Continued from page 1
Business planning involves evaluating these ideas against
prevailing business realities, including market, resources required, and resources available to you.
The plan also needs to include an estimate of outside assistance that you will need. It will explain your background, what you plan to do, as well as resources requirements and how you would arrange these.
Another key component of your business plan would be program for achieving profitability - how you will achieve required volumes, prices you will be able to charge, and costs you will incur.
An essential element of business plan would be estimating cash flows. Initially, there would be cash outflows for establishing business.
Once operations start, there would be cash inflows from sales. However, until sales reach a certain level, inflows would be insufficient to cover all outflows. There would also be problem of credit - credit you receive could be less than credit you have to extend to customers.
A cash flow statement showing inflows and outflows month by month, incorporating all above factors, would show how much external financing you would need and when. The same statement would indicate when you would be able to repay borrowings.
Plans alone would achieve nothing. It is organizing that creates business. With clear ideas provided by plans, you go out into world of government, investors, bankers, suppliers of equipment, merchandise and services, employees and customers. You would work with them to translate plans into an operating business.
MONITORING AND CONTROL OF YOUR SMALL BUSINESS
You have plans telling you how to achieve profits. Now you have to compare your actual performance against plans:
- Are costs within allowable limits?
- Are sales growing at planned volumes and realizing estimated prices?
- Are credit sales being collected in time?
- Are unsold stocks accumulating?
- Is there any significant change in market conditions?
Inevitably, there will be variations between planned and actual results. Your task then becomes identifying factors that caused variance and taking necessary actions to ensure profitable operations.
For example, if costs increase, you might have to increase your selling prices. If local demand declines, you would explore new markets.
Effective control is exercised not by bossing people around, but by setting standards, checking performance against those standards, and taking appropriate action in time.
CONCLUSION
Small business success is achieved by:
- Assessing yourself to improve your success traits
- Assessing market for demand and competition
- Meeting customer expectations and publicizing this fact
- Making detailed plans and implementing these effectively
- Controlling performance through monitoring and timely action.
Gopi Nathan is a qualified management accountant who worked in finance positions before starting out on his own as a computer applications developer. He is the publisher and webmaster of [url]http://www.smallbusiness-start.com[/url] that discusses how to start a small business right.
