How to write a business plan for a timber evaluation?
Putting together a business plan for a timber evaluation can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.
We will explore why writing one is so important in both starting up and growing an existing timber evaluation, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.
Without further ado, let us begin!
Why write a business plan for a timber evaluation?
Having a clear understanding of why you want to write a business plan for your timber evaluation will make it simpler for you to grasp the rationale behind its structure and content. So before delving into the plan's actual details, let's take a moment to remind ourselves of the primary reasons why you'd want to create a timber evaluation business plan.
To have a clear roadmap to grow the business
Running a small business is tough! Economic cycles bring growth and recessions, while the business landscape is ever-changing with new technologies, regulations, competitors, and consumer behaviours emerging constantly.
In such a dynamic context, operating a business without a clear roadmap is akin to driving blindfolded: it's risky, to say the least. That's why crafting a business plan for your timber evaluation is vital to establish a successful and sustainable venture.
To create an effective business plan, you'll need to assess your current position (if you're already in business) and define where you want the business to be in the next three to five years.
Once you have a clear destination for your timber evaluation, you'll have to:
- Identify the necessary resources (human, equipment, and capital) needed to reach your goals,
- Determine the pace at which the business needs to progress to meet its objectives as scheduled,
- Recognize and address the potential risks you may encounter along the way.
Engaging in this process regularly proves advantageous for both startups and established companies. It empowers you to make informed decisions about resource allocation, ensuring the long-term success of your business.
To get visibility on future cash flows
If your small timber evaluation runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your timber evaluation's future cash flows.
So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.
The good news is that your timber evaluation business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.
To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.
By diligently monitoring your timber evaluation's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.
To secure financing
A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your timber evaluation.
Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.
At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.
This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your timber evaluation and the terms of the agreement.
Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your timber evaluation's potential for high growth, profitability, and consistent cash flow generation over time.
Now that you recognize the importance of creating a business plan for your timber evaluation, let's explore what information is required to create a compelling plan.
What information is needed to create a business plan for a timber evaluation?
Writing a timber evaluation business plan requires research so that you can project sales, investments and cost accurately in your financial forecast.
In this section, we cover three key pieces of information you should gather before drafting your business plan!
Carrying out market research for a timber evaluation
Carrying out market research before writing a business plan for a timber evaluation is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
You might discover that customers may become increasingly interested in using recycled or upcycled timber in their projects. Additionally, research may reveal that the demand for sustainably sourced timber could grow in the coming years.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your timber evaluation.
Developing the sales and marketing plan for a timber evaluation
As you embark on creating your timber evaluation business plan, it is crucial to budget sales and marketing expenses beforehand.
A well-defined sales and marketing plan should include precise projections of the actions required to acquire and retain customers. It will also outline the necessary workforce to execute these initiatives and the budget required for promotions, advertising, and other marketing efforts.
This approach ensures that the appropriate amount of resources is allocated to these activities, aligning with the sales and growth objectives outlined in your business plan.
The staffing and equipment needs of a timber evaluation
Whether you are at the beginning stages of your timber evaluation or expanding its horizons, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is vital to ensure your business's success.
To achieve this, both the recruitment and investment plans must align coherently with the projected timing and level of growth in your forecast. It is essential to secure appropriate funding for these plans.
The staffing costs for a timber evaluation might include hiring a forestry consultant to assess the quality of trees and to provide recommendations on harvesting and replanting. Additionally, the evaluation may require hiring a wildlife biologist to assess the area for animal habitats and migration patterns. The equipment costs for the evaluation might include renting a GPS unit and a soil moisture meter, as well as purchasing or renting other specialized tools such as tree-climbing equipment and a chainsaw.
To create a financial forecast that accurately represents your business's outlook, remember to factor in other day-to-day operating expenses.
Now that you have all the necessary information, it's time to dive in and start creating your business plan and developing the financial forecast for your timber evaluation.
What goes into your timber evaluation's financial forecast?
The objective of the financial forecast of your timber evaluation's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for a timber evaluation are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
Your timber evaluation forecasted P&L statement enables the reader of your business plan to get an idea of how much revenue and profits your business is expected to make in the near future.
Ideally, your reader will want to see:
- Growth above the inflation level
- Expanding profit margins
- Positive net profit throughout the plan
Expectations for an established timber evaluation will of course be different than for a startup. Existing businesses which have reached their cruising altitude might have slower growth and higher margins than ventures just being started.
The projected balance sheet of your timber evaluation
Your timber evaluation's forecasted balance sheet enables the reader of your plan to assess your financial structure, working capital, and investment policy.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
Your timber evaluation's balance sheet will usually be analyzed in conjunction with the other financial statements included in your forecast.
Two key points of focus will be:
- Your timber evaluation's liquidity: does your business have sufficient cash and short-term assets to pay what it owes over the next 12 months?
- And its solvency: does your business have the capacity to repay its debt over the medium-term?
The projected cash flow statement
A cash flow forecast for a timber evaluation shows how much cash the business is projected to generate or consume.
The cash flow statement is divided into 3 main areas:
- The operating cash flow shows how much cash is generated or consumed by the operations (running the business)
- The investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.)
- The financing cash flow shows how much cash is raised or distributed to investors and lenders
Looking at the cash flow forecast helps you to ensure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
It is also a best practice to include a monthly cash flow statement in the appendices of your timber evaluation business plan so that the readers can view the impact of seasonality on your business cash position and generation.
The initial financing plan
The initial financing plan - also called a sources and uses table - is an important tool when starting a timber evaluation.
It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).
Having this table helps understand what costs are involved in setting up the timber evaluation, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).
Now that the financial forecast of a timber evaluation business plan is understood, let's focus on what goes into the written part of the plan.
The written part of a timber evaluation business plan
The written part of a timber evaluation business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Throughout these sections, you will seek to provide the reader with the details and context needed for them to form a view on whether or not your business plan is achievable and your forecast a realistic possibility.
Let's go through the content of each section in more detail!
1. The executive summary
In your timber evaluation's business plan, the first section is the executive summary — a captivating overview of your plan that aims to pique the reader's interest and leave them eager to learn more about your business.
When crafting the executive summary, start with an introduction to your business, including its name, concept, location, how long it has been running, and what sets it apart. Briefly mention the products and services you plan to offer and your target customer profile.
Following that, provide an overview of the addressable market for your timber evaluation, current trends, and potential growth opportunities.
Next, include a summary of key financial figures like projected revenues, profits, and cash flows.
Finally, in the "ask" section, detail any funding requirements you may have.
2. The presentation of the company
As you build your timber evaluation business plan, the second section deserves attention as it delves into the structure and ownership, location, and management team of your company.
In the structure and ownership part, you'll provide valuable insights into the legal structure of the business, the identities of the owners, and their respective investments and ownership stakes. This level of transparency is vital, particularly if you're seeking financing, as it clarifies which legal entity will receive the funds and who holds the reins of the business.
Moving to the location part, you'll offer a comprehensive view of the company's premises and articulate why this specific location is strategic for the business, emphasizing factors like catchment area, accessibility, and nearby amenities.
When describing the location of your timber evaluation, you may want to emphasize its potential for growth. You could mention the region's access to major transportation routes, as well as the availability of natural resources. You might also point out the area's potential for economic development, such as job opportunities or potential for increased property values. Additionally, you may want to highlight the area's current infrastructure and amenities, such as educational and recreational facilities. Finally, you could discuss the potential for technological advances and the presence of local industries. By describing the location in terms of potential, you could demonstrate to a third-party financier the potential value of investing in the timber evaluation.
Lastly, you should introduce your esteemed management team. Provide a thorough explanation of each member's role, background, and extensive experience.
It's equally important to highlight any past successes the management team has achieved and underscore the duration they've been working together. This information will instil trust in potential lenders or investors, showcasing the strength and expertise of your leadership team and their ability to deliver the business plan.
3. The products and services section
The products and services section of your timber evaluation business plan should include a detailed description of what your company sells to its customers.
For example, your timber evaluation could offer customers expert advice on the types of timber that are best suited for their project, such as recommending hardwoods for furniture making and softwoods for construction. It could also provide a detailed timber evaluation report that includes moisture content, decay and strength test results, as well as expert inspection for signs of insect infestation. Finally, it could offer a comprehensive timber grading and selection service, ensuring that customers get the best quality timber for their project.
The reader will want to understand what makes your timber evaluation unique from other businesses in this competitive market.
When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through.
4. The market analysis
When you present your market analysis in your timber evaluation business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.
The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.
Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your timber evaluation, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.
Next, focus on your target market, zooming in on the specific customer segments your timber evaluation aims to serve and explaining how your products and services fulfil their distinct needs.
For example, your target market might include residential construction contractors who are looking for quality hardwood lumber to build homes or other structures. These contractors would be interested in the evaluation services offered by a timber evaluation company because they would provide them with accurate and reliable measurements of the lumber, as well as an assessment of the lumber’s quality and suitability for the project. By using a timber evaluation, these contractors can be assured that they are getting the best quality lumber for their projects.
Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.
Finally, conclude your market analysis with an overview of the key regulations applicable to your timber evaluation.
5. The strategy section
When crafting the strategy section of your business plan for your timber evaluation, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.
The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.
For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.
In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.
Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.
Your timber evaluation faces a number of risks. For example, there may be an unexpected natural disaster such as a flood, drought, or wildfire, which could significantly damage the timber stock and reduce the value of the evaluation. Additionally, there might be a market crash that could cause timber prices to drop and adversely affect the value of the evaluation. It is important to consider these risks when completing a timber evaluation.
6. The operations section
The operations of your timber evaluation must be presented in detail in your business plan.
Begin by addressing your staff, specifying the main roles and your recruitment plan to support the anticipated growth. Outline the qualifications and experience needed for each role and discuss your recruitment strategies, which may involve using job boards, referrals, or headhunters.
Next, clearly state your timber evaluation's operating hours, allowing the reader to gauge the adequacy of your staffing levels. Additionally, mention any considerations for varying opening times during peak seasons and your approach to handling customer queries outside regular operating hours.
The key assets and intellectual property (IP) required to run your business should also be highlighted. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, ensure they are well-documented in this section.
You may have key assets and IP related to timber evaluation such as a specialized timber evaluation software and associated data. This could include a timber management system, as well as a timber inventory database that could be used to track the quality and efficiency of the timber operations. Additionally, you might have a patent or trade secrets associated with the evaluation process.
Finally, provide a comprehensive list of suppliers you intend to collaborate with, along with a breakdown of their services and main commercial terms, such as price, payment terms, break clauses and contract duration. Investors often seek insight into the reasons behind your supplier choices, which may include a preference for higher-quality products or established relationships from past ventures.
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of a timber evaluation business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my timber evaluation's business plan?
There are two main ways of creating your timber evaluation business plan:
- Using specialized business planning software,
- Hiring a business plan writer.
Using an online business plan software for your timber evaluation's business plan
Using online business planning software is the most efficient and modern way to create a timber evaluation business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your timber evaluation's business plan
Outsourcing your timber evaluation business plan to a business plan writer can also be a viable option.
Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.
However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.
From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).
You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.
The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.
For these reasons, outsourcing the timber evaluation business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.
Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.
Why not create your timber evaluation's business plan using Word or Excel?
I must advise against using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write your timber evaluation business plan. Let me explain why.
Firstly, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is highly technical and requires a strong grasp of accounting principles and financial modelling skills. It is, therefore, unlikely that anyone will fully trust your numbers unless you have both a degree in finance and accounting and significant financial modelling experience, like us at The Business Plan Shop.
Secondly, relying on spreadsheets is inefficient. While it may have been the only option in the past, technology has advanced significantly, and software can now perform these tasks much faster and with greater accuracy. With the rise of AI, software can even help us detect mistakes in forecasts and analyze the numbers for better decision-making.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Moreover, software makes it easier to compare actuals versus forecasts and maintain up-to-date forecasts to keep visibility on future cash flows, as we discussed earlier in this guide. This task is cumbersome when using spreadsheets.
Now, let's talk about the written part of your timber evaluation business plan. While it may be less error-prone, using software can bring tremendous gains in productivity. Word processors, for example, lack instructions and examples for each part of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they don't handle formatting for you.
Overall, while Word or Excel may seem viable for some entrepreneurs to create a business plan, it's by far becoming an antiquated way of doing things.
- Having an up-to-date business plan is key to maintaining visibility on your future cash flows.
- A business plan has 2 parts: a financial forecast highlighting the expected growth, profitability and cash generation of the business; and a written part which provides the context needed to interpret and assess the quality of the forecast.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this guide helped you to better understand how to write the business plan for a timber evaluation. If you still have questions, do not hesitate to contact us.
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