In their latest Financial Matters column, Fairhurst Accountants explain the importance of business plans
An explanation from Wigan’s Fairhurst Accountants in their latest column as to why business plans are key to future success
You have the idea, the energy, and maybe even your first customers. So why slow down to write a business plan?
A plan forces clarity
Day-to-day, running a business makes for a busy work life, and this can stop you from properly considering some vital questions. For instance, where exactly is your revenue coming from in 12 months? What happens if your biggest customer leaves? How much working capital do you need?
Writing a business plan forces you to answer these questions. The process of articulating your market, your competitors, your pricing and your costs often reveals assumptions you had not realised you were making.
It's essential for funding
Whether you're approaching a bank for a business loan, pitching to investors, or applying for a grant, a business plan is almost always required.
A strong plan lets lenders and investors know that you understand your business deeply. It allows you to show not just the opportunity, but also how you will manage the risks.
A clear, realistic, well-evidenced plan helps you to stand out. The discipline of putting forecasts and projections together often reveals whether funding is the right choice for your business.
It becomes your measuring stick
A business plan can be a living document that you return to regularly. You can compare where you said you would be against where you are. For instance:
Are sales higher than you forecast? If so, you can find out why and do more of it.
Is it taking longer than expected to find customers? You have an early warning sign that you can act on.
Comparing your plan to reality allows it to become a management tool to help you make better decisions.
Start simple
When urgent tasks demand your attention each day, taking time to write a business plan may seem too much. However, for businesses that are serious about growing, the thinking needed to put together a business plan is never wasted. Start with a single page covering your business model, your target customers, your competitive advantage and your key financial assumptions – and build from there.
If you would like help to craft a business plan to enable your business to grow, your accountant will be able to help.