Your accountant will tell you that small business enterprises are the backbone of the New Zealand economy and are the biggest employers in the country.
Ninety percent of these enterprises employ less than 20 people each. This is not surprising, as New Zealanders are highly entrepreneurial and willing to give new business ideas a go. However, many of these entrepreneurs will lack knowledge and experience in business planning, and should turn to an accountant for help. An accountant will provide input on a variety of issues and will express your ideas in meaningful financial terms.
A business plan is both a route-map and a blueprint. You can plan the best possible route to your objective and use milestones to measure your progress. Some people believe that business planning is akin to crystal ball gazing but this is not strictly true. If you can create a proper business plan with the help of a chartered accountant, you will be prepared for any unpleasant surprises or eventualities along the way.
Reaching the milestones that you created will let you know whether or not you are on course, and if not, what corrective action is required and when.
Business plans may be created in various ways depending on the advice of your chartered accountant but the following three elements will need to be addressed:
- Business Objective: This is what you are trying to achieve. Since the purpose of starting a small business is to make money, a business objective should best be defined in financial terms. Common measures of business objectives include return on investment, return on capital employed, return on net worth, growth and so on. Your chartered accountant will help you to devise the appropriate measure.
- Business Strategy: Strategy is one of the most misused terms in business terminology, so be sure to understand it clearly. If the objective is what you are trying to achieve, the strategy is how you are going to achieve it. Clearly, strategy has no meaning without an objective and vice-versa. If you cannot find a strategy to achieve your business objective, there’s a good chance that your objective is over ambitious.
- Business Behaviour: It is important to recognise that businesses behave just like people, and the objective and strategy must be in consonance with the behaviour. For instance, there is little point in forcing aggressive objectives and strategies on a highly conservative business. If you must be aggressive, make sure that the right people with the right attitudes are in place first.
You can see for yourself that a sound business plan is an essential prerequisite for success. Why don’t you get started today by hiring a good firm of accountants?