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Business Plans – External and Internal Plans Get You Different Benefits

Broadly, there are two types of business plans. These are external business plans and internal business plans. An external business plan is focused on parties that are outside your business. An internal business plan is, broadly, only for the eyes of those people who work within the business. Here is a brief summary of the differences.

External business plans

When a business plan is prepared for an external party, it should be focused on what the external party requires. Very often external business plans are prepared for people who are providing capital or finance to the business. However, this may not be the only reason. You may need to prepare a business plan for a community organisation or a council so that it outlines the impact of your business on the community. This will have a different focus to a plan that is prepared for a financier.

More specifically, external business plans are often prepared for parties that you would like to invest in your company. If you are preparing a plan for an investor of this category, you need to think clearly about what that investor wants to see in your plan. If it is at all possible, ask questions and understand exactly what the investor wants to see. Leaving this to chance is often a fatal mistake. Don’t try to guess the needs of your reader. Find out.

I would also warn you about putting too much detail in an external business plan. Keep it to the point and keep it focused. Don’t stray into reams of detail on the chance that your reader wants to know this. Further detail can be supplied at a later time. However, if your reader wants the detail, go ahead and write all the pages that you need.

In the opinion of some commentators, the executive summary carries about 95% of the importance to the reader. I think this is a bit overstated, but it is important that your executive summary outline very clearly the benefits to the reader. Your executive summary answers the question “Why should I read this plan?” So make sure you get the “What’s in it for me?” points into the executive summary.

Internal business plans

On balance, I think internal business plans are the most important. This is a document that dries your business forward. An internal business plan summarises what you and your team are actually going to do to improve your business and achieve your goals. No one need see what is written in this plan except those people who are directly involved in carrying out the plan. You may choose to show it to a wider readership, but that is your choice.

While the internal business plan will contain elements of what is in an external plan, the internal plan will be solely focused on trying to achieve the goals of the owners of the enterprise. What are the precise financial goals? How many locations will you operate from in five years time? When will the business be sold? How will production efficiency be improved by 15%? How many people will you employ at the end of next year? And so forth.

In my view, an internal business plan is only of use if specific tasks are assigned to specific people to be achieved by a specific time. Also, there must be constant follow-up of these goals. No progress is made until people know exactly what they have to do and by what time and they need to be accountable to the plan.

Another aspect of an internal business plan is that it will (and should) change. The world changes rapidly. Your industry changes rapidly. People come and people go. Opportunities arise and projects fail. Your internal business plan should not be a document that is visited once per year. Internal business plans that are reviewed that frequently usually sit in the bottom of someone’s drawer and don’t have any impact on the organisation. The internal business plan should be examined at least once per month.

Wishing you easier business.

John Jeffreys

Why is Trade Credit So Important to Business Credit?

No matter what, your business is it is likely you need supplies. For some companies it may only be a matter of office supplies and equipment, for others it might be an entire product line brought in for re-sale. No matter what type of business you are going to be dealing with vendors. Because of this you are in the perfect position to build your business credit in a way that will benefit your company in several ways.

Even if you can afford to buy your paperclips with cash-don’t. Right from the start you should be contacting vendors that you will be doing business with and enquiring about the possibility of trade credit. Use your business name, address, and pertinent information to obtain vendor accounts so that it is your business that builds credit not your personal credit history.

Make all of your purchases on trade credit accounts whenever possible. Not only will this build up a great deal of positive credit history for your company, it also helps you keep your finances in order with excellent records of all of your expenses. That’s a plus at tax time too, and it also keeps you from blending your personal money with business funds.

Why Trade Credit is Important to Your Business’ Financial Future?

Unless you want to be supporting your company out of your own pocket for the rest of its business life making sure your business has operating funds all its own is important. It will also make a huge difference when you need extended operating capital, expansion loans, equipment loans, or any other type of financial backing. Of course if your personal credit is excellent you might be able to back a loan with that-but do you want to bet your family’s home on it?

Many small business owners do just that. In some cases it can work out okay, but anyone who has been in business for any length of time can tell you it doesn’t take much for it to become a disaster. Even if personally backing a business loan does work out with a hitch, or disaster, is tying up your family’s financial situation for years a good idea? What about when you want to buy a new house, car, or pay for college tuition? How bad will you feel when you have to tell them that you can’t because your equity funds are tied up in backing a business loan?

With proper business credit your company can get the financial backing it needs without your help. Where your help comes in is in the intelligent planning and building of trade credit right from the start.

Because the economy has caused financial industries to re-think how they evaluate lending fewer lenders are willing to take a chance and risk a loan to a business of any size if it isn’t stable and doesn’t show fiscal responsibility. Your well-established trade credit history proves how well your company handles it’s financial obligations.

Avoiding Complications

Establishing business credit through trade credit is even more important if you have a partner or take on investors. Obtaining loans gets tricky when you are backing a company that you are not a sole owner of. Obtaining venture capital with no history of good financial stability is more difficult than if you have exemplary business credit as well.

These are all things you may not think of if you are sitting in your basement starting up a shoe-string business, but Ted Turner started in his basement and Google was the brain-child of a couple of college students-things grow. If you want to grow with your business start it off right.

Start Off Easier

Trade credit, otherwise known as vendor credit has also helped finance more small business start ups than lending institutions. No money for the things you need to get your business operating at full capacity? Get trade credit and pay as you go like you would a start-up loan. True start-up loans are much harder to acquire now with the economy being the way it is, but vendors need business just like you do and are more willing to extend varying amounts of credit to get you to buy their product.

Even if you are only able to obtain a small amount of credit take advantage of it as a way to get started and build credit. Make your monthly payments faithfully and apply for more credit. Some vendors will happily increase your limits when they see a reasonable payment history without even being asked.

Major Advantages of Trade Credit vs. Bank Loans

In some cases trade credit is even better than a bank loan. Repayment amounts are often lower than a bank loan, there is no down-payment and interest is often less than a bank loan. For those reasons it makes better sense to use trade credit for operating supplies and products than it does to use other forms of loans.

What to Look for in Trade Credit

Look for vendors who report to the major business credit agencies. The big three business credit institutions are slightly different than the big three personal credit agencies. Business credit reporting agencies are: Dun and Bradstreet, Experian Smart Business and Equifax’s Small Business Financial Exchange.

Make sure vendors report all activity: both good and bad. You want to build positive credit including information on when you pay on time, early, and more than the minimum.

Find out what the limits are on your account. You need to use credit to make it count, but you shouldn’t max out your accounts either. Just like in personal credit overcharging to the point you are at your limits only looks like poor management and financial skills.

Find out if they offer discounts. These can be very beneficial to you if you have the money to pay for items. Use your vendor account to purchase the item and then pay for it within the specified amount of time and get discounts for early payment. Many vendors offer deals like 20% discount on purchases paid within 10 days. This can end up being a sizeable amount on big ticket items like computers, office furniture, or product for re-sale.

Consignment vs. Credit

When seeking out vendors for products some offer an alternative to credit called consignment. In these cases products are supplied for you to sell and then you pay the cost of each item sold. One of the cons to consignments is that the cost is usually higher than items purchased outright. The bigger drawback to consignment purchases is that you do not develop any credit history. The biggest advantage to consignment purchases is that there is no interest charged and if you do not sell an item you return it in the original condition without penalty or cost.

Using consignment for products to sell is a viable option if you do not have income to start with but should be avoided if you can afford to make minimum monthly payments while proceeds start to come in. The key goal is to get started affordably while at the same time building credit for a bright future.

No Capital Required Business Opportunity

When I first started researching the leaflet distribution market I quickly came to the conclusion it was a grossly underrated business opportunity, which, anyone could start without the need for capital.

I found that not only was it a great money making idea for the solo operator… it was also a tremendous opportunity for the budding entrepreneur who had the ambition to build a larger business.

When you take into consideration that the majority of businesses must advertise, either in order to stay in business, or just to maintain customer awareness, you realise this is a business opportunity with a ready made prospect list, and that is before you even start…

Added to that a great many businesses are now operated from home, and once you’re in the leaflet distribution business, you can reach those prospects with your own promotional leaflet, at the same time you’re delivering paid for leaflets.

Yes there’s little doubt in my mind that leaflet distribution offers real potential for the aspiring new business owner, and you can start on a shoestring budget, and then quite quickly expand into a successful operation.

It’s a business you can keep small, or build large, and if operated well will be very saleable at some stage in the future. It’s a business which can provide you with an extremely high standard of living… and more importantly it’s a business that does not have to rely on you taking out a bank loan.

Now that is a business opportunity you don’t come across very often.

Consider the vast majority of leaflet deliverers you see on your street. Most of them are employed by leaflet delivery businesses that employ anywhere from five employees upwards; many employ in excess of 100 employees…

Rarely do you consider the larger and more profitable industry behind those individual leaflet delivery people.

When you consider that each employee can average £60.00 profit per day, after wages, you start to see the potential in this business. This of course can be less, or it can be more.

The great thing is that any self determined person with ambition can start this business, and what’s even better, it doesn’t need to cost you anything; you can start with no capital.

You can go out today, drum up some business, and start delivering leaflets.

Then once you reach the stage of having more work than you can cope with, you can employ your own leaflet delivery people, and become the boss who employs those leaflet deliverers you see on your street.

If you’re willing to follow a business plan, you can go from solo operator to successful leaflet distribution business owner, without ever having to put any of your own capital into the venture. I don’t know of many businesses where that can be said.

You can start part time and turn the business into a full time occupation within a short space of time. Once you reach the stage of employing leaflet delivery people you’re free to spend all your time marketing your expanding business.

Then at five, ten, twenty, thirty plus staff, which is not uncommon in this industry, the business can become extremely profitable. You also have endless opportunity for growth due to leaflet distribution’s close ties with marketing and advertising.

All in all this is a very simple business to start with outstanding potential. Whether someone operates the business alone, makes use of it as a stepping stone to other goals, or sets out to build a substantial business, it does not matter; it’s a real business, with virtually no start up risk; and the business concept if applied correctly does work.

If you’d really like your own business and don’t want to invest much, or don’t have much to invest, then you should give this business idea serious consideration; it could not only change your life, it could change your family’s life, and at the same time it could make you a great deal of money!

If you like the idea of starting your own leaflet distribution business, you might want to take a look at: it’s a comprehensive, yet simple 103 page step by step business plan and manual, which covers everything from starting the business right through to expanding and establishing a successful leaflet distribution business.