A business plan is a well-written document that explains how a company sets its goals and plans to attain them. It is essential to the success of any mobile app development firm. From a marketing, operational, and financial aspect, the business plan puts forth a documented path for the company.
Even though a planned business is essential for new firms, each company must have one. You must evaluate and update the plan regularly to check whether your objectives have been reached or if they have changed and developed.
If you have chosen to take a different path with your firm, you may be able to draft a new business plan for it.
If you’re looking to streamline your business operations, consider using a schedule planner app. This app can help manage tasks, deadlines, and resources more efficiently, ultimately enhancing productivity and organization within your firm.
What is the Purpose of a Business Plan?
Some of the reasons why you need a business strategy are as follows:
- To demonstrate that you are serious about your company.
- To set goals for the company.
- To have a better understanding of your rival.
- In order to have a deeper knowledge of your client.
- To express previously unspoken assumptions.
- To determine the viability of your business.
- To make a record of your income model.
- To figure out what kind of money you will require.
- In order to attract investment.
- To lessen the chance of following a bad opportunity.
- To enable your management team to do market research and get a thorough understanding of your target market.
- To entice workers and a management team to join the company.
- To chart a route and concentrate your efforts.
- to entice potential partners
- To establish your brand.
- To assess the success of your company.
- To reorient the company in response to changing circumstances.
- To keep track of your marketing strategy.
- To foresee and comprehend the company’s personnel needs.
- To discover new possibilities.
- What do lenders and investors have in common? What Should You Look for in a Business Plan?
When it comes to asking for a company loan, a business plan is a useful tool. What investors look for in a business plan may surprise you, but understanding what they are looking for can greatly increase your chances of acquiring the funding you need to grow your company.
When investors request a business plan, they are looking for the following:
The Company’s History
What was the origin of your company and how did it grow? Take note of the specific issues you experienced and how you dealt with them since this will show your business acumen and capacity to adapt to changing market demands.
How Are Revenues Produced?
Lenders want quick returns, therefore they are particularly interested in how you generate yours. Explain how you serve your consumers, how you provide the product or service, and how you collect money.
Management Team
Make sure your investors know who is in charge and what relevant skills, information, and experience they have. Lenders want to evaluate how capable your management team is at expanding and directing your unique organisation, thus the phrase “relevant” is crucial.
Market
Investors want to know who you serve, how big the market is, and how profitable it is (e.g., room for growth, affluence, etc.). They are also interested in learning about products, services, your competition and how you differentiate yourself. Make a list of all the marketing and exposure you are doing (regular social media, presentations, strategic alliances, broadcast advertising, etc.) so you can show how you are generating income and growing your business.
Financials from the past with Debt Coverage Ratios
To provide lenders with a comprehensive picture of your business’s financial health, you will need detailed financials that indicate all revenues, assets, obligations, and payback schemes. Many company loans fail to owe to poor or erroneous accounting, as well as insufficient cash flow and debt payment coverage ratios. In other words, not having enough cash on hand to pay back the loan.
Projections
Investors are interested in knowing what you anticipate to happen financially in the future. Discuss both what will happen if you do not get money and what you anticipate to happen if you do get funding. Include forecasts for job creation, market growth, product development, and everything else that could be affected. Consider seasonal or cyclical fluctuations in the company, as well as the financial implications of such changes.
Collateral
What are the assets that your business now owns? Include any patents, real estate, or other assets that you may use to pay off your debt. Rental homes, ranch land, and other personal property may also serve as extra collateral for underwriting consideration by your business executive.
The Project’s Goals
You must explain why you are seeking the loan. What purpose does it fulfil? Is it to create a new site, grow, relocate, install new equipment, or pursue other company objectives? If you are applying for an SBA loan or an economic incentive related to specific policy instructions, be as precise as possible. They want to know exactly where their money is being spent.
Beyond the business plan, lenders examine things like supplementary repayment sources (for specific loans), domicile, criminal history, and so on. Respond to every investor’s demands, no matter how frightening or insignificant they may seem since this will keep things moving. The objective is to be as prepared as possible so that you can show that your business is “up to the task.” Make every effort to boost your prospects, and do not allow your business strategy to hold you back.
Your Business Plan’s Exit Strategy
Exit strategies are plans put in place by company owners, traders, investors, and venture capitalists to liquidate their financial asset positions after certain conditions have been met. It refers to how an investor intends to exit a certain investment.
An exit strategy may be used to:
- Close a company that is not profitable.
- When you have met your profit goals, go ahead and start a company or investment endeavour. In the case of a dramatic shift in market circumstances, close a firm.
- Selling a business or an investment is a great way to make money.
- To minimize your losses, sell a failing business.
- Reduce corporate ownership or relinquish control.
Which Exit Strategy Is Most Appropriate for My Company?
The list below will provide you with an overview of the many sorts of exit tactics that are often used. The plan you choose is determined by your company’s strategic and financial objectives.
Some of the most prevalent tactics are as follows:
Acquisition
The transaction is more often referred to as a “merger and acquisition.” It is because when a firm sells itself to another company, the buyer often absorbs or merges that company’s services into their own product or service offerings.
When Google purchased YouTube, the video platform was effortlessly integrated into their search offering. When you Google a subject, you will notice that videos show in the search results.
On a lesser scale, it occurs when a coffee company chooses to purchase a bakery to expand its menu with pastries and tarts. For companies of all sizes, including startups, a merger or acquisition may be the best option.
The nicest thing about acquisitions is that if you get “strategic alignment” right, you can sell the firm for more than it is worth. If numerous corporations are interested in your goods, you may increase the price or start a bidding war.
An outside firm may attempt to purchase or merge with another company for a variety of reasons, including breaking into a new market, gaining a competitive advantage, or establishing a strong in-built client base. They could also be interested in removing you from the existing market as a rival.
If being purchased is your exit plan from the beginning, you will have more leeway to make yourself appealing to firms interested in buying you. Those firms may decide not to purchase you or may have never been interested in doing so. If you produce a niche product that only one corporation is interested in, you risk losing money if they do not bite.
IPO stands for Initial Public Offering (IPO)
It is appropriate for a select group of startups as well as bigger organisations. Even yet, most small firms will struggle to persuade both investors and Wall Street experts that their company’s stock is worth anything to the broader public.
An IPO is the best method for a smaller company that has already begun growing – such as restaurants that have franchised – to return their investment. It is important to note that they can not sell the shares till the lock-up period is up.
If you believe it is the best approach for you or if you want to have the option to go public later, the simplest method to become listed is to seek out investors who have done so before with other businesses. They know the ins and outs of the procedure and can better prepare you for it.
The procedure is lengthy and difficult. Even if you can win over the hearts and minds of Wall Street analysts, you must still adhere to the Sarbanes-Oxley Act’s requirements. You may have to pay underwriting costs, perhaps a “lock-up period” that prevents you from selling your shares, and you will be exposed to the danger of a stock market meltdown.
For a firm like Twitter or Macy’s, an IPO may be the best option. Consider if you want to put up with the hassle of adjusting company choices to the market and what experts predict will do well.
Buyout of Management
If you own a company and want to ensure that it is carried on when you are gone, you must look to your staff.
Employees have a solid notion of how to manage things, as well as extensive knowledge of the company’s aims and culture, as well as a pre-existing drive to make it work.
There will be a significant reduction in the amount of due diligence required. If leaving a legacy is important to you, it is a smart idea to sell your company to management or workers. You may always contemplate passing the company on to family members, but there is still a chance they will not comprehend it. Furthermore, they will lack the motivation to make it profitable, and there is a risk of family rivalry if the firm is divided among family members.
Succession in the Family
If your family has grown up with a thorough grasp of your company, they are the greatest individuals to pass it on to.
This is exactly what occurred at Palo Alto Software. Tim Berry created the firm in 1988, and shortly before the recession struck, his daughter Sabrina Parsons was named CEO and her husband Noah was named COO.
It was a calculated move that enabled Tim to concentrate on his other passions, including writing. Then Sabrina and Noah turned Business Plan Pro, the company’s primary desktop-based business planning application, into a SaaS solution called LivePlan.
It was more serendipity than planning that I was able to pass on the Palo Alto Software to my family. Tim constantly encouraged his kids to pursue their dreams. No one has a business degree. It is merely that Sabrina and Noah started their careers in the internet industry early on and had a great opportunity to join and expand Palo Alto Software’s product offerings.
There are numerous things to consider and prepare for if you want to pass your company on to your children or other family members. It entails ensuring that whoever is tasked with taking over the company has the necessary abilities, is competent, and is dedicated to its long-term success. It becomes much easier to retire as a result of this.
Liquidation
For all small enterprises, liquidation is a frequent departure option. It is one of the fastest methods to shutter a firm, and it is the only way to do it if the company’s functioning is exclusively reliant on one person. Especially when family members are unwilling or unable to take over and bankruptcy is imminent.
It is vital to remember that any earnings from asset sales must go to creditors first. To profit from liquidation, you must have valuable assets to sell, such as land, equipment, and so on.
You might consider selling it to the general public if there is not much bother and your choice to liquidate is not based on money.
Liquidating your assets is the best solution if it is not a possibility and it is advisable to lock the doors before you lose money.
Creating Financial Hypotheses in a Business Plan
Any company strategy has to include financial assumptions and estimates. All company plans must have three financial presentations that are universal.
For the next three to five years, you must provide a projected balance sheet, income statement, and cash flow statement. Have a story to go along with the figures that explains your assumptions and how the line items were calculated.
Income and expense assumptions, as well as inventory and accounts receivable in the balance sheet, are included in the financial assumptions and projections. Balance sheet assumptions must be conservative and based on realistic asset acquisition expectations over the next five years. It will aid in the construction of the cash flow statement’s assumptions.
Make an income statement.
For the first one or two years, create an income statement every month. Then, for the next three to five years, you may move to quarterly estimates. Your spending and income projections should be based on true, verifiable data.
If you are selling the product for $25 to $40, do not base your sales predictions on a $60 selling price. Also, the sales volume estimations should be based on accurate information that can be readily verified by a short market study.
Presentations of Balance Sheets
The assumptions used in balance sheet presentations should be cautious and based on realistic asset acquisition forecasts over the following five years. Accounts receivable and inventory are two areas that investors and lenders are concerned about. As a result, closely match your inventory estimations to your gross revenue predictions.
Do not predict big sums unless your industry’s accounts receivable are significant. Because cash is frequently in limited supply for small firms, storing it in excess inventory or accounts receivable may be detrimental.
Statement of Cash Flows
The predicted cash flow statement is an important financial assumption to make if you have a new small business or a small corporation that requires finance or investment. Lenders and investors want your small company to make a lot of money and have a solid balance sheet, but cash flow is also important. You repay debts with cash flow, and you share gains to investors with cash flow.
