What questions should you ask when preparing a business plan?

Creating a business plan can be a daunting task for many. But it is a great tool for both those starting a business and for those already in business.

It helps you set down everything that is been involved in starting a business - from testing its strengths as an idea to assessing the start-up and running costs.

It will prove a point of reference to check your day-to-day decisions against your stated objectives.

It is also an essential document to put in front of your bank manager, especially when you are discussing finance.

No two business plans will be the same, and there are no set rules, but here, our consultant Graham Sanders, sets out some of the subjects and questions you should ask yourself when preparing a plan. He encourages you to think ahead at least six months, and to keep your business plan updated.

The business idea:

• If you are buying or expanding a farm or rural business, why have you decided to do this?
• If it is an existing business you want to buy, why do the present owners want to sell it?
• What is the business that you are running or plan to start?

The people:

• What skills and experience do you bring to the business?
• Who are the other key people? What experience do they bring to the business? What are their specialist skills or qualifications?
• Are you taking on an existing business? If so, are there any staff you would like to continue to employ?

Your market:

• Have you done your market research?
• Who do you see as your customers?
• Does the market seem price sensitive– is there a lot of price cutting?
• Who are your competitors? What do they charge?
• What is going to make you different?

Your premises:

• What kind of business space do you need?
• Should you buy, rent or lease? If you pay a premium for a lease, or buy a freehold, consider the effect this would have on your start-up costs. Would it be better for you to rent?

Sales and pricing:

• How much do you expect to pay for stocks or raw materials? Have you checked on reliable sources of supply and alternatives? Have you checked comparative costs?
• How much credit can you obtain from suppliers – and for how long?
• What level of sales do you expect to achieve over the first six months? What are you basing your sales assumptions on?
• What will you charge compared with competitors, and why?
• Work out your gross profit margin: in other words how much you expect to make on each sale.
• Will your customers expect to buy from you on credit? How long will you have to wait for payment?
• If you are purchasing an existing business, what are the previous owners charging compared to competitors? What credit terms have they received from suppliers? What credit terms have they given to customers? What is their gross profit margin? How could it be improved?

Equipment:

• What will you need? Do you need vehicles?
• Consider the best way of financing the equipment and vehicles you need. Should you buy outright with a bank loan or on HP, or would leasing suit you better?
• When do you anticipate needing to expand, update or replace your equipment or vehicles?
• If you are taking on an existing business, what equipment and stocks do they have? Can you make use of it? How many years of life has it left? Is the price realistic?

When you put a proposal to a bank manager asking for funding, you may often only get one chance. If you want to make sure your business plan will get a positive response from you bank manager, please contact us.