management and financial status of your business.
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