Business plan guide What is a business plan and why do I need one? A business plan is a written document that describes your business, its objectives and strategies, the market you are targeting and your financial forecast. It is important to have a business plan because it helps you set realistic goals, secure external funding, measure your success, clarify operational requirements and establish reasonable financial forecasts. Preparing your plan will also help you focus on how to operate your new business and give it the best chance for success.
In organic businesses you have a conversion period. Usually you cannot sell the product as certified organic during the first one or two years. At the same time you have all the costs of putting field staff in place, an ICS, certification, and you probably have to pay the farmers some premium to motivate them.
This means that the first two years are almost always a period in which you make a loss. Example of a profit and loss calculation. Once you are able to sell certified organic product, the situation looks better.
However, often you will have expanded from the initial producer base to a larger one, which requires additional resources for extension, ICS and certification. First time marketing costs may also be higher than in a consolidated situation.
In the third or fourth year, when you are able to sell larger volumes of your product as certified organic you should be approaching the break even point. Most organic businesses turn profitable within years.
The length of the conversion period, the complexity and the overall size of the business are the major determining factors see chapter "Organic Business Guide"The time needed to set up an organic business.
Break even of costs and revenues; new investment. In the following years you try to make the business more efficient, by optimising your cost price and marketing approach. This is when you start earning money. However, when reaching the initial break even point, you should already start thinking of adding another product or investing in scaling up your operation Figure Sensitivity analyses Table 5: Example of a sensitivity analysis.
Cost calculations are normally based on real costs existing business or assumptions start-up business. It is good also to analyse what happens when one or more of the factors changes considerably. This could be positive or negative changes. Typical changes are fluctuations in the currency exchange rate, but also higher or lower yields or changing market demand.
A shortage of the crop may increase local prices above what you have planned to be the organic premium price. Increases in cost of diesel and energy have surprised many businesses in the recent past, so if you want to reduce your risks, you need to make a sensitivity analysis.
This means that besides the normal case you calculate a best and worse case scenario. Table 5 provides an example of a sensitivity analysis. It is unlikely that all these factors will change for the better or the worse at the same time. You can also calculate worst and best case scenarios for each single factor.
Cash flow management Table 6: Example of a cash flow calculation. For any business activity it is important to plan your financial needs in order not to have a working capital shortage at a crucial time in your production or trade process, which would block your business activities.
Throughout the year there are significant changes in cash flow. The best way to get insight into your financial needs is by planning your incoming and outgoing cash flow on a monthly basis Table 6.The stodgy business plan--that multipage printed document that entrepreneurs used to hand out at meetings with venture capitalists--has gone the way of the typewriter and Rolodex.
Strategic planning advice with free strategic planner & sample strategic plan covering mission statement, SWOT analysis with business plan software for cash flow forecasting and financial . The Level 3 generally includes a page expanded, custom-written Business Plan with a comprehensive market research analysis and extensive financial statements.
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