Business Planning
Starting up a business? -or just thinking about the possibilities?

As soon as you start to write down what your costs are going to be, and where your income will come from, you are drafting your first 'business plan'.

Whether it is on the back of an envelope, or a handy piece of scrap paper, your plan will help you decide whether to go ahead, and whether you can survive your first year.

Writing an effective business plan is essential to survive and succeed, whether you are a window cleaner or a computer shop. But most businesses, or prospective businesses, never get further than those first sheets of scrap paper.

You may be asked to complete a standard form by the bank - especially if you ask for a loan - but everyone seems to accept that this sort of business plan is to justify the loan, rather than to judge whether you can afford it. (After all, if you couldn't afford it, you wouldn't have asked the bank for the money in the first place -would you??)

The problem with writing your own business plan is that you are always too close to the project. You won't ask the obvious questions which may not have obvious answers. Suppose the product doesn't sell? Suppose I get ill and can't work? What will be my real income for the year - what might be my extra expenses if we have a fire or a burglary?

-And of course unless you have some experience in writing such plans, you might forget some of the important questions. As an alternative -

So what can you do? -Start by having some confidence in your own common sense, and exercise enough discipline to sit down for one evening (or as many as it takes) with an independent helper - your spouse, partner or a reliable friend.

Write down the costs you will incur in starting up, and running your business for the first two years.

If you don't have some of the figures, guess for the moment, but find out the full cost. You can always change your figures later.

Look at the income. Where will all your customers come from, what will they pay you - and when. What happens if you have a very good year? What happens if someone else sells your goods/services for half the price and you lose custom? Write down a 'best case' and a 'worst case' income. Use somewhere in between to work with.

Look at your pay. Work out how much you (and any partners) need to live, and see what drawing that amount of money from the business. Don't forget that income takes time to clear through your bank account before you have access to the cash.

Get your helper(s) to ask stupid questions - they will usually remind you of something you didn't think of first time around.

Once you are happy that your figures are somewhere near believable, don't just forget about them. Napoleon is supposed to have said 'No battle plan survives contact with the enemy' - he should have tried running a small shop.

You will need more or less space, raw material, or time than you planned for; your worst customer will put in your biggest order, and your best customer will close down. All this affects the plan. KEEP IT UP TO DATE - and keep adding up the numbers so you can take a good guess at what tomorrow will bring, and what it will cost.

If you ever need to ask a bank for money, going in two months before you actually need it to explain how much and why, will usually get you a loan on the day.

Going in to the bank only when you desperately need the money to stay in business is not a good way to survive.

NABC have helped produce 'Business Builder' -computer software which helps produce business plans quickly and easily. We also draft business plans for businesses without a computer or computer skills.

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