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Part 4: How do you plan your business?

You already know you'll need a business and marketing plan for your new venture. A common mistake made by new business entrants is to develop their plan because the bank wants one or because they are told that they have to submit one as part of an application for funding.

All of those requirements are valid, but first and foremost your business plan is a tool that you need, designed to assist you. It will:

  • Help you to put your ideas down on paper. Once seen in black and white, business proposals often look more, or indeed less, appealing.

  • Help you identify strengths and weaknesses. When something is conceptual only, it’s easy to focus solely on the good points and put the bad news to the back of your mind. By making a plan it’s harder to ignore the downsides.

  • Help you plan for the long term future. Many new business owners fail to think beyond the first year and put all their eggs in one basket, assuming they will make enough of a return in the first year to keep going into the second. You need to plan three years ahead so you can ensure you have the funds and resources necessary to really establish your business.

Tie up loose ends

Formal business planning requires you to think holistically about your proposal. As a result, you may well pinpoint challenges and concerns that might otherwise be overlooked.

For example, many small business owners underestimate staffing requirements or believe that because they will only employ one or two people that human resources aren't really an issue for them.

Whether you have one or 100 employees, you need to provide the appropriate terms and conditions for them to flourish and this needs to be planned and budgeted for.

Anticipate hidden costs

Often new business owners overlook certain costs associated with their business, particularly expenses associated with their own time involved with establishing and running the business. Don't make this mistake.

Failing to factor your time (or that of family members) into your expenses may make the financial picture look healthier. In reality it's a false economy because you're not showing the true cost of the business.

Reduce risks

Planning can't eradicate risk, but it does help reduce it by first identifying the potential pitfalls and then by preparing effectively to ensure they are addressed appropriately.