Business plan and financial plan: are they necessary, and what is the difference?

 

If you're planning to start a new activity, you've surely heard about the business plan! But are you systematically required to draw a comprehensive business plan before starting your business? And what is the difference between the financial plan that entrepreneurs must have?

Determine your business model

Drawing up a business plan is certainly useful, especially for thinking carefully about how you will position yourself against the competition. For example, how will you develop your products or services to make a difference? What is your ecosystem? Which model will you use (e.g., a "physical" store, a "virtual" online store, a combination of the two, ...)? Are you subject to certain regulations specific to your sector, and how will you be able to comply with them? Finally, how do you organize the cash flows?

That last aspect is the subject of the "financial plan" since it determines how you will finance your business. The financial plan is thus an integral part of your business plan, often forming the last part. Among other things, it gives you an answer to these questions:

·         How much money do I need to realize my ideas?

·         What income is there in return?

·         How can I estimate in advance what turnover I will realize? What am I left with at the end?

Are a business plan and a financial plan required?

The financial plan is indeed mandatory for most companies (except sole proprietorships), but the business plan is not always ... even though it remains highly recommended.

They also enable you to prove to the authorities that you have provided sufficient resources to complete the notorious milestone of the first two years of operation. That is all the more important. You could be held liable if you went bankrupt within 3 years because you need to provide more capital. Your "company" activity is not enough to protect you in these circumstances. You may have to pay the debts from your own resources.

In addition, the two exercises will enable you to convince the banks if you need funds.

What exactly does a business plan consist of?

Not all types of business need a fully developed plan. But even if you are going to offer a modest service or launch your activity as a sideline, it is worth thinking about some basic questions:

·         What is your priority goal, your main activity?

·         What strategy will you develop to achieve that goal? What is your vision, and what mission and strategy are you committed to?

·         A mission describes what you stand for as a company. What do you want to mean for your customers? Next, with your vision, you indicate the direction you want to go. Here you also describe what you want to achieve within 3 to 5 years. Finally, your strategy describes exactly how you want to do that.

·         What are the risks and opportunities of your future market?

·         What are the strengths and weaknesses of your product or service in that market?

·         What are your arguments to convince your potential customers? Why will they come to you instead of your competitors?

·         How will you finance your activity? Do you need investors, and what guarantees can you offer?

A professional company like Maven business plans can help you in writing a business plan. You can check various templates on their website. Here is Bakery Business Plan Sample.