Preparing a written business plan is your first step in business. If you need to raise finance from a bank or from outside investors, it is virtually essential.

A business plan is normally divided into two main sections.

Firstly there is a narrative section explaining what the business will do, how and where it will be done, who will run the business and how it will be financed.

The second section concentrates on the financial aspects, and normally comprises a profit projection, a cash flow forecast and accompanying notes.

It does not need to be a large document and in fact is likely to be more effective if it gives the reader all the relevant information in just a few pages. However, the more elaborate the proposed venture, the more detail is likely to be required.

Why do I need a business plan?

Preparation of a business plan serves a number of purposes.

Firstly, it makes you commit your ideas in writing. In doing this, fresh ideas (and potential hurdles)may spring to mind which may help you to clarify the precise direction that you wish to take, rather than set off without planning your route. If there are any fundamental flaws in your business plan, it is preferable to identify these at the outset, rather than hit an obstacle later on, when correction may prove costly.

The second purpose of a business plan is to encourage you to consider the financial aspects of the proposed venture, such as pricing policy, whether the business will provide you with the desired level of income, how much capital you will need to start up and how your bank balance is likely to stand from month to month. Only by quantifying your expectations will you know later on whether things are going as intended. The third purpose of a business plan is to assist in raising finance. This may be finance from private or corporate investors, but more commonly the finance will come from a bank.

If you approach a bank for loan or overdraft facilities, they will almost certainly ask you to prepare a cash flow forecast to enable them to consider your application. By having this readily available within the business plan, you can save time by avoiding the need for an additional appointment, and more importantly, the bank manager will see that your proposals have been carefully thought through beforehand. This is likely to help in getting your relationship with the bank off to a good start. Click Here for the business plan that never fails