Business planning is one of the most important activities you can undertake. Good plans play a critical role at every stage – from establishing a business through to laying foundations for growth and expansion.
A business plan is more than a blueprint for the future. It is also a document many lenders will want to see if you are applying for finance, so it's worth developing a plan at an early stage.
Considering overarching factors first
Drafting a business plan forces you to address the key factors necessary to operate a successful venture. First up, identify the industry you are in – does it have strong prospects for the long term? As technology evolves entire industries are becoming obsolete. Be sure your industry will still be viable in five, 10 or 20 years.
Next, identify your product and your market. How big is that market? Is it growing and what share of the market are you aiming for? This is critical to identifying revenue flows and producing profit forecasts.
Importantly, your business plan should include clear strategies on how you will capture your share of the market. The more you can drill down and identify specific strategies, the more accurate your plan will be.
An effective business plan will also pinpoint your competitors. Describe their strengths and weaknesses, and explain how you will overcome (or take advantage of) these. In short, what will set your business apart from the competition, and what weaknesses could your business have that competitors may be able to exploit?
Consider your business structure
Establish the structure of your business will have – sole trader, a company, a partnership, or a discretionary trust.
Seeking legal or professional accounting advice here is helpful as it can be expensive to shift the business over to a different structure at a later stage.
Do the maths
Now it's time to start crunching some numbers.
Work out your establishment costs and ongoing operating expenses. Do you need an injection of cash to finance these costs – is your own equity sufficient or is it likely you will need additional debt funding? If so, can your business afford additional interest charges?
Consider your anticipated revenue for the first year. It can pay to err on the conservative side as it may take a while for your business to become fully self-funding. Determine the point at which the business will break even based on revenue versus costs.
If you have got this far and the business still stacks up, chances are it will be viable. But the process of compiling a business plan can reveal fatal flaws – like what will happen if you get sick, or simply that the return the venture offers is not worth the risk involved.
The main point is that the rigorous analysis required to put together a business plan means you will go into the venture with your eyes wide open rather than taking an overly optimistic approach.
Help is available
Preparing a business plan takes a fair bit of effort. Your accountant may be able to help but it is worth doing a large part of the work yourself so that you understand exactly what running the business will involve.
One of the benefits enjoyed by Mortgage Choice franchisees is the wealth of support available to establish, nurture and grow their business. It means you have the resources of big business while still running your own show. Even better, the team at Mortgage Choice know what it takes to succeed in the industry, and this can give you a head start with your business plan from day one.
To learn more about investing in a Mortgage Choice franchise call us today on 1300 650 330.