How you can Create a Iron Enterprise Plan (and Why It is Essential)
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Let’s be honest: nobody starts a company that wants to fail. Most new businesses start with a fantastic dream of new opportunity and future success.
But the pressing truth is that many companies fail. In fact, 50% of all UK startups go bankrupt within five years.
Why? Because there are so many hurdles new businesses must overcome – from unforeseen overheads, complicated tax regulations, access to finance, and everything in between.
The good news? You don’t have to be one of those sad stats as it is absolutely possible to overcome these start-up hurdles and get your new business off to a flying start.
All you need is an iron business plan – and we’re here to help.
This quick start guide explains what a business plan is, why it is important, and what you need to include in your business plan so that you can put your new business on the fast lane to success.
What is a business plan and why is it important?
The first is the first: what exactly is a business plan? It’s basically just a written document that describes everything you know (and want others to know) about your company.
A business plan includes your business goals, strategy, product or service line, marketing plan, planned finances, and more.
It’s pretty much the blueprint of your business, and it needs to pull all the aspects of starting a business together to get an idea of where you’re from, where you want to be, and how you want to get there.
Why are business plans important? According to researchers from the Strategic Entrepreneurship Journal, companies with a business plan are 16% more likely to be successful than companies without a business plan – for a variety of reasons.
First and foremost, a formal business plan is good for your health.
It will keep you updated, help manage expectations, and provide a simple explanation for partners or employees on how things should go. The process of sitting and writing your plan can also reveal gaps in your strategy or supply chain that you have not previously considered.
In practice, however, a business plan is also important for gaining access to business funds. When applying for a small business loan, most government agencies will request banks to provide a copy of your business plan before they are ready to lend you a penny.
By submitting a watertight business plan to a credit manager or seed investor, you can demonstrate that you’ve covered all of your bases and that borrowing your new business money will generate some return on investment (ROI).
What should you include in a business plan?
Full Disclosure: Here in the UK, business plans for limited liability companies are not required by law. As a result, there are no set rules for how to create a business plan or what to include.
However, if you want to prepare for success and tick all the boxes that are expected from lenders, it is important to consider the following basics:
- Summary and elevator parking space
This is a brief summary of your business plans as well as a brief mission statement.
In this section, you should outline your background, experience, and motivation for starting a new business.
- Your products or services
This part explains exactly what your company will do. Describe your product or service and how much you would like to charge for it.
Include information about the demographics that you want to sell your goods or services to and why you think they will get you business.
In this section, you should describe the research you have conducted on your competitors, your location, and USPs. One of the easiest ways to do this is to do a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis.
Describe how you plan to market your products in order to reach your target market.
In this section, you should outline how your business will run every day. This includes everything from making a product or service customer, to order fulfillment, the human resources department, the company administrator, plans to start a limited liability company, and everything in between.
In this section, you need to explain and rationalize your income expectations in order to get a positive ROI. The best way to do this is to add a cash flow forecast.
Things don’t always go the way we want them to. For this reason, the best business plans include a disaster recovery plan that describes how to respond if there is a data problem, an influx of competitors, or if something goes wrong with logistics.
It’s important to remember that this list is just your bare bones. No two companies are the same, and therefore no two business plans should be the same. This is why you need to sit down, do your research, and think long and hard about what your business needs to survive and thrive.
This gives you limited financial liability
An important part of the business planning phase is studying how your new business will be structured. No matter how big or small your dreams are, you need to make sure that your personal finances are protected.
Because of this, at the business planning stage, many business owners choose to legally set up a limited liability company.
What does that mean? The incorporation (or “incorporation”) of a company is the process of registering your business as a limited liability company with Companies House – the UK Government’s business register.
When you start a business, you officially transform your business into its own legal entity. This means that your company legally becomes a person of its own. This is very important when bad luck occurs and your business fails.
There are a few different types of companies to choose from, but the most common is a limited liability company.
This type of company creates a wedge between your personal and corporate finances, liabilities, contractual arrangements, property and assets. You essentially decide what the company should own and then establish ownership of those assets in the form of company shares.
Shareholders are your company owners and their financial liability in the company is limited to the value of the stocks they own (stocks are often valued at as little as £ 1). Everything above this amount is protected. So when your business gets into bad debt and collectors knock on the door, all your personal funds and belongings are legally protected.
Ready to find out more?
This is just the tip of the iceberg. So we’ve explained what a business plan is, why it’s important, what to include, and why it’s important that you protect your finances by starting a limited company.
But there is tons of support for startups and new business owners. To get you started, there’s a ton of great information here on MoneyMagpie – and plenty of resources on the 1st Formations blog.
Remember, if you want your business to be successful, you need to plan ahead. If you have an iron business plan in place, you are in the best place to get started and make your dreams come true.