The Reasons Why You Need a Sound Business Plan
Business Plan

Some people think that drawing a business plan is some optional luxury. What they don’t seem to understand is that starting a business without a sound business plan is like departing for an unknown destination. Accordingly, this article highlights a few reasons why you should think of a business plan before you venture into any business start-up. Read on to discover why you need a meticulously drawn business plan before plunging into any commercial enterprise.

First, the business plan is your compass as you steer your business ahead. It is not necessarily about sourcing the funding but a vital aid that will help you market your business more effectively. When you put your thoughts to paper, you chart particular courses of action that should be undertaken to improve your business at different specified times. A good business plan offers alternatives for future scenarios, goals to be achieved within particular timelines, and the resources required to achieve both and where they will be sourced.

While lending opportunities get very competitive, the business needs to have a sound business plan in order to win the approval of the funding institutions. Whereas your financial statements may highlight the past of your business, the business plan gives them an idea about the future of your start-up. They will use it to determine your future success and subsequently, your ability to pay.

By the same token, a business plan helps you develop and communicate some course of action. The reason why you hear some tycoon’s beneficiaries engaging in legal battles all over the news is because some guys succeed in business without elaborate business plans. When such people die, it becomes very hard for the heirs to determine why the businessstarted, how it should be run, and the particular goals it should address. As a result, they start sharing the business instead of continuing the idea of the original owner.

Finally, a business plan enables you to manage cash flow. Note that cash flow is a fundamental requirement for any business out there. Remember that many start-ups do not die because they are not making money. They die simply because they are insolvent – that is, they are unable to pay their debts. Although the break-even point (where the revenues equal the costs) is a highly important figure in business, it becomes quite immaterial once the enterprise is up and running profitably. It is when your start-up is doing exceptionally well that you should think about a business plan because that’s when most people make grievous mistakes that cost them their businesses.

Effectively Manage Cash Flow

While many figures can help project the overall success of your business, one factor can cause even successful businesses to fail: negative cash flow. Businesses receive cash through the sale of their goods, services, or investments but they use it to pay for their operating expenses, purchase of assets, and to pay off debt. Maintaining positive cash flow is a necessary component of running a successful business.

Project Sales

One of the first steps to positively manage cash flow is to accurately project sales. This allows you to make an estimate on the funds that are likely to come into your business. Complete this task by comparing your numbers from the last few years. Estimate the amount of sales that you expect to have for each month. Remove those sales that will be on an accounts receivable basis. With these accounts, determine how long it usually takes to receive payment and log this information with the cash sales you expect to have.

Determine Expenses

Include a line item budget that shows the expenses that you will pay for each month. This includes employee wages, insurance, mortgage payments, utilities, asset purchases, professional fees, debt payments, costs to advertise, maintenance expenses, and costs for materials. Specify on the budget when these expenses will be incurred so that you can be sure to properly plan for them.

Improve Receivables

A fundamental way to improve your cash flow is to get paid for your goods and services faster especially if you have had a history of receiving payment on a delayed basis. There are several ways to accomplish this goal such as issuing an invoice promptly and delivering it by email or fax. Customers may be required to make deposits on purchases so that you can receive at least part of the payment upfront. Conduct credit checks on customers who want credit extended to them. Follow up on those payments that seem delayed and avoid offering credit to slow-paying customers in the future.

Establish a Back-Up Plan

Even the most savvy business owner may experience a shortfall due to an unexpected expense or factor outside his or her control. After all, the business owner is basing cash flow on estimates and projections, not exact data. There are ways of handling such shortfalls such as keeping an open line of credit available from the bank or asking suppliers to lengthen the payment time frame.

SBDC Programs: What Are These and What Advantages Do They Bring?
Business Law

Small Business Development Center (SBDC) programs are a Federal government resource available to small business startups and entrepreneurs. The goal of the various programs is to create a local impetus for jobs to be created and where existing jobs can be long term situations for the employee. The SBDC does this by making a concerted effort to help small businesses get off the ground and keep them growing and expanding.

When it comes to actual hands on involvement, the SBDC provides individual business advice and training along with other specialized services at no cost to the business. Regardless of whether you are a woman, minority, or veteran, the SBDC is there to help you and all other small business owners get your company off to a good start. There are some SBDC offices located in state universities as a way to connect job seekers with small businesses and education with internship training opportunities.

Some of the services an SBDC offers are:

  • l business plan development essential for creating a viable long term entity
  • l financial packaging and lending which are made possible through the funding and involvement of the Federal government in the entire SBDC program
  • l market research, a necessary part of a long term plan to grow the business
  • l procurement and contracting which are important emphases as small businesses can get the inside track on available Federal contracts
  • l importing and exporting an essential component of being competitive in today’s global economy

But the SBDC is not an organization that remains stuck in government mud, falling behind the times. They are constantly upgrading and improving their services to adapt to a continually changing business environment. For new businesses, this is an absolute must-have because customers and other companies do not want to deal with a new business that is out of date before it opens its doors.

The broad idea behind the SBDC is to make available what is essentially a one-stop place for small businesses and entrepreneurs to go and get a wide range of help on many of their most important concerns. It connects the idea of a single company with the impact it can have on a region, while providing it with support from other businesses in the region. And it creates a long term partnership between the government and business that can impact the economy on a local, regional, and national level.