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Why is makes sense to have a business plan and to prepare budgets

The annual business plan and budgeting process is a key part of running a business successfully and achieving your strategic goals. It provides a discipline for the management to thoroughly review progress and to set objectives - and for the directors and/or holding company the budget provides the framework to analyse and commit to any future investment plans.

A business plan is necessary for three primary reasons:

  1. It gives business owners a current assessment of the business as well as a roadmap for the future.
  2. It helps a business grow, both organically and through outside funding.
  3. It is essential to have an up-to-date business plan in order to secure financing (overdrafts, bank loan or venture capital funding).

The business plan/budget is a living document that should be continuously reviewed in light of the business environment and actual performance. In addition there should be formal reviews on a quarterly basis. This enables the directors to oversee business performance.

Business planning should operate on a rolling five years basis, whilst the budget is likely to be required only for the coming financial year.

When to use outside help

If a business plan is to be effective it should be owned by those who will have to implement it. So, it cannot realistically be delegated to a third party. However, an experienced business facilitator or external FD can add value to the process, whilst ensuring that ownership is in-house.

The words of the business plan are important as they make commitments to action.

The experienced external FD can ensure that they are carefully chosen and understood and the figures in the budget represent an interpretation of those commitments to action.

Objective of the Business plan

A business plan should be used to communicate a plan of action that will achieve the company's strategic objective it should then be used to provide a means of monitoring progress towards that objective and of stimulating alternative action if the objective is unlikely to be met by the original plan..

The plan should take account of internal resources and the external environment, and define measures of quality and customer satisfaction.

The plan is likely to focus on:

There are various exercises that can be helpful in the planning process:

For a business plan/budget exercise you should focus on: -

 FD Outsource Ltd provide outsourced financial planning, company secretarial skills, budgetary & strategic expertise for SME’s without the PAYE expense