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So you've got an idea, it seems foolproof, you can see an endless market to exploit. What can possibly go wrong?
Sadly, many new business start-ups will fail within three years, with a large number of those failures inside the first six months. Thankfully, that does not have to be the case for you!
So what can you do to ensure a better chance of survival? Research shows that having some kind of a business plan is vital to the success of your venture, yet so many small businesses start without one and this could well have contributed to their downfall.
Even if you never show it to anyone else, compiling a plan will help to ensure that you have thought through your idea and will definitely increase your chances of success.
Compiling your business plan can be quite daunting but it shouldn't be an intimidating process - a good business plan can focus the mind as well as assist in securing finance and support.
Going through the exercise of compiling a business plan will clarify your strategy as well as defining your long-term objectives.
The plan itself can provide a 'blueprint' for the way that the business will operate with a series of benchmarks to check your progress.
Ideally it should also contain a cash flow forecast, a vital tool for convincing your bank or potential funders - and possibly key customers and suppliers - to support you.
Consider the funding question from the opposite side of the desk — if a friend or family member asked to borrow money from you for this idea, how would you react?
A good place to start is to ask yourself “where do I want to be in 12, 18 and 24 months time”? From here you can begin to formulate your approach to growing and developing your business idea.
The following tips should give you a much clearer idea of what is involved:
I have seen business plans which take up less than one side of A4 paper, some that could rival 'War and Peace' and everything in between. Ultimately, there is no perfect 'one size fits all' plan, the most important consideration is that the proposition is viable - your plan should be able to prove this. In theory, there is nothing to stop you simply writing a document which outlines your thoughts but I would strongly advise you to use a template which has already been tried and tested as this will make sure that you don't miss anything vital.
There are plenty of excellent websites offering business planning advice and you will be spoilt for choice if you are looking for free or paid for templates.
These professional advisors will all tell you how important your business plan will become as your new venture takes shape. Thankfully, they also have the knowledge and experience to assist you with its compilation, and may well have a template that you can use.
Do you remember back to school days when you had to look at previous exam papers and answers to help you revise? Adopting a similar principle can also work with your plan. You will find a wide selection online. They should give you ideas for style and structure, but do not be tempted to copy their wording directly.
If you are applying to a lender for funding, they will almost certainly have a template that you can use. In fact, some will insist on it.
Once you have identified what format or which template you are going to use, it is time to start committing 'thoughts to paper'.
Although the layout is in a set order, you do not have to stick to this when adding information. It is probably best to begin with what you know already and then undertake more research before filling in any gaps or areas of uncertainty.
Strangely, the finished plan usually starts with a section which is best left until last to complete - the executive summary. This is because it should be an 'easy to read' summary of all the other sections.
Tip: Investors often make an initial judgement on the executive summary alone and only read on if it is strong enough.
This is an overall description of the business, what it offers, to whom, within what area, the aims, ambitions of the business.
How much money it needs to start and where that money will come from.
If it is an existing business what are the previous trading figures?
If applying for funding, how much do you need? How will it be used? What impact will it have?
Provide details of any existing or anticipated work or orders.
Provide details of orders you have now.
It is important to provide evidence that there are sufficient customers.
(Stands for strengths, weaknesses, opportunities, threats)
The SWOT analysis is made up of an assessment of the business's strengths, weaknesses, the opportunities that exist and potential threats from competition and market trends.
It is normally presented in a grid or quadrant with a portion for each consideration.
Strengths & opportunities - you should detail the main strengths and opportunities, which you believe will make your business successful.
Then detail areas in which you feel you have weaknesses and how you might overcome them.
If completed honestly, the SWOT can be really useful when planning short, medium, and long term strategies.
DID YOU KNOW? A well respected support agency undertook a survey which identified that more than 90% of the failed businesses questioned admitted that they had not written a business plan.
Knowing how much you need each month to live on is essential if you want to be able to concentrate on your business without worrying about paying your personal bills.
A personal survival budget helps you calculate the minimum amount you need to take out of the business as drawings each week/month.
Remember, this is meant to be the lowest figure possible, not how much you would like to earn if everything goes well.
Sadly, money rarely comes in or goes out at the most convenient time, for example you may have to pay for your stock before you can sell it. A cashflow forecast will help you work out roughly what you can expect financially in the future - even though some of the figures will have to be based upon calculated guesswork. This is vital information, particularly if you are planning to borrow money - it is best to plan for the maximum amount that you will need rather than having to keep going back to your lender asking for more!
“Turnover is vanity, profit is sanity”
Not having enough money in the bank when needed is one of the most common reasons why businesses go bust - even those who appear to be successful.
A cashflow forecast is generally designed to cover the next 12 months of trading and is effectively made up of three key elements: money in; money out; and a running total of what effect these have on your bank balance.
Free Template - You can download a free cashflow template and step-by-step instructions from: syob.net/free-pack.php
Once you have completed all of the sections, you should have a really clear idea of your target market, what you are going to offer and how you are going to reach potential customers. Income and expenditure will be calculated based on the results of your market research and you will be in a much stronger position to start.
After this, it is important that your Plan becomes a 'live' document - it will evolve with your business. You will be able to measure your progress both in terms of market penetration and financial success and prioritise your targets and new opportunities that will undoubtedly arise.
Starting your business is the beginning of a long journey for you, one which will provide you with excitement, independence, success, set backs and 'freedom from the boss'. Your Business Plan is your route map for this journey. Construct it carefully and you will avoid unnecessary detours and costly errors.
Having a great business is no good if nobody knows that it exists. This one page marketing plan template will help you consider how you are going to reach your market. Also contains '200 Guerilla Marketing Tools' - tried and tested ways that you can raise awareness. Many of the suggestions will cost you very little or no money at all!
Courtesy of Agile Marketing.
Worrying about paying your personal bills will distract you from the running of your business. This template will help you to identify how much you need to make each month to cover your outgoings. Use in conjunction with your cashflow forecast to ensure that your projected income/expenditure takes this into account.