Why do I need a business plan

10 reasons for a business plan, in no particular order.

1. Benchmark your business

Compare key ratios of your business with other similar businesses. Compare the months performance against your original business plan.

2. Rent or buy new business space

How will the extra cost of a new warehouse affect your bottom line. Will you have to increase turnover to justify the extra expense?

3. Employ new staff

You intend to employ a new salesman but how much will they need to increase sales to justify their cost.

4. Reduce overhead

You made a loss in the previous year and you don’t see your turnover increasing sometime soon.

What’s the minimum number of staff you need to deliver the order book. Relocate your business to cheaper premises and see the effect on your bottom line. Go through your overheads line by line, justifying to yourself that each one is essential.

5. Purchase or lease new equipment

You need to buy three new lathes. should I lease or buy? What will the effect be on gross profit and cash.

6. Sell your business

Any potential suitor will want to see a written business plan. It helps them understand how your business works and gives them comfort in        knowing the current owner is in control.

7. Create a new business

Absolutely essential for gaining investment and also stress testing whether your plan will actually generate the acceptable return on investment.

8. Seek investment for your business

Whether it’s the bank manager or a third party investor, they must see that the business can afford to make the repayments and that you have thoroughly researched your plan.

9. Create a marketing plan

Often forgotten by a business owner who’s totally engrossed in the day to day running of a business. Market research together with your own knowledge of the industry should help you create the necessary number of lead generation strategies required for growth and stability.

10. Set senior management objectives

The different departments within the organisation will have their own business plans within the whole, enabling you to set targets that the  department head has to achieve. Senior management should have a high level of input into their departments business plan and also buy into the business plan of the whole organisation. If they don’t ask why and be prepared to part company.