|
There are two very different types of business plan. The first is an all-singing, all-dancing sales document with pages of neat text, upward sloping graphs and a ‘promise’ to turn any cash laden investors into a millionaire. The second usually consists of scribbled notes on the back of an envelope, some quick calculations and a hint of hope. Strangely enough, the latter is often of more use in determining future success of a new venture. Whereas most advisors and information sources concentrate on fancy plans for finding funding (the next Business Planning article will cover funding), this article focuses more on practical advice for entrepreneurs at the outset – especially those who are too busy starting a company to plan!
Use a basic plan to demonstrate whether you can turn your great idea into a winner – and how to do it by:
· Defining the opportunity
· Determining what resources are required to meet it
· (Most importantly) showing when you are going to make a profit from your efforts.
Equally the plan will help you avoid the pitfalls of being a new business:
· Finding customers
· Managing your time / resources (trying to be all things to all men)
· Running out of cash
Essentially a basic plan is a set of structured answers to key questions that will determine how you achieve your goal. Start your plan by writing answering broadly the following questions:
What is the business and market?
What product / service are you providing?
How / why is it unique?
What is the competition?
How will you market your product / service? To whom and at what price?
How will you operate – people, location, equipment etc?
Financial analysis: Profit & Loss and cash flow forecasts. (See below)
Contrary to public opinion, a new business does not need to be based on a brilliant innovation. Many successful companies have been built by providing a product or service very well – or at least persuading the customers that they do it well. To sharpen your plan, try and focus less on your product or skills and try to determine what you think the market wants. Re-read your answers from above adding in realistic / honest responses to the following:
1. What is the problem you are solving for your customers?
Customers want 5mm holes when they buy 5mm drill bits! Or for example, web-sites have difficulties establishing customer loyalty – my software will help clients lock their customers in. Establish your business to solve the problems for a set of customers.
2. Who is your target market?
Try to write down the profile of a typical customer – eg. On-line recruitment agencies. Make sure you can define and reach your target market. Find products for your target customers, not customers for your product.
3. Can you define your product?
Again do not try to be all things to all men. Set boundaries for what you will do. Focus on one thing and do it properly.
4. What is it you are doing that is different? What is your Unique Selling Point (USP)?
This can literally be anything, but it will help you focus on what you do better than the competition. Are you quicker / cheaper? Can your system be easily used / integrated? Chose one or two things your customers will want (and pay for).
5. What are the competition doing?
Do not kid yourself that there is no competition – if there is that is usually a sign that there is no market. Break down and analyse their offerings in terms of “must haves” and “niceties”. Plan how you will match the “must haves” such as product support helpline and compete with the “niceties” such as 24hour delivery.
6. How will you do turn your marketing into sales?
Marketing theory offers three strategic choices:
· Lowest cost supplier
· Market focus – to a ‘niche’
· Differentiation – having a competitive advantage.
The first in unsustainable in the long-run. If you have defined a target market, now check it is not crowded with competitors – or re-define your target to a niche where you can be a player – ie. Focus locally, not nationally. Better still develop some knowledge or techniques (and patent them!) to obtain an inimitable advantage.
Planning for marketing involves deciding where you will sell your product and at what price, and how will you promote it. Always remember that your selling price should be based on what the customer will pay NOT what it cost you to produce.
7. How will you function? Do you have the right skills and equipment?
Make your best guess on paper how long it will take to complete each order – will you be able to cope with the volume of sales you need? Think about what skills you will need to buy in.
8. How will you make it work? (Control costs)
A detailed financial analysis will show up if you have enough cash to keep going if sales take off or are slow. Crunching numbers will indicate when you will reach profit – a real motivator! Make sure the venture is viable - make your mistakes on paper, not in real life! Use the plan to determine when you need to spend to make revenue.
Financial forecasts
Get hold of one of the new business packs available from High Street banks that offer free disc software where you can plug your costs and revenues into a template spreadsheet. This will save you precious time!
It is obviously not possible to cover all scenarios and details required for a solid business plan, but if you can sensibly answer the above questions then you are well on your way to completing a professional plan. Remember it is your plan – don’t just write it and file it in the corner, treat it as a living document that offers support as the business grows. Good luck!
--
Mark Roderick
|
