The Importance Of A Business Plan In A Sluggish Economy

By Author: John Bregar
Total Articles: 27
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There is no doubt that the financial crisis has had a significant impact on the flow of credit, not just in the UK but on a global scale. Britain has moved closer to its second recession in three years after official figures showed the shaky UK economy had contracted by 0.2% in quarter 4 of 2011. If you are a small business owner, you are perhaps aware that all matters of business are more testing during an economic downturn, particularly if you need to get your hands on cash from investors or a loan from the bank. However all is not lost. If you do need financing during this period, the preparation of a solidbusiness plan is the way forward. Wisteria Chartered Accountantsare here to present you with a few pointers in relation to your future plan:

If you’re relying on investment during this negative period, it is important that you present a comprehensive plan that reflects the current economic conditions. The better business plans tend to make more realistic assumptions. The financial forecasts are particularly detailed and highlight the point of break-even and ...
... when your backers can expect to see a return on their investment. If you are concerned that this may present an unattractive proposition, consider ways in which you can reduce business overheads. Alternatively you may diversify and seek additional sources of revenue.

Although the business plans that bode well during a gloomy economic outlook are comprehensive, they tend not be overtly so. There is no reason that writing a business plan should exceed 25-30 pages. The model of the business should be presented in a manner that lenders can immediately grasp. Try not to complicate things and simplify ideas that may appear arcane or abstract. Investors look at the plan in its most simple terms, being “if I can’t understand this, then your customers most definitely won’t”. Furthermore, it is important that the plan is well-written, substantiated by relevant and current research and prepared by somebody with industry experience.

The economy will recover. Economic activity is a somewhat a cyclical process. And so employment will again reach peak and output levels achieved prior to this downturn will return with businesses beginning to flourish. With that being said, it may be a good idea to limit your financial forecast assumptions to 1 to 3 years. You can then revisit these assumptions later and take into account the state of the economy at that point.

And finally, as the income and wages of your customers fall and their purchasing power rapidly diminishes. You considering multiple eventualities (contingency planning) will always impress the banks. A poor economy is very constraining for you and the investor, although it needn’t prevent you from securing finance. In fact the lending of cash is just what we need to get things moving again. Perhaps then then only constraint is the business plan and we hope to have provided you with just a few considerations to aide this process in a sluggish economy.