Planning & Forecasting - Guidance

Many individuals who are thinking of starting up their business develop a written business plan. This process allows them to think through the issues that they will face such as:

• Their business model – what they will do to generate sales and make a profit
• The size of the market – is it big enough to allow you to make a living from it?
• Customers – who will buy your product or service? What will be your route to market?
• Competitors – who are they?; what are their strengths and weaknesses?; will you be able to compete?
• Pricing – how will you structure your pricing and will it generate sufficient profit for you?
• Profit – what will your gross and/or net profit be, and will it be enough for you to live off?

There are many other elements to a well-structured business plan and there is support for that in Northern Ireland from the Local Enterprise Agency network through the Go For It Programme

It is still worthwhile undertaking some planning when you are an existing business for instance when:

• Your business model doesn’t seem to be working and you want to change things around
• When you are trying to grow your business and you want to know the impact on income and costs
• When you want to diversify your products or services, or you are considering entering a new market

This is often a detailed document that will comprise the words that make up your plan and a set of cash and profit forecasts, elements of which will be embedded in your plan as summaries. This is most often used by start-ups but can be used by existing businesses as well.

The timescale can be anything from 1-3 years and can be used for external funding/investment purposes.

This is usually less formal than a full business plan. It can come in many forms but should involve a clear planning process that culminates in a “planning document or proposal”. This will give the owner a more focused idea about what has to be done, what the steps involved are and what the milestones/deadlines, outputs etc. are. It is generally written for internal purposes by the owners/directors in a way that is easily understood by them.

This will also be accompanied by some cash and/or profit forecasts that will show the income and cost impact of making the change to the business.

This is usually a more high-level document that takes a longer-term view over a 3-5 year period. It is often used by larger businesses and not-for-profit organisations like charities and credit unions to map out their direction and will include elements such as vision; mission; values; strategic goals; aims or objectives.

It is often shared with outside stakeholders who can also provide feedback and guidance on it and usually is not accompanied by detailed projections of cash and/or profit. There are often milestones and Key Performance Indicators that will be tracked on a regular basis.

This is the numbers part of planning where the ideas, thoughts and the proposed business model are incorporated into a set of projections to see what the financial outturn will be. Business owners often struggle with this element of planning and that is why detailed assumptions should be developed to support the forecasts.

Often it is a good idea to produce some sensitised forecasts i.e. look at what would happen if your sales were higher or lower than expected. Or if your costs were higher or lower or they occurred sooner or later than expected. This all helps to anticipate problems or challenges when cash flow does not meet expectations.