You May Not Want A Business Plan, But You Need It. - Streetot '

Finding oneself to be in possession of a rather unique business idea could be one of the exciting moments of someone’s life. We could begin to imagine straightaway in our head how big the business will be, how large the offices will look, how the monies will begin to roll in, and we would embrace the fame that comes with it and sometimes how even you will retire after several years of work into a home that was specially designed to your taste and going on vacations to Copacabana or Miami or Hawaii.

 

It is always like that. Most people just dream on, talk about it and then dream again. They never get to work or sometimes they quickly settle on their laptops and type out the modalities of their plan and then go on admiring it. Some take the further step by meeting one or two people, some have the erroneous belief of thinking they can do it alone and hoard their idea. Many usually turn back at the first try and give reasons for the failure at the first attempt! They attribute it to the problems of the country or that of their immediate environment!

 

Most times, however, the reason why several business fail or fail to even materialize is the underestimation of the construction of a proper business plan or the thought that a business plan is not really required for your small idea.

 

WHAT IS A BUSINESS PLAN?

Well, in just six-year-old language, I would say a Business plan is basically a set of documents that defines the scope of your business, your projections for the business, practical approaches on how you intend achieving your plans and lastly the factors that are militating against you and how you intend overcoming them.

Business plans explains your vision and mission, it addresses the formulation of your management and staff, the financial projections, your exit strategies, your product and suppliers, your sales and marketing strategies and also the qualities of your competition. Your business plan is most times what determines if you’re ready to go out or not! It is what determines the strength of your business or its imminent failure.

These are what the business plan helps you with:

DECLARING YOUR EXECUTIVE STATEMENT

This is the background of your whole business plan. Here you write the business idea that you have. You construct your vision and mission. You state clearly how you want to achieve your plans and your projections for it. A quote goes thus “People with clearly written goals are more likely to succeed than those without” Here, you also state clearly your objectives and your financial overview. Without the business plan, you do not have a clear picture of what your whole idea is about and whether it is good or not. Getting your business plan as soon as you have interest in developing your business is essential to the progress of your businesses.

DECIDING YOUR  EXIT STRATEGY

Many people do not take this into consideration when planning their businesses especially when it involves more than one person. The exit strategy defines what will happen if one or two or all of you decide to leave the business. Are you working all hard so that someday, you can go public with your company? What happens when some big people decides they want to buy your business, what provisions have you for that? Would you accept it? All these need to be planned for beforehand as you can fully project the consequences rather than wait till you get to that bridge.

 

DESIGNING YOUR MARKETING AND SALES PLAN

What good is a business idea that is not publicly accepted? Your ability to sell whatever you are producing is pertinent to the viability of your business idea. Business projects that people don’t find the need to buy them never see the light of the day.

Until recently, marketing departments are usually apart from Sales departments, but most companies are beginning to see reasons the two departments much work hand in hand. The Marketing Team ensures people are interested in the product and the Sales Team ensures people get to have the product.

Without the business plan, most organizations would not be able to outline their marketing strategies. Your marketing strategies are the patterns or approach you which you wish to make your product more appealing to the potential customer. An example is Coca Cola’s collaboration with Food Restaurants with the “BETTER TOGETHER” campaigns that show Coca Cola drinks bring taken alongside your pounded yam or white rice.

 

DECIPHERING YOUR BREAK EVEN POINT

Many people think about how much they are going to make once a business idea starts to take refuge in their minds, some would already have gone into the extent of calculating what they’d use the profit for. Take a look at the picture below and it is the perfect example what we think of a business sojourn and what it actually is. The point is there is a level to which you must sell before you can think of making profit.

 

“The breakeven analysis reveals the level of sales required to generate sufficient gross profit to cover the fixed costs or overheads of the business (i.e. to break even). Once this level of sales has been reached, further sales should result in profit.” The breakeven point can be calculated from the following equation:

Assuming fixed costs of £25,000, unit costs of £12 per unit and a sales price of £20 per unit, the breakeven point is 3125 units – i.e. the number of units that need to be sold to make any desired profit is 3125 units. Without proper planning, all these cannot be put into consideration and when things do not go as intended, you begin to wonder how it all went wrong and you’d be left stranded as you don’t have a second plan which should also accompany your business plan.

 

DETERMINING YOUR FINANCIAL FORECASTING

Inappropriate financial forecasting would result in improper planning. The consequence of this might be your prices being too high or too low, setting over-ambitious sales target, inaccurate sales target, underestimation of variable cost, and could also make one suffer from incomplete market intelligence. An accurate and realistic profit and loss forecast is extremely important. Your bank and potential investors will look for evidence of a healthy profit potential based on realistic assumptions about future market conditions and your ability to control costs.

Your ability to forecast the financials of your business will be influential in determining your liabilities, assets, income to be received, income to be paid, variable costs, fixed costs, and then sales itself.

Your business plan will enable you predict to a very good level the income that will be generated and all what would be paid for. Taking steps without covering these stage could be hazardous to one business aspirations as one could either be stuck between struggling to balance Profit and Loss sheets or closing up the business.

DECRYPTING LEGAL TERMS AND GUIDELINES

Several people do not understand that a load of legal guidelines are binding upon them when they start their businesses. The focus on making profit blinds their insight and when they are hit with legal allegations are found dumb and several times dead without their businesses. While many are unaware of certain guidelines that must be adhered to operate a business, others might not have it come up in their mind due to their zeal for profiteering. And unfortunately, there is no plead for ignorance in the law court.

Writing your business plan will enable you take several things like this into consideration, especially the proper registration of your brand with the appropriate authorities in order to have a legal backing for the operation of your business. The Corporate Affairs Commission is in charge of registering businesses in Nigeria and registration of a business name might not be too hefty in price.

DEVELOPING CUSHION PLANS

  1. It’s a fact that sometimes things don’t go exactly as planned. However, for a person who has no business plan, their humpty-dumpty fall usually lead to irreparable crashes which could develop into emotional and financial breakdown or sometimes death. Developing business plans before executing projects enable you to plan for the worst-case scenario and thus ensure a safe landing when such happens. The best businessman is one that is ready for all consequences.

DENOTING YOUR TERMS OF PARTNERSHIP AND EQUITY

This is one of the most important things that either make or mar a business institution. It sometimes extends beyond the closure of the business into long term feuds and extended court cases which asides from consuming time also eats of money. It is part of a business plan to determine, in the case where there is more than one stakeholder, the stakes which each person or group of persons hold in the business in clear terms. This must be done before the commencement of the venture. It must be stated clearly what each person is contributing to the venture and what percentage each person accrues or loses based on the turnover over the company. This is very pertinent as each person now knows what he or she can lay claim to and what loss he or she bears without feeling cheated at any moment. This is one of the biggest reasons to have a business plan.

 

By StreetotNG

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