The best business idea will, without a solid business plan that helps to secure finance, remain just that – an idea.
So, if you want to get that idea off the ground and start a new business or to grow your existing business further, what do you need to consider?
The first step is to qualify your idea, consider whether it will appeal to consumers and if it is a viable commercial proposition. This should include researching your potential market to analyse the demand for the service/product, the overall size of the market and your competitors.
Third-party advice will help you to evaluate your business idea – friends, family or professional advisers should be sought to provide you with a sounding board.
Once you've determined that your idea is commercially viable, you'll need to work out the vision for your business. Do you know what you want your business to achieve?
You need to be clear on where you want to go and how you are going to get there. Set yourself definable objectives in accordance with this and have your assumptions challenged to get an alternative perspective.
It is only once you've qualified your idea and considered what you want your business to achieve that you are in a position to write a business plan that will outline how you’re going to get there.
A business plan is the key to obtaining the much-needed cash to finance your business idea. Whilst a business plan must be written and owned by you, advice at this stage is crucial.
A huge percentage of enterprises fail to obtain financing because they write a poor business plan or approach the wrong people.
When drafting your business plan, it is important to remember that it should be written and owned by you reflecting your character because it will be you that will be answering the questions from the finance providers.
You must be clear about how much and what type of finance you need and who you should approach. Make sure you give them what they want to see, not what you want to write.
For example, whilst lenders want to see immediate success in order to meet quarterly interest payments, they generally seek a return on their investment over a long period of time.
When considering providing finance to a business, both lenders and investors will primarily look at three aspects: its management, its management and its management. A business stands or falls by the strength of its management and they will be looking for this to be communicated in the business plan.
Alongside demonstration of management strength, lenders and investors require a business plan that provides a detailed description of what the business does, what competitors in the market are doing and what makes this business better than its competitors. Investors and lenders both want to understand how and why it will succeed.
The key to any investor or lender's decision will be the financial projections for the business, both in terms of borrowings and in terms of earnings for the business.
Whilst a lender will also want to understand the projected cash flow and estimated sales and profits over the next three years, the investor will be looking more closely at the prospects for growth for the business.
Lenders and investors have to take a calculated risk when providing finance to a business, so it is only natural that they will want to consider the downside. When drafting your business plan aid this process by providing financial assumptions.
Draft two projections, including a worst-case scenario that at least shows the business being able to service the required funding. If you need maximum sales from day one, with money being paid exactly in line with your terms of trade to succeed – ie: no latitude for error – getting the money may prove very difficult. Halving the income and doubling the costs in the early days of a new business venture is a very useful piece of advice.
Never include complicated spreadsheets in the body of the plan and rely on the reader to make sense of them. Include a simple matrix of key information and set out in the text your key assumptions on which these figures are based. If necessary, include them in the appendices and invite the reader to refer to them if they so choose.
By raising as much money as you can from your own resources, friends and family you demonstrate to any investor or lender that you are "putting your money where your mouth is" and sharing the financial risk. There is no better way to demonstrate you truly believe that this enterprise will succeed.
It is also worth remembering that lenders will want to see that the predicted borrowings will be amply protected by security should the business not be the success everyone, including the lender, hopes it will be.
Consider the types of questions you might be asked about your plan and prepare responses to them. Finally, prepare and practice your presentation prior to the event.
The general rule of thumb is that you should spend three times as long practicing your presentation as it will take to actually present it. That should ensure your presentation is as polished as the plan itself.
Last, but not least, good luck! But don't forget that luck is when good preparation meets opportunity...
Thursday, 30 April 2009
Tuesday, 14 April 2009
How To Get Your Business Off The Ground
Okay, so far in this blog I’ve given you a lot of background about entrepreneurship and hopefully I’ve pointed out how important I believe entrepreneurial training to be. So now I’m going to focus on giving you information and advice which you should find really useful if you are thinking about starting a new business, or if you already have a business (you just need to adapt the following to your own personal circumstances).
So, when looking at a business, either a functioning one or a would-be one, we need to look at it in the round – we need to do an audit.
But this should be a different kind of stock-take! This needs to be an ‘intangible audit’ which allows you to see the big picture – the true picture. Only if you study the past, can you foretell the future! It will help you to understand why customers want, or do not want, your products or services, the motives underlying their purchases, what is affecting their behaviour, and why and how customers buy, and who influences their buying decisions.
Have you ever sat down and described your company and the industry it operates in, using both positive and negative perceptions and facts? What is the nature of your business? Where is it located? The size, market share, turnover, etc.? And what is the overall business opportunity or problem?
What is your product or service? What is it called? What does it do? How does it work? What percentage is it of the market and what is your market share? What competitors does it have? What are the Unique Selling Points? What are the distinguishing features of each product? Can you translate the features into benefits?
How about your customers? At all times, in your business cycle, you have three main target market groups: your present or existing customers – active and inactive; your past customers; and your prospective or new customers. They are the most important ingredients in your business strategy. As Anita Roddick of The Body Shop said: “Don’t sell to everybody, sell to somebody!”
What was/is the market opportunity that brought/will bring your product into existence? Has the original opportunity changed? If so, why? What external, unforeseen circumstances enhanced or retarded your marketing, campaigns, strategy and plans? What are the number of years and money spent on previous marketing strategies? Have you ever done any research on the success or failure of your current strategy? Is the research valid?
Does your creative approach to your business fit with your products, target market and corporate identity? What are your short- and long-term marketing objectives, and with what yardstick will you measure success or failure? What do you want your present / past / potential customer to do? What is your ‘offer’ strategy?
What other marketing / advertising is planned? What are your primary and secondary merchandising objectives? What are your distribution objectives? What is the distribution pattern and how is it done and by whom and what percentage of the costs or price is it? Is it effective and cost-effective?
Loyal employees create loyal customers. Employee loyalty increases business profitability, competitiveness and market share. What, how, when, where, why and to whom do your communicate? And how does it fit in with your overall plans?
Which industries, companies or products can be tied in with your products? Looking at your products and services now and the objectives to be met, do you know enough about the market, the target market and the competition? What existing research is available? What further research should be undertaken to help you plan your business strategy?
Who, what, why, when, where, how? It’s not easy doing an intangible audit! If you sell tables, you count how many you’ve made, how many you’ve sold, and how many are left in the store room. Although not always easy, it’s still pretty straightforward. But when doing an audit of concepts like ‘why do I have the customers I have and why don’t I have more’, things get a bit more tricky.
You could literally spend days if not weeks undertaking the kind of audit outlined above. Instead, what we need to do is build a simple profile of your business or business idea. What you need to do first is print off this article, then find one of those days of yore writing implements called a ‘pen’. Then circle the words below that apply to you. This is not an exact science, so circle the ones that apply the most to how you feel – but you must be brutal! You need to be as honest as you possibly can to build up an accurate picture. After all, you’ll be the only one looking at this anyway:
Your sector
Profile of market or sector: size, dynamics, trends
Circle the words in bold that apply to you:
Is your market big, medium-sized or small?
Is it a fast-changing or slow-changing market?
Is it a growing or static market?
Your organisation’s status and reputation
Circle the words in bold that apply to you:
Would you say your customers were loyal or opportunist?
Would you say your suppliers were loyal or opportunist?
Would you say your customers and suppliers saw you as a big or a small company?
Competitors’ status and reputation; role models
Circle the words in bold that apply to you:
Would you say your competitor’s customers were loyal or opportunist?
Would you say your competitor’s suppliers were loyal or opportunist?
Would you say your competitors were big or small companies?
Profile of customers / stakeholders in market or sector
Circle the words in bold that apply to you:
Would you say that, in the main, your customers were old, young, middle-aged, or a balance of all three?
Are they mostly male, female, or a balance?
Would you say they rich, poor, or reasonably well-off? (Use your own judgement here).
Characteristics – seasonal / regional
Circle the words in bold that apply to you:
Are your customers mostly local, regional, or national?
Do you sell more in the spring, summer, autumn or winter, or is it steady year-round?
Your organisation
Description of your business – what does it actually do?
Circle the words in bold that apply to you:
Do you provide a product or a service?
If a product, do you manufacture, wholesale, or retail, or if a service, do you provide directly or sub-contract?
Background and history
Circle the words in bold that apply to you:
Is your business under five years old, between five and 10 years old, over 10 years old?
Are you the founder of the business, or the successor in it?
Mission and values
Circle the words in bold that apply to you:
I have or I have not got a mission statement.
I have or I have not got the values of my business written down.
Objectives and goals
Circle the words in bold that apply to you:
I have or I have not got business objectives which are written down.
I have or I have not got marketing and sales objectives which are written down.
I have or I have not got product / service-specific objectives.
Unique selling points
Circle the words in bold that apply to you:
Are you acutely aware, quite aware, or vaguely aware of your product’s or service’s unique selling point(s)?
Do you see the unique selling point(s) of your product or service vital, useful, or relatively unimportant to your business? (And remember, be honest!).
Organisational / management structure
Circle the words in bold that apply to you:
I have or I have not got a management structure in place.
Are there formal or informal lines of reporting in place between different employees?
Where does your business want to be in 3/5 years?
Circle the words in bold that apply to you:
Do you want to grow significantly, grow gradually, or not grow at all over the next three to five years?
Do you want to be smaller than your main competitor, the same size as your main competitor, or bigger than your main competitor in five year’s time?
Are You Sitting Comfortably?
Okay, so now we have some simple background about your business. We’re starting to see what makes your business tick, and we will tell ourselves a little story about your business. Taking each of the words you circled in order, fill in the blanks in the following passage:
My business operates in a market that is ______, __________, and _______. My customers are __________, my suppliers are ___________, and they see me as a _______ company.
The age of my customers is mostly ___________, and their gender is mostly __________, and, as for their pockets, they are mostly __________. They are usually from __________ areas, and they mostly come out (in the) __________.
My business provides a ________ which I ____________________. It is a business which is __________ years old, and I am the _____________ of it.
________________ got a mission statement written down, and _______________ got the values of my business written down. _________________ got business objectives which are written down, _________________ got marketing and sales objectives which are written down, and _________________ got product / service-specific objectives.
I am __________________ of my product’s or service’s unique selling point(s), which I regard as ________________ to my business.
__________________ got a management structure in place, and there are _____________ lines of reporting in place between different employees. I want the business to ___________________ over the next three to five years, and, compared to my main competitor, I want to be ____________________.
And there you have it! A snapshot of your business, your customers, your reputation, and your aspirations. It all looks quite different written down doesn’t it? Don’t underestimate how useful this exercise has been: many small businesses, or even big ones for that matter, never get this far in taking a look at themselves!
So, when looking at a business, either a functioning one or a would-be one, we need to look at it in the round – we need to do an audit.
But this should be a different kind of stock-take! This needs to be an ‘intangible audit’ which allows you to see the big picture – the true picture. Only if you study the past, can you foretell the future! It will help you to understand why customers want, or do not want, your products or services, the motives underlying their purchases, what is affecting their behaviour, and why and how customers buy, and who influences their buying decisions.
Have you ever sat down and described your company and the industry it operates in, using both positive and negative perceptions and facts? What is the nature of your business? Where is it located? The size, market share, turnover, etc.? And what is the overall business opportunity or problem?
What is your product or service? What is it called? What does it do? How does it work? What percentage is it of the market and what is your market share? What competitors does it have? What are the Unique Selling Points? What are the distinguishing features of each product? Can you translate the features into benefits?
How about your customers? At all times, in your business cycle, you have three main target market groups: your present or existing customers – active and inactive; your past customers; and your prospective or new customers. They are the most important ingredients in your business strategy. As Anita Roddick of The Body Shop said: “Don’t sell to everybody, sell to somebody!”
What was/is the market opportunity that brought/will bring your product into existence? Has the original opportunity changed? If so, why? What external, unforeseen circumstances enhanced or retarded your marketing, campaigns, strategy and plans? What are the number of years and money spent on previous marketing strategies? Have you ever done any research on the success or failure of your current strategy? Is the research valid?
Does your creative approach to your business fit with your products, target market and corporate identity? What are your short- and long-term marketing objectives, and with what yardstick will you measure success or failure? What do you want your present / past / potential customer to do? What is your ‘offer’ strategy?
What other marketing / advertising is planned? What are your primary and secondary merchandising objectives? What are your distribution objectives? What is the distribution pattern and how is it done and by whom and what percentage of the costs or price is it? Is it effective and cost-effective?
Loyal employees create loyal customers. Employee loyalty increases business profitability, competitiveness and market share. What, how, when, where, why and to whom do your communicate? And how does it fit in with your overall plans?
Which industries, companies or products can be tied in with your products? Looking at your products and services now and the objectives to be met, do you know enough about the market, the target market and the competition? What existing research is available? What further research should be undertaken to help you plan your business strategy?
Who, what, why, when, where, how? It’s not easy doing an intangible audit! If you sell tables, you count how many you’ve made, how many you’ve sold, and how many are left in the store room. Although not always easy, it’s still pretty straightforward. But when doing an audit of concepts like ‘why do I have the customers I have and why don’t I have more’, things get a bit more tricky.
You could literally spend days if not weeks undertaking the kind of audit outlined above. Instead, what we need to do is build a simple profile of your business or business idea. What you need to do first is print off this article, then find one of those days of yore writing implements called a ‘pen’. Then circle the words below that apply to you. This is not an exact science, so circle the ones that apply the most to how you feel – but you must be brutal! You need to be as honest as you possibly can to build up an accurate picture. After all, you’ll be the only one looking at this anyway:
Your sector
Profile of market or sector: size, dynamics, trends
Circle the words in bold that apply to you:
Is your market big, medium-sized or small?
Is it a fast-changing or slow-changing market?
Is it a growing or static market?
Your organisation’s status and reputation
Circle the words in bold that apply to you:
Would you say your customers were loyal or opportunist?
Would you say your suppliers were loyal or opportunist?
Would you say your customers and suppliers saw you as a big or a small company?
Competitors’ status and reputation; role models
Circle the words in bold that apply to you:
Would you say your competitor’s customers were loyal or opportunist?
Would you say your competitor’s suppliers were loyal or opportunist?
Would you say your competitors were big or small companies?
Profile of customers / stakeholders in market or sector
Circle the words in bold that apply to you:
Would you say that, in the main, your customers were old, young, middle-aged, or a balance of all three?
Are they mostly male, female, or a balance?
Would you say they rich, poor, or reasonably well-off? (Use your own judgement here).
Characteristics – seasonal / regional
Circle the words in bold that apply to you:
Are your customers mostly local, regional, or national?
Do you sell more in the spring, summer, autumn or winter, or is it steady year-round?
Your organisation
Description of your business – what does it actually do?
Circle the words in bold that apply to you:
Do you provide a product or a service?
If a product, do you manufacture, wholesale, or retail, or if a service, do you provide directly or sub-contract?
Background and history
Circle the words in bold that apply to you:
Is your business under five years old, between five and 10 years old, over 10 years old?
Are you the founder of the business, or the successor in it?
Mission and values
Circle the words in bold that apply to you:
I have or I have not got a mission statement.
I have or I have not got the values of my business written down.
Objectives and goals
Circle the words in bold that apply to you:
I have or I have not got business objectives which are written down.
I have or I have not got marketing and sales objectives which are written down.
I have or I have not got product / service-specific objectives.
Unique selling points
Circle the words in bold that apply to you:
Are you acutely aware, quite aware, or vaguely aware of your product’s or service’s unique selling point(s)?
Do you see the unique selling point(s) of your product or service vital, useful, or relatively unimportant to your business? (And remember, be honest!).
Organisational / management structure
Circle the words in bold that apply to you:
I have or I have not got a management structure in place.
Are there formal or informal lines of reporting in place between different employees?
Where does your business want to be in 3/5 years?
Circle the words in bold that apply to you:
Do you want to grow significantly, grow gradually, or not grow at all over the next three to five years?
Do you want to be smaller than your main competitor, the same size as your main competitor, or bigger than your main competitor in five year’s time?
Are You Sitting Comfortably?
Okay, so now we have some simple background about your business. We’re starting to see what makes your business tick, and we will tell ourselves a little story about your business. Taking each of the words you circled in order, fill in the blanks in the following passage:
My business operates in a market that is ______, __________, and _______. My customers are __________, my suppliers are ___________, and they see me as a _______ company.
The age of my customers is mostly ___________, and their gender is mostly __________, and, as for their pockets, they are mostly __________. They are usually from __________ areas, and they mostly come out (in the) __________.
My business provides a ________ which I ____________________. It is a business which is __________ years old, and I am the _____________ of it.
________________ got a mission statement written down, and _______________ got the values of my business written down. _________________ got business objectives which are written down, _________________ got marketing and sales objectives which are written down, and _________________ got product / service-specific objectives.
I am __________________ of my product’s or service’s unique selling point(s), which I regard as ________________ to my business.
__________________ got a management structure in place, and there are _____________ lines of reporting in place between different employees. I want the business to ___________________ over the next three to five years, and, compared to my main competitor, I want to be ____________________.
And there you have it! A snapshot of your business, your customers, your reputation, and your aspirations. It all looks quite different written down doesn’t it? Don’t underestimate how useful this exercise has been: many small businesses, or even big ones for that matter, never get this far in taking a look at themselves!
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