Building A Business From The Bottom Up

There are many obstacles to overcome when you first start in business and much of them are a mystery until you have struggled your way through them. Easier ways of working exist and most of them involve preparation and planning to avoid problems rather than having to deal with them.

Cash Flow Problems

Every business needs working capital and that may not be readily available when a business is young, but understanding where your business will fall short is essential to sound financial planning. A cash flow forecast is an essential element in any business plan because it identifies times of the month and year when you are going to need extra cash input. If you have a properly prepared cash flow forecast and it shows where the shortfall in one month is accounted for and corrected in the next month, then you are much more likely to secure an overdraft extension, a business loan or access other sources of funding.

Why the Shortfall Anyway?

Shortfalls or gaps in available funds happen all the time in business. It is especially true if you provide goods or services on credit or the way you collect payment from customers affects your company’s liquidity. Your business will experience shortfalls most often if you need to purchase materials, equipment and pay staff to complete an order before your customer or client pays you. In some cases, you complete a job one month, invoice a customer and they can have 28 days or as much time to pay as you have agreed. This often leaves businesses extremely short in the meantime.

Capitalising on Shortfalls

It is important to consider whether your potential customer or clients are in a similar position because your understanding of their predicament can lead to you receiving more work from them if you are in a position to finance your operation and wait for extended periods for payment. This approach gives your business a unique selling point that many competitors lack, but you obviously need to consider the risk factor too.

Anyone who sells to local authority or government institutions will be well aware of complex tender processes and invoicing and collecting payment is a similarly long process, but rewarding when it is finished and the money is in your bank. If your business is able to offer better terms than competitors can because you have used your business plan to identify opportunities, strengths in your business and weaknesses in others.

SWOT Analysis

A SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) is an important part of any business plan. Obviously, threats occur when the market you operate in is unstable, your customer or client has a less than perfect credit report or you stretch your cash flow to the limit by your eagerness to win the contract.

SWOT analysis, cash flow forecasts and balance sheets are a great way to see in black and white if your plan is feasible or not. Too many great ideas fail to come to fruition because business owners lack attention to planning or implement change before a company is ready. Hunger to chase new business is a desirable quality in any entrepreneur, but sound business sense is often more important because priorities are key to success.

Market Research

It is clear that market research is an important element in the early stages of a marketing plan if you intend to build a business from the bottom up. People often work in an industry for many years and feel they are in a great position to start their own company or ‘go it alone’. This may be true, but without an understanding of the market size, it is questionable how you are going to generate new business and whether or not there is likely to be major changes in the market in the near future. These issues will all become a problem if you have no basis for starting a successful business.

Author Bio:
Bill Jobs is a writer who has a keen interest in business. He believes that bank business plans are vital to the success of any business as they ensure maximum professionalism and create a structure for your company.