A well-prepared business plan is in amazingly versatile document that small business owners may use for fundraising, benchmarking operations, and a list of other potential activities. However, some small business owners failed to fully utilize a business plan in reference to measuring various performances within a company. Two of the most important aspects of a business that could be measured using a business plan, based on research from our business plan writers, would be sales forecast and cost of goods sold.
Measuring Sales Projections using a Business Plan.
Just about every good business plan has a financial statement projection included. Not surprisingly, sales projects probably get the most attention from a business owner when writing up the business plan. However, after the business plan is written, small business owners tend to forget about the plan and move on with their business. In doing this, the owners miss an opportunity to utilize their sales projections as a measuring tool. For example, a small business owner could structure their financial model and profit and loss statement to include monthly sales as well as annual sales. From the structure, the business owner can then compare actual sales on a monthly basis with projected sales in the business plan. By following the structure, the small business owner could then determine how well they are performing with their projections. Further, they can also adjust their future projections based on results found.
Measuring Cost of Goods Sold using a Business Plan.
Cost of goods sold is the raw material prices that business owners are charged to make your finished products. A restaurant owner’s cost of goods sold maybe their meat and vegetables used to make their dishes. When attempting to use cost of goods sold as a measuring tool in the business plan, there are a couple different options for utilization. The first option is to have a detailed sheet as an appendix in the business plan breaking out projected cost for specific raw material items. The specific category may include meats, vegetables, and spices, to again, play off of the restaurant theme. This detailed structure does take a little bit of time to update and manage. However, the thoroughness will reward business owners with in-depth understanding of the cost of goods sold activities. The second, more efficient, but less effective, method would be to compare cost of goods sold as a percentage of sales. In using a percentage, business owners are able to quickly ascertain whether the cost of goods sold is increasing or decreasing as compared to sales. If the cost of goods sold are increasing, then the business owner knows they need to act to lower their costs.
In summary, business plans are excellent tools to use as a measuring gauge for various aspects of a business. Common utilization of a business plan in regards to measurement is for sales and cost of goods sold. By following and tracking these two line items, business owners are able to have a continuous broad understanding as to how well the projection skills have been implemented as well as a good understanding about their sales and cost of goods in the business.
Author: Paul Borosky, Doctoral Candidate, MBA., Author