Rules for preparing a business plan in Excel
There are several clear rules that you must follow creating a business plan. Make use of our example along with the rules we describe below to prepare your own business plan.
Rule 1. Planning period
Methodology of the financial planning widely uses the concept of a planning period. A business plan is a project that is difficult to implement within a single year. When it comes to the implementation, we usually imply the payback period of the project. The optimal payback period for business projects is up to five years. Therefore, all the costs should be planned not for a month or two, but for five years ahead. Also, take into account the scale of the project. You can plan the first year on a monthly basis. The second year is enough to plan on a quarterly basis. The next three years are not usually planned in such detail. Instead, it is enough to set annual goals.
Rule 2. Grouping costs
You should understand clearly which funds are invested in business only once and which are regular. Additionally, all the costs are divided into fixed and variable ones. Variables costs depend on the scale of activity and commonly include the cost of materials, wages, fuel, electricity, etc. Fixed costs relate to the very process of organizing a business. As a rule, these are commercial expenses, including rent of premises, tax payments at fixed rates, etc.
Rule 3. Planning production volumes
Always plan the volume of production according to the real volume of sales. It’s a devastating practice to predict the planned sales volumes based on your own desire. You have to understand the clear market need in certain goods or services. Also, conduct research to find out how much people are willing to spend on these products or services. It is worth relying on the planned sales figures of your competitors. If such information is not available, you should understand that uncertainty is an integral feature of the market environment. That is, the result of a real activity may radically differ from the planned one and an effective business planning can be done only after the test period.
Rule 4. The purpose of the business plan
The business plan is always prepared taking into account certain needs. If you plan to receive a loan or attract investments from a potential investor, it’s necessary to submit two completely different business plans. At the same time, the investors have different goals of business planning too. You must clearly understand what the investor needs. This may be receiving a percentage from the future profits or obtaining a share in your business for a further resale. Or even a short-term investment in order to get a certain planned interest. There are many conditions and each of them requires specific calculations to perform.
Rule 5. Focusing on the market price
You need to predict the costs and margin for your products that will form the price which is not significantly higher than the price of your competitors. Before you plan your own business, examine the average prices of your competitors.
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