Do I Need a Business Plan and a Financial Plan?

For most businesses, having a detailed business and financial plan in place is essential. The two normally overlap, so rather than two separate documents, you’ll usually have a single all-in-one plan.

 

What is a business plan?

A business plan covers everything from the idea behind a business, to how it will work in the real world. It might vary depending on what sort of business you plan to run (or are already running), but in general a good business plan will include:

  • How the business functions
  • What it intends to achieve
  • The current state of the industry and market opportunities
  • Routes to market (how you will supply your products or services)
  • A marketing strategy
  • Logistics
  • Who is involved in the business (particularly for start-up businesses which will have limited financial data to show how viable they might be)
  • … and more!

 

What is a financial plan?

A financial plan usually forms part (an important part) of a business plan. It will detail all of the expected costs, and forecast how the business plans to manage its finances. It will usually also include any financial reports that the business already has, because this will show how the business is performing.

The exact information that a financial plan includes will depend on the business in question. It’s usually a good idea to look at funding requirements, fixed costs, and forecasts for income, expenses, and cash flow.

Most business plans include some kind of financial information, whether this is a basic financial forecast or a more detailed financial plan.

 

Why business and financial plans are important

Business and financial planning both serve the ultimate purpose of explaining how a business will function in the future. It’s a way of setting out your business goals, and mapping out what needs doing to achieve them.

Business plans aren’t just for owners, although they are a good foundation for making considered decisions. Giving staff and colleagues a clear understanding of what the business is trying to achieve can help everyone stay motivated with tangible, measurable goals.

You might also find that someone else looking over your business plan will be able to spot opportunities or a way of working that you’ve completely overlooked.

A clear business plan can also help you make changes more rapidly if something unexpected happens (looking at you, lockdown).

 

Do I need a financial plan if I don’t want to ask for investment?

OK, so potential investors, lenders, and anyone issuing grants will almost always want to see your business and finance plan before handing any money over to you. But, even if you don’t intend on asking for financial support or loans, it’s well worth putting a financial plan in place.


Your financial forecast basically puts your business plan into solid figures.


Do you really want to spend time trying to grow a business which, once you look at the figures, is impossible to grow? It will also help you make more effective decisions if you know what the business is able to afford, and when.

 

What should I include in my business and financial plans?

The best advice when it comes to writing a business plan is to be professional and realistic (with a strong emphasis on realistic). We’ve all seen those cringeworthy Dragon’s Den pitches asking for eye-watering amounts of cash without really explaining what the business will do to make the money back!

 

Who will see it?

As well as core information about what the business is and does, consider who else might need to see your business plan (even if you don’t think anyone will just yet). For instance, if you were trying to win over someone to help you manage a fledgling business, what questions might they have?

Pre-empting these helps you think about your business in a different way, which in turn will help you make things more robust.

It’s also important to base your plan on detailed information, where possible, and to present it so that it is easy to understand.

Good things to include in a business plan are:

  • An explanation of the history of the business and the people behind it.
  • An explanation of what the business provides and what the market opportunities for it are. This often means providing quite a thorough market analysis.
  • Information about what specific objectives you want to achieve and what you will do to achieve them. This can include information such as what your marketing strategy will be, or how you will price your goods.

 

Setting goals

Business plans focus quite heavily on making predictions and setting goals for a business. It’s not always easy to decide how to approach this, or how optimistic and ambitious you should be. It’s all about finding the perfect balance!

For example, when it comes to setting targets for your business, it’s fine to be ambitions, as long as you’re able to demonstrate how you will reach them.

 

Financial planning

Again, this depends on your business, but in general:

  • Historical financial information (if it is available). This should include a balance sheet, and a profit and loss account
  • Funding requirements
  • Income and expenditure forecasts
  • Current liabilities and assets
  • Cash flow forecasts

When it comes to making forecasts as part of a financial plan, as with setting goals in a business plan, it is important to be careful.

Be realistic and provide evidence for the forecasts you make, and these should fit in with the rest of your plan. For example, if incoming payments will be delayed at certain points, then your cash flow forecast should reflect this.

 

Can an accountant help me with my business plan?

Writing a financial plan is difficult, particularly for start-ups where there isn’t much business history so financial information is unclear. An accountant can usually help you with the planning stages, and even help you set out your information ready for investors, distributors, or other important stakeholders in your business.

Find more tips and advice for your business on our website, or learn more about hiring an accountant.

Elizabeth Hughes
A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.