10 things to do before writing a business plan
It's always best to undertake research to help you develop the various sections in the 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 or trade name 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: … Your Start-up Costs … Your Break-even point … Your funding requirements … Your cash flow forecast for the following months Free Calculators that can assist you with these calculations are available in this section of the site. It is also highly 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).
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 sources such as Cobweb (www.cobwebinfo.com), which produces various business profiles. 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 attractions in the U.K. 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.
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.
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 the most important phase. 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 stark contrast, some entrepreneurs take the view that the more input they can get the better, and they enter every business plan competition they can to gain independent feedback on their various ideas rather than to win the prize on offer.