Doing business plans is not only for large corporations but also for small businesses. There are different reasons for making a business plan, but the most common is when it is needed to get loan financing from banks or equity from private investors. Business plans come in different forms, too. There are business plans for startups, for expansion, and for developing strategies for a business.
If you are thinking of venturing into a new business, it is important that you develop a clear business concept. Once you have firmed up your business concept, you may proceed to do your business plan.
Writing a business plan can be time-consuming, and you may not have the time to investigate your competitors, develop pricing policy, or research the demographics of your target market. Very often, after developing your business concept, you may immediately find yourself too preoccupied responding to the urgent needs of your target customers, fearful that your competitors might take advantage of the same business opportunity ahead of you. So, instead of doing a business plan outright, it is advisable to do a feasibility study first to validate your business concept-- to see if it is possible, practical, and viable in the first place.
First thing to do in a feasibility study is to identify your business idea\\\'s strengths, weaknesses, opportunities, and threats (SWOTs). After doing the SWOT analysis, you need to determine if the concept still looks like a good business, which means that its strengths and opportunities outweigh the weaknesses and threats. After this, you can work on your financial feasibility.
You can first investigate the startup costs associated with putting up the business. Startup costs include rental deposits, renovation costs, business permits, SEC registrations, inventory, supplies, and fixed assets. Decide on what price you want to sell your product and project your sales targets for the next six months. Budget your monthly operating costs, then deduct all your related costs from your projected sales to determine whether the business will result in a profit or in a loss. If this exercise results in a profit, then you can investigate further.
You may perform a sensitivity analysis using the spreadsheet model you have used to project your financial feasibility. Ask yourself if the volume you projected is achievable or not. You may also want to compute for the breakeven volume. Before you start computing, however, it is important to check your operating costs and determine which are fixed and which are variable. Fixed costs mean that you will incur the expense regardless of whether you generate sales or not.
Variable costs mean that you will incur the expense only when you generate sales. In computing for the breakeven sales, deduct all of your variable costs per unit from your selling price; the resulting figure is called the contribution margin per unit. Once you have that, you can divide the total fixed costs by your contribution margin to derive the break-even sales volume.