How to write a business plan for an independant carpenter?
Putting together a business plan for an independant carpenter 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 independant carpenter, 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 an independant carpenter?
Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having an independant carpenter business plan is so crucial.
To have a clear roadmap to grow the business
Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.
In this dynamic context, it's essential to have a clear roadmap for your independant carpenter. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.
That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.
To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your independant carpenter to be in the next three to five years.
Once you have a clear destination for your independant carpenter, you'll focus on three key areas:
- Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
- Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
- Risks: you'll identify and address potential risks you might encounter along the way.
By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.
To get visibility on future cash flows
If your small independant carpenter 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 independant carpenter'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 independant carpenter 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 independant carpenter'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 independant carpenter.
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 independant carpenter 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 independant carpenter'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 independant carpenter, let's explore what information is required to create a compelling plan.
What information is needed to create a business plan for an independant carpenter?
Writing an independant carpenter 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 an independant carpenter
Before you begin writing your business plan for an independant carpenter, conducting market research is a critical step in ensuring precise and realistic financial projections.
Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.
In the course of this research, you may stumble upon trends that could impact your independant carpenter.
You could find that people may be looking for more sustainable materials for their carpentry projects. Additionally, people might be interested in larger projects that require more advanced carpentry techniques.
Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.
By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your independant carpenter.
Developing the marketing plan for an independant carpenter
Before delving into your independant carpenter business plan, it's imperative to budget for sales and marketing expenses.
To achieve this, a comprehensive sales and marketing plan is essential. This plan should provide an accurate projection of the necessary actions to acquire and retain customers.
Additionally, it will outline the required workforce to carry out these initiatives and the corresponding budget for promotions, advertising, and other marketing endeavours.
By budgeting accordingly, you can ensure that the right resources are allocated to these vital activities, aligning them with the sales and growth objectives outlined in your business plan.
The staffing and capital expenditure requirements of an independant carpenter
Whether you are starting or expanding an independant carpenter, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.
Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.
Staffing costs for an independent carpenter might include wages for employees, salaries for supervisors, and insurance and taxes associated with their employment. Equipment costs might include the costs of tools and materials, such as saws, drills, hammers, nails, screws, lumber, and other supplies. Additionally, the carpenter might incur costs for renting or leasing power equipment, such as a table saw or band saw, as well as costs for purchasing or leasing a truck or van to transport tools and supplies.
In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.).
Once you have all the necessary information to create a business plan for your independant carpenter, it is time to start creating your financial forecast.
What goes into your independant carpenter's financial forecast?
The objective of the financial forecast of your independant carpenter'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 an independant carpenter 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
The projected P&L statement for an independant carpenter shows how much revenue and profits your business is expected to generate in the future.
Ideally, your independant carpenter's P&L statement should show:
- Healthy growth - above inflation level
- Improving or stable profit margins
- Positive net profit
Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established independant carpenter. And similarly, an established company should showcase a higher level of profitability than a new venture.
The projected balance sheet of your independant carpenter
The balance sheet for an independant carpenter is a financial document that provides a snapshot of your business’s financial health at a given point in time.
It shows three main components: assets, liabilities and equity:
- Assets: are resources owned by the business, such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors and other entities, such as accounts payable (money owed to suppliers) and loans.
- Equity: includes the sums invested by the shareholders or business owners and the cumulative profits and losses of the business to date (called retained earnings). It is a proxy for the value of the owner's stake in the business.
Examining the balance sheet is important for lenders, investors, or other stakeholders who are interested in assessing your independant carpenter's liquidity and solvency:
- Liquidity: assesses whether or not your business has sufficient cash and short-term assets to honour its liabilities due over the next 12 months. It is a short-term focus.
- Solvency: assesses whether or not your business has the capacity to repay its debt over the medium-term.
Looking at the balance sheet can also provide insights into your independant carpenter's investment and financing policies.
In particular, stakeholders can compare the value of equity to the value of the outstanding financial debt to assess how the business is funded and what level of financial risk has been taken by the owners (financial debt is riskier because it has to be repaid, while equity doesn't need to be repaid).
The projected cash flow statement
A cash flow forecast for an independant carpenter 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 independant carpenter 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 an independant carpenter.
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 independant carpenter, 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 an independant carpenter business plan is understood, let's focus on what goes into the written part of the plan.
Need inspiration for your business plan?
The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.
The written part of an independant carpenter business plan
The written part of an independant carpenter 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
The first section of your independant carpenter's business plan is the executive summary which provides, as its name suggests, an enticing summary of your plan which should hook the reader and make them want to know more about your business.
When writing the executive summary, it is important to provide an overview of the business, the market, the key financials, and what you are asking from the reader.
Start with a brief introduction of the business, its name, concept, location, how long it has been in operation, and what makes it unique. Mention any services or products you plan to offer and who you sell to.
Then you should follow with an overview of the addressable market for your independant carpenter, current trends, and potential growth opportunities.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Finally, you should detail any funding requirements in the ask section.
2. The presentation of the company
The second section in your independant carpenter's business plan should focus on the structure and ownership, location, and management team of the company.
The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.
The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).
When describing the location of your independant carpenter, you may want to emphasize the area's potential for growth and development. Point out that the area has access to resources that could help support the business, such as an educated workforce, transportation, and a diverse customer base. Additionally, highlight the area’s proximity to other businesses that could lead to potential strategic partnerships and collaborations. You may also want to mention the area’s natural beauty, which could be an attractive asset to potential financiers. Overall, the goal should be to emphasize the potential of the location and its ability to support the growth of the carpenter business.
Finally, you should introduce the management team. Explain each member's role, background, and experience.
It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.
3. The products and services section
The products and services section of your business plan should include a detailed description of the offerings that your company provides to its customers.
For example, your independant carpenter might offer custom furniture building, custom cabinetry, and installation services to its customers. Custom furniture building could include creating pieces from scratch, such as tables, chairs, and bookcases. Custom cabinetry could include building kitchen cabinets, bathroom vanities, and home office storage. Finally, installation services could include hanging cabinets, installing furniture, and any other carpentry related tasks. All these services can be tailored to the customer's exact specifications, allowing them to create the perfect look for their home.
When drafting this section, you should be precise about the categories of products or services you sell, the types of customers you are targeting and how customers can buy them.
4. The market analysis
When presenting your market analysis in your independant carpenter business plan, you should detail the customers' demographics and segmentation, target market, competition, barriers to entry, and any regulations that may apply.
The goal of this section is to help the reader understand how big and attractive your market is, and demonstrate that you have a solid understanding of the industry.
You should start with the demographics and segmentation subsection, which gives an overview of the addressable market for your independant carpenter, the main trends in the marketplace, and introduces the different customer segments and their preferences in terms of purchasing habits and budgets.
The target market section should follow and zoom on the customer segments your independant carpenter is targeting, and explain how your products and services meet the specific needs of these customers.
For example, your target market might include young professionals who are looking to upgrade their homes. They may be looking for custom-made furniture or cabinetry that is stylish and functional. They likely have a good budget to work with and are willing to invest in quality craftsmanship.
Then comes the competition subsection, where you should introduce your main competitors and explain what differentiates you from them.
Finally, you should finish your market analysis by giving an overview of the main regulations applicable to your independant carpenter.
5. The strategy section
When you write the strategy section of your independant carpenter business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.
The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.
Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.
For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.
Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.
Your independent carpenter may face the risk of a downturn in the economy. This could lead to fewer customers or people being less willing to spend money on carpentry services. The carpenter might also face the risk of injury or illness. Working with tools and materials in cramped or hazardous spaces could lead to injury or illness, and the carpenter may not have access to employer-provided health insurance or worker’s compensation.
6. The operations section
The operations of your independant carpenter must be presented in detail in your business plan.
The first thing you should cover in this section is your staffing team, the main roles, and the overall recruitment plan to support the growth expected in your business plan. You should also outline the qualifications and experience necessary to fulfil each role, and how you intend to recruit (using job boards, referrals, or headhunters).
You should then state the operating hours of your independant carpenter - so that the reader can check the adequacy of your staffing levels - and any plans for varying opening times during peak season. Additionally, the plan should include details on how you will handle customer queries outside of normal operating hours.
The next part of this section should focus on the key assets and IP required to operate your business. If you depend on any licenses or trademarks, physical structures (equipment or property) or lease agreements, these should all go in there.
You, as an independent carpenter, may have a few key assets and IP that could help make your work successful. For example, you might have a reliable set of tools, helping you to get the job done efficiently. Additionally, you could have an eye for design and problem-solving, an IP that may give your customers the satisfaction of knowing the job is done right.
Finally, you should include a list of suppliers that you plan to work with and a breakdown of their services and main commercial terms (price, payment terms, contract duration, etc.). Investors are always keen to know if there is a particular reason why you have chosen to work with a specific supplier (higher-quality products or past relationships for example).
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 an independant carpenter business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my independant carpenter's business plan?
There are two main ways of creating your independant carpenter business plan:
- Using specialized business planning software,
- Hiring a business plan writer.
Using an online business plan software for your independant carpenter's business plan
The modern and most efficient way to write an independant carpenter business plan is to use business plan software.
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 independant carpenter's business plan
Outsourcing your independant carpenter business plan to a business plan writer can also be a viable option.
Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.
However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.
Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.
Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.
Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.
For these reasons, carefully consider outsourcing your independant carpenter business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.
Why not create your independant carpenter's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write an independant carpenter business plan is a terrible idea.
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
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.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my independant carpenter business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
Overall, while Word or Excel may be viable options for creating an independant carpenter business plan for some entrepreneurs, it is by far not the best or most efficient solution.
- A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
- Having an up-to-date business plan is the only way to keep visibility on your independant carpenter's future cash flows.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this practical guide gave you insights on how to write the business plan for your independant carpenter. Do not hesitate to get in touch with our team if you still have questions.
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