One of the key components of a competitive business plan in today’s market is the inclusion of key reports. Three key ingredients that can strengthen any business plan are Financials, Projections and Market Research. For many business owner the idea of including even one of these sections is an overwhelming prospect and you may find yourself wondering, “What if I’m not a numbers person?” or “Can’t I just hire someone to do this?”
In today’s commerce, hard numbers provide valuable information about the health of your business and there’s just no getting around it. Not to worry, this doesn’t mean you should start hiring a team of quants that your business can’t afford. Start by thinking about the ins and outs of your business and you may discover you already have the data to calculate the numbers without hiring outside help. Even if you aren’t completely comfortable working with numbers, the goal is to learn how to measure and quantify your business and it’s not a long road if you start with the basics.
A good starting point is to carefully consider the following questions and devising an honest answer:
This post can help you answer these questions about your business and get you to start thinking about your business plan strategically. You will also learn the answer to the more fundamental question, “What are financials, projections, and market research?”
Financials generally refer to financial statements used by large corporations to report on the financial health of the company to shareholders. Financials have become such a staple in business that nearly every business, including sole proprietorships, are expected to produce financials at the close of each fiscal year.
There are three main statements that make up the financial statement: (1) balance sheets, (2) income statement, and (3) cash flow statement.
If you are a new start up, your business plan may include just the balance statement with a record of any initial purchases made for your business. As a more established business, you may already have financial statements or a tax return that can be used to create one.
Financial projections can help you plan ahead for your business and determine a strategy for the future. It can help you determine:
If you’re interested in obtaining funding, projections can give potential investors a “big picture” about the ROI that can be expected by investing in your company.
Market research involves gathering information to identify and analyze the market need, market size and main competitors. It can provide an overview of your industry and identify the position of your business within the larger framework. For a competitive business plan, include a complete analysis of your key competitors and don’t forget to include critical numbers about competing businesses, such as their pricing model, the percentage of their market share, and the size of their business.
Even if you have already written a business plan, keep in mind that market research can become outdated and your business plan may not be considered competitive over time. To curtail this issue, take another look at the market research section and determine whether this information needs to be updated. Begin by evaluating the strength of the research, especially how much data you have in support of your business. Good questions to consider are: