Drawing up a business plan

If you’re thinking of opening your own salon, or expanding your current venture, you’ll need to draw up a business plan. Every salon owner needs to have a clear idea of where their business is going. No business will be successful for long unless the manager has a clearly laid-out set of objectives based on realistic projections.Why do you need a business plan? | What goes in a business plan? | Where do you start? | Understanding Cashflow

Why Do You Need A Business Plan?

Preparation in business planning is key – and that applies as much to an established enterprise as to one that is just starting out. A business plan should be continually reviewed – starting before the enterprise is launched and continuing throughout the life of the business. If you plan to launch a new service, this should entail a separate plan, with objectives for that particular service. Measuring the success of any such venture involves incorporating benchmarks or indicators into a plan. These could include financial targets and productivity benchmarks for team members’ sales targets.

What Goes In A Business Plan?

Business plans are essential for a successful salon, and they can easily be neglected because of the pressures of day-to-day work. But ignoring the need for planning is a shortsighted way to progress. An effective plan can safeguard investment and help you spot pitfalls in advance; ease financial problems; provide a tool to measure success; and focus efforts. If your salon’s development requires some kind of loan then a well-drawn-up business plan becomes critical. If you want your business to be taken seriously, it's vital that a business plan reflects professionalism. Most potential investors will insist on seeing a strategic business plan. Your business plan should be a summary of:

• what your business does
• where it comes from
• where it’s going.

You also need to make it clear what time-frame the business plan covers. No-one knows a business or the market it operates in better than the owner, and a plan needs to reflect this. Here are some basic tips on putting together your plan:

Where Do You Start?

While preparing a business plan may seem daunting, small business owners should remember outside help is available from banks, accountants, and local business-support organisations. Introduction: This should focus on the business and objectives, stating what the business does; how its performance compares with its competitors; and listing its major achievements. Set clear, realistic and challenging short- and long-term objectives. Discuss how products and services will be developed; list their unique selling points (USPs) and show how they will be positioned in the marketplace. Don’t use hairdressing jargon – not everyone will understand the terminology. Marketing: This should analyse your clients and competitors; describe the market sector you are in; and what your marketing strategy will be. Operations: Describe the location and description of the business premises; list equipment owned; personnel requirements; and management details. Finance: This section should include a summary of financial forecasts that include cash flow, profit and loss and balance sheet projections; and, if already trading, should also include audited accounts. Funding: This should form the final section. Here you should detail how much funding will be required; what it will be used for; and the prospects for the lender or investor. Lenders will be presented with hundreds of business plans every year so make life as easy as possible for them. Keep the plan clear and concise. Put excess information – CVs, technical information, market statistics, and financial figures – into appendices. Over-complicated documents often get ignored because they are too daunting to read. Constructing a business plan will give your business a good foundation on which to build, and increase it’s chance of succeeding. Invest the time in creating one and watch others invest their cash and trust in you. The Royal Bank of Scotland recommends all new businesses prepare a monthly cash flow forecast for the first year, and an annual forecast for the first five years of business operations.

• An accurate monthly forecast allows you to get a clear idea of how your business is doing – and how it is likely to perform in the future.
• You will be able to specify when it may need additional funding.
• Inconsistencies in performance can be identified and remedied.
• Major new investments can be bedded in and accurately assessed.

Constructing A Cash Flow Statement:

You will need to gather all bank statements and cash at hand. Cash In - In the appropriate month, enter:

• Sales made, for which you are awaiting payment – include the VAT.
• Other incoming amounts.
Forecast of sales you will make in future months and the cash amount you expect to receive.

Cash Out - You will be aware of the routine expenses from your budget. Consider the areas in which there may be timing differences, include rent, payroll, VAT and creditor payments. Calculating the Cashflow - You now have the information to complete the calculations. Start with the opening balance, add incoming cash, and subtract outgoing cash. The balance at the end of the month is the opening balance for the following month. Keep it Updated

• Keep the information confidential.
• Keep a clear record of your forecasts and judge them against actual performance; note any factors you didn’t allow for in your forecast.
• Use your forecasts to extend your business overdraft or apply for a loan.

Before you embark on your business plan, make sure you have thoroughly researched your business idea.

• Find out about the town/area – ie, population, demographics, and businesses (the local council should be able to provide such information).
• Identify what will be the best opening hours for your business.
• Establish what advantages your business has over the competitors and be clear on what makes them different. Identify their unique selling points (USPs) and include them as something to differentiate your enterprise against.