If the entrepreneur or the large company wants to survive, and also to develop, he must plan his activities with the utmost care. Business environment is much more complex and complex than the environment of an individual or family. As an example, we can look at the income. The vast majority of people manage by only the one income. Planning for the future by individuals is relatively easy.
Although even here, many individuals are not surprisingly capable handle this activity. They lack the Financial Literacy .
By contrast, even the smallest entrepreneurs usually work with tens, or a hundreds potential incomes. There is no longer a primitive way to predict their development. Many small businesses, especially of one owner, start with a plan which has only owner in its head. Also, many of such company end their business career in the first year of existence. (There are not enough "rich uncle" to allow the company continue in the business.)
The fundamental problem is that making a profit means accept a risk as well.
The new small company is at a disadvantage compared to established and large companies, and it must undergo far more risky operations if things are not evolving as expected. For example, a large and established corporation, serving thousands of customers, can afford to lose several of them, which for example will take over the competition. For a tradesman or small start up it can be a liquidation affair. She can't afford to lose any one.
It should be noted that:
THERE IS NO WAY TO AVOID ALL RISKS IN BUSINESS.
Some may be avoided, some risks can be partially alleviated. A successful entrepreneur or company is capable anticipate and work with risks. He can understand how the loan affects its business. Must be able to bring together the information from the market, from the area of finance, to know their customers and their behavior, and a whole host of other things directly affecting his business and from this information to mix his business cocktail to achieve the desired result. In other words, he must be able to properly define his strategy.
Moreover, if the strategy is carefully projected into a particular plan, then it is quite likely that the enterprise will survive and develop. Especially for budding entrepreneurs, the plan has a fundamental communication significance.
[PL1]Link to financial literacy on the Web
The plan directly appeals to 3 vital groups:
- The entrepreneur himself,
- The employees, coworkers
- The financial resource providers – investor, banker
When you plan We need to be aware of the fact that this is a kind of idea of the future and since we do not know it, we are facing a number of risks, as mentioned above. In order to be able to eliminate risks as much as possible, one option is to build a plan in variants. Create your Scenarios for different assumptions and situations that may occur. Basically, it means to create a business result model in the bow "WHAT IF".
If you build your plan based on all the scenarios you can imagine at the time of its creation, you will be ready if they occur. But beware! If you should create scenarios for all the situations that may arise, you might go mad and waste your valuable time. Therefore:
Focus your energy on what you can change and let others to swim!
For example, you can Influence your pricing policy, your subcontractor what you sell and in what amount etc. But you probably won't affect the price of oil on world markets, interest rate, exchange rates, etc.
Nowadays, it is no problem to make your plan for example. In Excel. In this way, you can easily manufacture the simulation model, which allows you to examine various changes in the input values and what is main, you are able to simulate your business before they come real money from real business and simulate “WHAT HAPPENS IF”.
It's a kind of simulation model on which the entrepreneur can also simulate his business steps before the real money flow in real business. For the begining, you can try a small simulation here.
SCHEDULE = SIMULATION TOOL
He can experiment with the price of products, sales quantities, profit margins, the maturity of invoices for goods etc. We'll deal with it in the next articles.
A good business plan also has a good and legit effect on the business environment – providers of financial resources, stockholders, shareholders, bankers, cooperating companies, suppliers, etc. They can then easily hear at your requirements for financial resources, interest rates, deferral of instalments, provide a credit, etc.
A quality business plan is most important for companies that have no history yet.