Banks and investors will want to know whether you have a market for your business, whether you can make a profit and whether you’ve thought through the activities to make it a success. It’s also important to complete a plan so that you can manage your business effectively and anticipate any risks.

The format will depend on your anticipated audience. Banks and investors will probably have their own requirements but you may be expected to complete it either in presentation or document format. Sometimes they will ask for additional supporting material. Having lots and lots of irrelevant information probably won’t make it any better, it’s not how big a plan is that counts but the clarity of the content and how well this has been thought through. Having said that, 5 -10 pages should be a good benchmark, dependent on your business model. Any more than that and it probably won’t be read fully.

The type of plan outlined below is especially for those looking to raise funding. However the same elements should be used if you are looking to build the plan for yourself to help you to manage your business effectively.

Business Overview

This will immediately give your readers a good idea of what you do, why it’s unique and who you are.

• Summarise each part of the plan
• Explain what stage the business is at
• What the purpose of the plan is (if it is to raise money)
• Expected profits
• Marketing
• Your unique selling points (why is this a good idea)?
• Who runs the business

Your Market

Here you will need to explain that you do have a market

• How do you know and what is it’s potential size?
• What are the market trends, is it growing/shrinking/changing?
• Who are your competition
• How will this market fare in a recession?

You can get lots of stats to support your figures here and this is more important than just using your own hunches. The Office for National Stats is one place to starthttp://www.statistics.gov.uk/hub/index.html

Your Products and Services

• What is better about your product or service, why is it different to the competition?
• Describe each product or service (remembering to be concise) and what it offers that is better than other similar products
• Provide more detail such as pictures and diagrams only if this is essential to understanding the product and remember to keep it brief. You may want to include any of these additional details in a separate appendix, so people can refer to them if they wish

How Will The Business Operate?

• Who Are The Key People Who Will Run The Business
• How Will You Market Your Services/Products?
• Financial Forecasts
• Funding Requirements

Following these plan basics will not only help to get ready for any discussions with potential investors, it will also help to clarify your thinking on why you’re doing this and how you can make it a success! If you would like more coaching book a series of business coaching sessions to get you started or do your own self coaching online!

Need More Help With Getting Started On Your Plans? Checkout Our Low Cost Online Coaching Programme.

How Much Money Do I Need To Start My Business & When Will I Make A Profit?

These are questions we hear all the time from clients and getting to grips with the both questions fully will help to determine whether or not your business will be a success.

1- How Much Money Will I Need?

Let’s start with getting things up and running. You will need to calculate your initial set up costs, some of which will be one offs and some will be recurring especially for the first year.

Some of the costs you need to think about are on the business start-upchecklist which is attached to every coaching newsletter andinclude as an example:

• Setting up a limited company
• Creating a logo or brand
• Setting up a simple website
• Seeking legal and financial advice
• Registering for VAT and PAYE
• Registering as a Data Manager if you’re setting up a website
• Marketing costs, including web marketing costs
• Finding and setting up physical premises
• Any professional qualifications
• Any professional insurance
• Finding and hiring staff
• Stocking up on raw materials or products
• Finding manufacturers or suppliers and the cost of setting up contracts
• Your regular costs, which you will need to keep a good handle on include:-Rental charges, Council rates and other premises charges-Insurance for premises-Cleaning and security for premises-Utilities costs including access to telephone and internet services

Once you have your complete list, work out your initial set up and recurring costs from before the launch date right the way through the first year. This will be your cash-flow forecast and is absolutely vital to success. Whatever overall monthly figure you end up with add on a contingency amount of between 10-20% as these estimates are rarely 100% correct. The best advice is always to work to the worst case scenario in terms of cash planning as much of the cash flow forecasts are based on factors outside of your direct control, for example VAT and other taxes.

Most of you will know that gross profit is the amount you have left once all your costs are taken off. Your business will break even if your gross profit is the same as your costs. This should now give you a good idea of how much you need to sell in terms of goods or services in order to start making a net profit (your gross profit after the deduction of all taxes).

Therefore to calculate how much money you need you need to work out how much your monthly costs will be in total and how much you will need to sell to cover this amount. Chances are that for the first 6 months to a year you may not sell enough to cover all of your monthly expenses. With this in mind you will also need to budget for additional investment into your business to cover this possible shortfall, at least for the first 6 months to a year dependent onyour sales forecasts.

2- How Much Profit Will You Make & When?

Obviously calculation of such a figure and date is not an exact science (otherwise we would all be Alan Sugar). Therefore treat any estimates with caution as youl earn more about how your business is faring post launch. However based on any market research you have already done (which we covered in an earlier post) you should have a reasonable estimate of how many sales you may be able to make within your chosen customer base and within your distribution area.

Remember though this is an estimate and marketing plans take awhile to start working, so unless you are the next Bill Gates profits will take a while to come through. In the case of very successful businesses this can take years…that said you will should link your cash flow estimates outlined in part one with your income/sales estimates so that you can work out your break even point and how much you need to initially invest to keep the business going.

This next phase of building your business really is critical for success.
We also help businesses by creating bespoke workshops that help youto work through the initial set challenges as a team. If you would like to know any more about this service, please get in touch by phone or email.

So your next plans should be to really get to grips with your estimated cash flow and to get a good handle on how much money you need to invest up front and going forward. More importantly you should also by now start to have a better idea ofwhat profit you may be able to make and when this likely to come through.

Need More Help With Getting Started On Your Plans? Checkout Our Low Cost Online Coaching Programme.

BUSINESS FEASIBILITY

So now you have decided to go ahead the next most important thing you must do before investing lots of time and money is to test whether you will have any customers in your area and whether you can make any money!

Let’s take a look at the questions you need to answer before going any further to avoid major problems later on.

1. If you are manufacturing a product are you sure that you can source sufficient materials to meet demand and that your suppliers have the capability and the capacity to meet your needs. Make a list of the materials and supplier support you need and work out what you will need going forward. This should include costs and an estimate of what you will need at minimum and maximum levels.

2. If you’re providing a service, how many people will you need to provide this service and can you easily hire these skills at the price you want in your area? Again, have a think about what support you will need, check at your local Job Centre or Employment agencies for the availability of these skills in your area and what you would expect to pay, either for a permanent employee or for temps.

3. If you are buying into a franchise then most of this would already have been checked. However, franchises can be very hard to run so it is always important to speak to those running the franchise already and do your own re-check of revenue projections and market size for your area.

4. Will you have enough customers with the cash spend on your product or service? You will need to check out the following:

• Who are you competitors, who else offers a similar service within your area? The size of your area will vary dependent on the service you are offering but you will want to avoid significant overlaps with any competitors especially if they are well established and unless you have a very, very strong offering
• Carry out market research to test demand. This may sound daunting but it will give you vital customer insight. You carry this out yourselves quite easily. It can be a very valuable way of helping to tailor your business for actual demand. You can always ask local businesses such as coffee shops if you could conduct your research there or anywhere where there is good pedestrian traffic or where you are likely to meet good numbers of customers who will want your product or service. Repeat your research at different times and on different days to make sure that you cover off a good cross section of people. So what sorts of questions should you be asking? A lot will depend on your product or service but to frame your questions start with your overall objectives, what is it you really want to find out?  Try to frame your questions as ‘open’ questions (how, who, what, when, where) to help you to elicit more information and keep to a  limit of 12 or so questions. Be professional, e.g. typed questions and business type dress to reflect the type of business you have in mind. If those you approach agree ask them for their email addresses so that you can let them know when you’re up and running. Always get their explicit permission to email them first and that way you will start to build up a ready made list of potential clients. Here are some example questions and always start with a brief description of your product or service. If you have any leaflets  or photographs of what you will be offering show them that as well;

1- What should this product/service do for them?

2- How often would they buy it?

3- How much would they be willing to spend?

4- What would they expect for that price?

5- What after care service would they want?

6- Do they use a similar product or service already?

7- How long have they used it for?

8- How much have they paid for this product/service?

9- How would they rate this existing service or product?

10- Would they pay for premium services and what would this look like?

• Have a think about sample size as well, our recommendation would be for at least 100 (if you can do this many)as this will give you a good cross section of ideas
• You will then need to analyse the data and work out how this help to shape your business idea. The information you now have will help you to shape your;

Target market – the people who will buy your product/service

How much they would be happy to spend – pricing

How much they would be happy to spend on premium services

What is the potential market size in your area

What age group and how far they may be willing to travel for your service

What may be best way to market your business

5. You should set a budget for your research as well which does not need to be very high if you intend to complete it yourselves. Planning and managing your costs right from the start was one of the key actions on the business checklist in last week’s coaching newsletter.

• Other places to gather information on your fledgling business and do research are the many free libraries across the UK. Some University libraries may also allow some access to non-students especially for access to business databases, books, periodicals and research. There may be a nominal fee for University Library access but it would definitely be worth asking the question. Other  types of data that may be useful to you would include: Unofficial UK Statisticswww.gowerpub.com , Business listings, including product and service sub categories can be found www.business.com

That should be enough to keep you for a bit! Understanding who your customers are, where they are, what they want, how they will buy and what they will pay will help the setup of your business significantly.

Need More Help With Getting Started On Your Plans? Checkout Our Low Cost Online Coaching Programme.

Business Advice Centre – Business Start Up Check List

Need More Help With Getting Started On Your Plans? Checkout Our Low Cost Online Coaching Programme.

In these hard times there has been much debate as to whether the Government or the Banks are doing enough to support SMEs. Funding is available if you know where to look but as with everything else it is not guaranteed.

Which means you will need to be smart. The Government agencies, banks and Business Angels will all want to know that you have a properly thought out and convincing business plan.  A lot of people find this difficult so look out for more detailed guides on business planning in future posts. For now, here are some useful links to potential sources of funding.

A  good place to look for funding as a starting point is the ‘Business Link’which is a good general Government research site for start up companies, the first is a general link and the second will take you directly to the ‘grants and loans page’.

http://www.businesslink.gov.uk/bdotg/action/home

http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1076795362

Whichever route you choose, you will have to show that your business idea is a viable one which means that you will be able to produce a decent business plan. Your plan should include as a minimum;

·         Overview of your product or service

·         Evidence that there is a viable market

·         How your service

·         Your Plans

·         Your marketing plans

·         Your pricing structure

·         Your financial plan

·         Any risks

·         How much you need in terms of cash and what level of funding (if any) you will add yourself

One, thing to bear in mind is that government funds maybe harder to get in the future, one because of the UK budget deficit which may reduce the level of funding and two due to greater demand. This doesn’t mean that you shouldn’t try, quite the contrary, try harder and make sure your business plans are well thought through and convincing.

There are of course many business angel sites and just 2 are listed as examples.  Both hold regular investor and entrepreneur sessions across the country and you should always do your own checks and get proper professional advice before entering into any financial business arrangement.

http://www.bbaa.org.uk/

http://www.beerandpartners.com/

Also, an excellent book to read is ‘The E Myth Revisited’ by Michael E Gerber’….….it’s a great guide on managing the various stages of a new business successfully from growing pains to maturity and will give you great food for thought.

 

Need More Help With Getting Started On Your Plans? Checkout Our Low Cost Online Coaching Programme.