Writing a Business Plan:
Top 10 Things to Do Before You Write a Business Plan
Before writing a business
plan, it is best to undertake some research to help you develop the
various sections in the plan.
1. Research All the
Relevant Sections
Before commencing with
your business plan, make sure you understand the sections that are
required, the purpose of the various sections, and the objectives of the
plan. Products such as Business Plan Pro® 2005 help to ensure
all sections are covered. However, if you chose to go it alone, websites
like
www.bplans.co.uk and
www.businessplanhelp.co.uk can help you fully understand the various
components required to write a compelling business plan without any
obvious gaps!
2. Decide the Legal
Structure
While, understandably,
the focus of most entrepreneurs is on their ‘idea,’ it is vitally
important that the operational and logistical requirements are not
neglected. For example, decisions regarding whether you intend to trade as
a sole trader, partnership or limited company are very important. Prior to
deciding, enlist the help of a local accountant or business link or
research the characteristics of the different options on websites such as
www.startups.co.uk . Similarly, issues such as understanding your VAT
obligations, registering a Trade Mark and drafting employment contracts
have to be covered.
3. Manage the Numbers
Whether you like figures
or not, having a thorough understanding of ‘the numbers’ that impact your
business is a crucial component to running a successful business,
particularly at the planning stage. At the outset, it will be important to
understand:
o
Your
Start-up Costs
o
Your
Break-even point
o
Your
funding requirements
o
Your cash
flow forecast for the following months
Free calculators that
help to assist with these calculations are available at
www.bplans.co.uk . It is also recommended that you set the business up
with a basic accountancy package from the likes of QuickBooks®
(www.intuit.co.uk) or Sage® (www.sage.co.uk)
from Day 1.
4. Obtain Industry
Reports
Despite the unique
characteristics of your business, there will be similar companies
elsewhere and undertaking some market research on these will help you
understand your target market a little better. Companies have been
classified into various categories by the U.K. government under the
Standard Industrial Classification (SIC) system; start by identifying your
particular class and identifying your SIC code. This will then help you
search for data on your competitors and other industry participants. Then,
seek some data from the likes of Cobweb (www.cobwebinfo.com),
which produces various business profiles, as this will enable you to
obtain an external perspective on the characteristics of similar firms in
your field.
5. Research the Market
When seeking to advertise
it is worth using the Key Word Assistant on
www.overture.com to see which terms related to your business or
service are most heavily searched. This will give you some help with
headlining your adverts or securing a URL or understanding the key words
you should use in Search Engine Optimization once you have a website set
up. You will also be able to plug these terms into a Search Engine, which
will help you identify competitors.
6. Assess Demand Levels
Prudently
In contrast to assessing
costs, one of the most difficult things to predict is the level of demand
for your products or services. The general rule is to use conservative
estimates on likely demand and to use proxies where data is hard to come
by. One should also use proxies to help even when the idea is innovative
or unique, rather than plucking figures from the air or claiming there are
no comparative figures available. A classic example relates to a recent
tourist development in London which failed spectacularly after a short
time in existence. One serious issue was that visitor numbers were far
lower than those predicted and hence revenues failed to cover the large
cost base. If the owners had researched the visitor numbers of the top
tourist attractions in the UK beforehand, they would have found figures
that represented the upper limit of likely potential visitors. By
predicting a visitor figure far in excess of these, they badly
miscalculated, and these wildly optimistic assumptions contributed to
their ultimate downfall as costs and revenues were far out of sync.
7. Secure a Route to
Market
In an increasingly
competitive landscape, it is vital that the entrepreneur has researched
his route to market or how he intends to access his customer base. Most
new businesses will consider a multi-channel route – however, this is not
only costly but is significantly more expensive than single-channel
routes, for non-established brands. Internet marketing is one attractive
route, as marketing spending can be tracked carefully. Alternatively,
identifying current suppliers who service a similar market niche can give
some indication as to which marketing activities are most effective. Of
course, this assumes the incumbent has got it right!
8. Hire the Right People
Along with financial
predictions, the people entrusted with putting the plan into action will
be subject to particular scrutiny by potential financiers. Regardless of
the entrepreneur’s/founder’s skill set, he will invariably need help.
While many non-core activities can be outsourced, certain functions, such
as sales, will need full-time attention. You should outline the various
skills required to run the business, price them into the model, and also
identify any gaps and prospective candidates to fill them. Investors are
not just investing in an idea- they need to be convinced that those
entrusted with using their investment funds are the right people to
realize the opportunity.
9. Clearly Define and
Articulate the Customer Benefits
Many entrepreneurs fail
to clearly articulate the benefits of their new venture. As a result, the
term ‘elevator pitch’ was introduced into modern lexicons as a proposed
solution to this – an elevator pitch is your idea, supported by your
business model, company solution, marketing strategy, and competition,
all stated in the length of time it takes for a short elevator ride. This
simple idea seeks to force entrepreneurs to think carefully about the
language they use when describing their new venture (particularly
technology ones). It is also used to remind them that they should remain
customer-focused and ensure that they concentrate on describing the
benefits as distinct from just the features.
10. Get a Mentor
Many start-up
entrepreneurs are paranoid that their idea will be taken and often behave
irrationally prior to launch. Usually the idea is closely guarded and only
discussed with close confidantes. However, these confidantes (often family
or friends) find it difficult to pose sufficiently rigorous questions as
(a) they do not want to offend or (b) lack the relevant experience or
judgment to critically analyze the new venture.
Hence, an idea with
serious flaws which could have been rectified early on in the process can
progress before the wheels come off at a later stage (when cash has been
spent). It is highly recommended that the entrepreneur engage an
independent mentor or plan reviewer at an early stage. This person can
help hone the idea before it is presented to financiers or bankers.
Finally in a similar
light a recent trend has seen entrepreneurs enter every business plan
competition they can to gain independent feedback on their various ideas
rather than just to win the prize on offer. This is definitely worth
considering particularly if you can overcome any fears that your idea will
be taken.
Alan Gleeson is the Managing Director of Palo Alto Software,
Ltd., creators of Business Plan Pro® 2005. He holds an MBA from
Oxford University and is a graduate of University College Cork, Ireland.
If you would like further information on business planning, he can be
contacted at
alan.gleeson@paloalto.co.uk. Alternatively visit our websites at
www.bplans.co.uk and
www.paloalto.co.uk.
