What is a Business Plan?
A business plan is not just a document. It is a holistic analysis of your company, the environment it operates in, and a route map to achieving success based on the resources available. Unfortunately, the image most of us have is of a 30-page bound document.
While the business-planning process is in itself a very worthwhile pursuit, most business plans are produced for a specific purpose. For example, the business plan can be used as a means to convey an idea with a view to achieving a specific goal, e.g. securing funding. Hence it needs to be tailored with the audience in mind, and good knowledge of their unique requirements will help shape a winning plan. For example, the requirements a Venture Capitalist will have in assessing a plan seeking to secure a million-pound investment will differ considerably from those of a local bank manager who needs a plan to support a small-loan application. While the former will be primarily looking for capital growth, the latter will be more concerned with security.
Why do I need a business plan?
The following list represents some of the key reasons you need to produce a business plan:
1. To plan for an uncertain future
Business planning is vital to help you manage your business more effectively. By committing your thoughts to a plan, you can understand your business better and also chart specific courses of action that need to be taken to improve your businesses performance. A plan can also detail alternative future scenarios, set specific objectives and goals, and list the resources required to achieve these goals. In short, it can help ensure that you are prepared for all sorts of eventualities.
2. To help grow your business
In an ideal world, all businesses would be self-financing in exploiting business opportunities. In reality, few are afforded this luxury, and hence, many businesses will be required to secure external investment. The production and dissemination of a credible business plan is one of the primary means by which entrepreneurs access capital when they are seeking investment to grow.
3. To commit to a particular course of action
A business plan can help a company assess future opportunities, choose the optimal one, and then commit to this particular course of action. By committing to one opportunity, all other options are effectively marginalized and the company is aligned to focus on key deliverables which will help them achieve their goals.
4. To manage cash flow
Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple—many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due). Cash flow forecasting is an essential part of any business plan.
5. To ensure all bases are covered
When you start a new business, the temptation is to spend time on ‘the idea’ to the neglect of the rest of the business. Entrepreneurs that lack focus tend to react to events as they come up rather than focusing on what is most important. The very creation of a business plan ensures that you cover all the various bases you need to when taking an idea from conception through to launch, and to ensure you are focussing effort on the right areas.
As you’ll have garnered from the above, business planning is an essential activity, regardless of the stage of business you’re at. The very process of producing a business plan enables management to give due consideration to the various factors that mesh together to create the opportunity they are seeking to explore, as well as the resources required and the key drivers needed for success.
Having decided to produce a business plan, there are three main ways to write one:
1. Pay someone to write it.
2. Write it yourself using Microsoft® Word and Excel.
3. Write it using a task-specific software product such as Business Plan Pro UK Edition.
If you, like many entrepreneurs, are time rich and cash poor, option 1 quickly removes itself from the equation, given the cost of having someone write a plan for you. Aside from cost, it is difficult to truely own a plan that someone else has written.
You are then faced with the choice between using Business Plan Pro® and building everything yourself, from scratch, in Microsoft Word and Excel.
Why are we not recommending other business plan software options? Because Business Plan Pro is the best business planning software available – without exception. Palo Alto Software (the maker of Business Plan Pro) has a long proud history developing the software, has had category leadership for years and has extensive lists of testimonials and independent reviews on the website, all corroborating this view.
By all means, you should consider other software options; however, we are confident that your own analysis will reveal that Business Plan Pro® stands head and shoulders above the alternatives.
When it comes to using Word and Excel there are undoubted benefits – not least the fact that they are ‘free’ in the sense that they are bundled on most PCs. The interface is also familiar, given the popularity of their use. However, while these tools are excellent when you know exactly what you need to produce, they offer negligible assistance when it comes to producing specific content, such as that required for a business plan. If the purpose of the business plan were simply to jot down a few notes to keep you on track, they would suffice. However, if you intend to circulate the plan to peers, colleagues or prospective investors, you will need to produce a plan worthy of your name. After all, you are the author!
Here are the reasons why we believe that using Business Plan Pro® is the best way to write a business plan:
1. Offers significant time saving
2. Provides the structure
3. Includes hundreds of examples
4. Ensures you do not leave out any sections
5. Makes the numbers part easy
6. Free Support Available
7. Signposts relevant resources at appropriate points
8. Designed specifically for producing a business plan
9. Risk free
10. Increases your chances
Finally, for most people a business plan is written for a specific purpose, such as securing funding. You should give yourself every chance of succeeding by producing the best quality plan that you can.
Business Planning Mistakes to avoid
The following constitutes a list of the most common business planning mistakes and how to avoid them.
1. Incredible Financial Projections
One of the key areas business plan readers will focus on will be ‘the numbers‘. Specifically, they will concentrate on the projected Income Statement or Profit & Loss. The fact that numbers are projected does not mean that those figures can be included without due rigor or process. They need to be credible, defensible and consistent. Of course forecasting is not an exact science, and the use of proxies can help the author ensure that the figures included are plausible and consistent with the story being told in the other areas of the business plan. The figures must also show an ability of the company to generate free cash flows so that the business can be run profitably while satisfactorily servicing their debts at the same time.
All costs should be recorded including salaries to owner managers who run the company. It is not credible to generate P&L projections where expenses such as salaries are omitted to demonstrate managerial commitment or to artificially reduce losses, etc. By the same token, no investor will be prepared to fund a business where the projected salary payments are excessive. While dealing with finances is not everyone’s strong point, there has to be someone on the management team who is cognizant with the maths. A business plan will need to include everything from break-even projections to proposed return on investments to cash flow forecasts, and one of the key players will have to converse on these subjects in a convincing manner. They will also need to justify the numbers.
2. Lack of a Viable Opportunity
A business plan needs to not only describe an opportunity, it must also detail how the opportunity can be exploited profitably and demonstrate the company’s ability to deliver what is required. In recent years there has been a significant increase in plans that are inaccessible to the average reader because they are couched in technical jargon and unfamiliar terms. If the reader of the plan cannot fully grasp who the prospective customer is, how that customer will be targeted, and the prospective benefits from the proposed solution, the reader will not invest. In an increasingly time-pressed world, people crave simplicity. Many business plan recipients will only scrutinize the Executive Summary and the financials, using these as the decision points as to whether to read further or not.
Hence it is of paramount importance that both the executive summary and the wider plan describe the opportunity in readily understood terms, such as:
- What is the issue or pain point?
- What is the proposed solution?
- What are the benefits of the solution?
- Why are these benefits compelling?
- Who will benefit the most from these?
Once these are detailed, there will be greater transparency regarding the viability, or otherwise, of the proposed opportunity in terms of the company’s ability to profitably serve the target market.
3. No Clear Route to Market
All opportunities are only prospective ones without evidence that the target market can be accessed profitably. Many entrepreneurs are inherently product focused, concentrating their energies on ‘the idea’ to the exclusion of many other important elements such as how they intend to access their customer base. The growth in popularity of the Internet has certainly helped niche producers find geographically dispersed customers, making many more ideas commercially viable. However, it does not come without its challenges, as creating awareness online is both costly and intensely competitive. The business plan must include a comprehensive and credible analysis of how the company intends to secure access to their target market in a cost-effective manner. The low cost and barriers to entry for websites have resulted in the creation of hundreds of thousands of sites. Ensuring that a site stands out from the crowd is easier said than done. Knowledge of who the customer is and how they buy is very important, but identifying them and accessing them on an individual basis is much more challenging and costly.
4. Overestimation of Revenues
Another key element of the plan will relate to the size and value of the opportunity. Does the business plan describe a small local business-to-business opportunity with limited scalability/ return or is it a concept with widespread or even potentially global consumer appeal? While the description of the market opportunity will undoubtedly be couched in positive terms, an obvious danger relates to the innate optimism of entrepreneurs and their tendency to exaggerate every business opportunity. Hence the general interpretation of sales forecasts is that they will be optimistic but not excessively optimistic.
Admittedly what constitutes ‘excessive’ is subjective, but the numbers will need to be justified and if it emerges that the figures are mere fantasy, the author will lose all credibility and it will significantly undermine any confidence the potential investor might have in the plan.
It is important to guard against this by use of proxies and conservatism when it comes to sales projections. Placing some rigor around the process of deriving credible revenue figures also serves the entrepreneur well by enhancing their awareness of some of the key drivers for revenue growth in their business.
5. Lack of Appreciation of the Importance of Good Cash Flow Management
A critical subtlety of any new business is the ability of the entrepreneur to understand the differences between cash and profits and to accept the fact that insolvency is probably the most significant threat to a business. Many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due).
Good cash flow management is vital when businesses pursue investment opportunities where there are significant cash flows out, in advance of the cash flows coming in. The start-up phase of a business is an obvious time when cash flow is under stress with uncertain income streams sitting alongside a raft of certain and often overdue bills. This tension is exacerbated if there are delays to the income streams, e.g. if a restaurant fails to open on time.
Once up and running a company can bank the income immediately if they are a ‘cash-only’ business; however, if they sell on credit, they receive the cash in the future and hence may need to pay some of their own expenses before that income hits their account. This will put a further strain on the company’s solvency. A well structured business plan needs to reflect reality with likely losses in the first months of trading being expected and with financing provisions, e.g. overdraft limits, being put in place in advance of the predictable cash squeeze. A contingency figure should also be added as it is important to leave breathing space for the unexpected costs and overspends that always occur when least expected.
6. No Clear Objective
What is the main purpose of the plan? If it is to seek investment in the business, it is important to clearly describe the investment opportunity. As mentioned previously there is a tendency amongst entrepreneurs to focus myopically on ‘the product’ or ‘the idea’. This is where they expend most energy but alas that is only one part of the process. While the plan describes the concept in detail, it must also address the purpose of the plan. If it is to secure investment, one needs to recognize that investing is the investor’s area of expertise and they will be seeking an appropriate risk/ return for their investment. Their primary interest will quickly shift from the product once they ‘get it’ and ‘like it’ to assessing the ability of the company (including management) to generate free cash flows to enable the business to grow while also returning cash to them.
Once the primary objective of the plan is clear, the author will be able to ensure that the key requirements of the reader are met.
7. No Evidence of Real Demand
Another main area of interest when planning (linked to Point 4) is justifying the sales forecast or demand levels for the product or service. There are two main elements to forecasting – the use of facts and the use of subjective assessment/ judgment. However, no matter how unique a concept is, if the market is defined widely enough, it is likely that figures from alternative offerings (facts) can be used to help assess likely demand levels (judgment). The aim of sales forecasting is to come up with some revenue figures that can be considered to be credible in the wider context. While earlier we countenanced against excessively optimistic estimates, here we are delving deeper to ensure there is, in fact, real demand for the offering. Prospective investors will not want to invest at the very start where the risk is highest. Is there poof of concept in the guise of sales or firm orders? Have some sales occurred already? If not, why not?
8. Business Plan Inconsistencies
A business plan needs to be consistent throughout as all the various strands are brought together into one single entity – the plan. If there are multiple authors of the plan the risks increase that certain inconsistencies will emerge. Similarly any presenters of the plan must be fully cognizant of all facts and stay ‘on script’ so as to ensure that a cohesive story is being told. The numbers must also be consistent with the broader content so that there are no contradictions between them.
9. Playing Down the Competition
There is always competition. Yet the number of times the phrase “there are no main competitors” appears in plans is considerable. No matter how unique the proposition, there will also be some other business competing for the same scarce resource, i.e., people’s money. While competitors may not always be obvious in product terms, competitors emerge upon assessment of the key needs the product fulfills. By broadening the definition of the market, substitute products emerge as ultimately all products and services serve to satiate a defined set of needs, be they physical or emotional. If competitors can not be identified then the search has simply not been diligent enough.
Finally it is also important to consider the threat of entry. What will the competitive landscape look like in a few years? Are there significant barriers to entry, or is it likely that a successful entry will be followed by better-placed competitors with greater resources, etc. What will emerge as the bases for competition and will the company be well placed to compete on these bases?
10. Rushing the Output
The plan needs to be right the first time and the content needs to be accurate, clear and also without spelling or grammatical mistakes. More often than not business plans need to be completed by a certain date and hence the final stages can be rushed. Consequently, in many instances the final output does not do justice to the plan. Attention to detail at the end is vital, so it is important to ensure the following:
- The plan is printed on good quality paper and bound where appropriate.
- Tables and Charts have been edited to ensure they are formatted correctly.
- Content of the plan has been edited down to a digestible size (Addendum can be provided on request).
- Someone removed from the process has independently proofed the plan.
- If a presentation is part of the process, it should reflect the Executive Summary.
Key UK resources
1. Business Plan Competitions
Numerous business-planning competitions are taking place in the UK at any given time. These competitions test a wide range of skills that are often neglected by entrepreneurs. By producing a credible business plan and presenting your case persuasively, you will significantly enhance your ability to secure funding. These competitions are an invaluable resource enabling you to road test your business plan in a safe environment before submitting the plan to potential investors.
2. Start-up Websites
There are a number of start–up websites that can help you understand what needs to be done and how. These websites normally consist of a mix of articles and relevant products and services from third-party vendors. Most also have specific business-planning sections to help you with your plan. The following three well-known UK sites can give you some further insights into the building blocks that make up a winning business plan.
- Bytestart www.bytestart.co.uk
- Startup’s www.startups.co.uk
- Smarta www.smarta.com
- Startup Donut www.startupdonut.co.uk
3. Local Advisor
Despite the availability of a range of different online resources, there are occasions when professional advice is highly recommended. While there is undoubtedly a trade off (professional advice usually costs), there are some decisions that should be made only after consultation with professionals, such as choosing the legal structure of the company. While local accountants are a natural starting point, there are also a number of other bodies that can provide information and advice, and can point you in the right direction for more complex concerns.
- Business Link www.businesslink.gov.uk
Business Link provides information, advice and support to help people start, maintain and grow their business. It is an excellent site with some really great sections and clear sign posting to additional resources. There is also a postcode search facility so you can track down your nearest local advisor.
4. Funding Websites
Entrepreneurs need to consider their financing at the start-up stage and most will look to outside help to assist them in financing the start-up phase. A good understanding of the implications of the various sources of funding is important, not least with respect to the various obligations arising under each. At its most basic, the sources of funding are either debt based or equity based, and each class confers certain obligations on the recipient of the funds. If the business plan is used to secure funding, it will need to clearly outline the benefits to the investor, and the terms of investment, as they’ll be seeking to assess their risks, as well as the ability of the firm to generate free cash flows.
Outside of the traditional sources of finance, it is also worth exploring the following sites, which explain the merits of grant or VC funding. Obviously the conditions for securing either are fairly strict, so both sites will indicate which issues you should consider, as well as information on the availability of the funding.
- J4B www.j4b.co.uk
The site allows quick and simple searches of the j4b database of business grants and loans — the most comprehensive database of its kind in the UK.
- BVCA www.bvca.co.uk
This is the website for the British Venture Capital Association (BVCA) which has over 170 full members and contains a directory that enables users to search for a local member.
5. Scavenger by Cobweb
Scavenger reports are essential reading material for anyone starting up a business in the UK. The Business Opportunity Profiles are reports on specific industries and are updated frequently. With over 800 reports in total, the range includes everything from ‘Children’s Day Nursery’ profiles to ‘Coffee Shop’ profiles to a profile on ‘Complementary Therapy’.
6. Sites with Demographic Data
There are also numerous resources you can use in assessing likely demand for your goods or services. Websites such as www.caci.co.uk/acorn and www.upmystreet.com provide extensive free demographic data about areas based on UK postcode searches. These enable you to build up profiles of the local population and are ideal when you are looking to set up a shop to serve the local community specifically. If you want to consider setting up overseas, then websites such as www.cia.gov/cia/publications/factbook/ give an excellent insight into various local conditions in advance of undertaking more detailed localised research.
7. Your Local Library
Finally, libraries can be excellent resources, helping you access information from a host of disparate sources. They can be particularly useful for researching hard-to-access data relating to markets and potential suppliers.
The Business and IP Centre at the British Library www.bl.uk/bipc/ is just one example of a new resource specifically created to support entrepreneurs in the UK. It enables users to access a range of databases including Amadeus, Economist Intelligence, Mintel, Datamonitor, One Source, LexisNexis, Dialog and the Complete Business Reference Adviser (COBRA).
After a business plan has been written, the next stage often involves pitching the plan to prospective investors. This very fact means that the plan authors and management team should be one and the same and that ‘outsourcing’ the business plan writing process should not be considered. It is not just the content of the business plan that is being scrutinised. The capabilities of the management team are also on show and hence their ability to deliver a presentation in a clear, concise and convincing manner are vital to the overall objective – that of convincing an investor to invest in the business. These prospective investors are not investing in a physical document but in an idea and in those proposing to deliver the idea.
The following is a list of tips to maximise your chances of success when pitching to investors.
1. Know your audience
All presenters are taught about the importance of knowing their audience and engaging with them on a personal level where possible. The Internet has enabled us to research more effectively than we were able to in previous years, so it is important to use this resource to our advantage. Investors have a range of asset classes to choose from as they decide on the composition of their investment portfolio. Hence it is necessary to understand the backgrounds of the prospective investors and their motivations prior to presenting. Once you have done extensive research on the investors it is then possible to tailor the pitch accordingly.
2. Tell a Story
One of the most effective ways to pitch is to place the investment opportunity in the context of a story. Ideally, the story will focus on a problem encountered and the fact that the new idea being pitched solves this particular problem. If the investors can relate to the problem, they are more likely to invest in your business. After that they will be assessing how many people are affected by ‘the problem’ and whether the proposed idea satisfactorily resolves the problem. Finally, if they believe that the idea can solve the problem profitably and it is defensible (via patents, trade marks, etc.) it is likely they will be interested in investing.
3. Prepare to win
Pitching to an investor is not a last-minute afterthought – it is the culmination of weeks, if not months, of planning. All too often, entrepreneurs do not plan accordingly and then find that the preparation of their business pitch suffers. Preparation for the pitch should commence as soon as the business plan process commences. For many investors, the executive summary of the business plan is what opens the door for a presentation, and the full business plan may only be read after a successful presentation has been delivered.
4. Pay strict attention to the detail
Your typical investor will have a good eye for detail and hence the plan and its pitch need to be mutually reinforcing and containing no inherent contradictions. From the outset, there should be one owner of the process who can oversee all preparations and is ultimately responsible for the content. This is particularly important if a number of disparate contributors have worked on the plan and where the pitch consists of numerous participants.
5. Avoid death by PowerPoint®
While the average plan is produced in Microsoft® Word and Excel, PowerPoint tends to be the tool of choice for presentations. While it undoubtedly has advantages in terms of aesthetics, it can be misused when utilised at the pitch stage. The number of slides should be kept to the bare minimum, the content must be rigorously analysed to ensure relevance and clarity and time must be managed carefully. It is recommended each investor receives a slide deck, which contains more detail than the presentation itself (with Appendices used extensively). Finally, it is important to manage the subsequent Q&A process carefully as this is the stage where the investor gets to request information about details that they require to convince them that the proposal is indeed worthy of their investment.
6. Get the numbers right
Investors tend to be very focused on numbers, so all facts must be accurate. The numbers should be realistic and defensible and at least one of those pitching the plan needs to be prepared for in-depth questions relating to the projected financials. While it is easy to couch ‘the opportunity’ in technical terms, future growth projections, supporting demographic trends, etc., investors will focus on hard evidence. So if you have been trading, they’ll want to know turnover/sales figures, break-even points, gross and net margins (profits), and so on. These are indisputable facts and evidence that enable them to accurately assess the risk. If performance has been poor, the presenter will need to articulate clearly why this has been the case and also elaborate on why investment will solve the performance gap. If on the other hand you have not been trading, the risk increases considerably and there is likely to be a significant focus on supporting evidence to justify demand predictions. Remember that investors have options – it is a competition, so you need to sell your idea as the best option for their investment.
7. Practise the Presentation
It is clear that many entrepreneurs have not practised their pitches before impartial observers prior to pitching. This dry run should be arranged well in advance of the presentation date with a panel of critics who have a carte blanche to critique the plan and pitch. One attractive alternative to this is to submit an entry to the growing number of business plan competitions. These contests afford entrants a low-cost opportunity to “stress test” their plans in a very realistic role play. Such competitions test a wide range of skills that are often neglected in the day-to-day tasks of entrepreneurs, who are focused on bringing their idea to fruition. By producing a credible business plan and presenting your case persuasively, you will significantly enhance your ability to secure funding.
8. Excite them
Entrepreneurs pitch to investors to sell them an idea. There must be something unique about the idea, and it must be pitched with conviction, so as to grab the attention of investors who deal with hundreds of business plans every month. This was summed up by former Dragons’ Den investor Simon Woodroffe in a BBC2 show, when he said,
“You gotta make me feel like I’m going to miss out”.
Why would the investor be better off investing in your business rather than leaving money in a bank account, shares or investing in another business? If you are seeking investment it is important to clearly describe the investment opportunity and also to sell it.
9. Learn the lessons
Do not get too downhearted if a pitch is unsuccessful. The investors are likely to give clear reasons for their lack of interest, and this feedback must be considered carefully as it may shape improvements in subsequent pitches. The presenter should segment the various feedback points into groups – is the issue or concern with the idea, the equity share on offer, the management team, etc. Most entrepreneurs need to pitch to a number of investors before securing an investment. If you can line up a number of pitches, remember not to organise the most attractive investor up front as there are likely to be significant improvements in the pitch after it has undergone a number of presentations.
10. Remember the purpose of the pitch
Finally, while the emphasis may well be on an idea, it is important to remember that the pitch has a very specific purpose. This must not get lost in all the details. If the purpose is to secure funding, the presenter needs to ask questions after the presentation to ensure the audience has gained sufficient information with which to make a decision. If an offer is made, the presenter must have a full grasp on whether it meets his requirements, and options if not. So as to maintain credibility, the presenter needs to consider all the various eventualities before undertaking the pitch so that the pitch does not go flat at the end when the issues of substance need to be agreed.
A to Z Guide
Starting a new business is a very exciting time – however, it is also very challenging. Luckily there is plenty of help at hand for those who are clever enough to look for it. Did I say clever? Yes, I did, because many entrepreneurs charge headlong into their pet projects without giving due consideration to the resources available to them. While the energy levels for all entrepreneurs tend to be very high, it is important to step back, when appropriate, to ensure that the proper advice is being obtained. For many people, a new business is like a boat sailing in uncharted territory. One can reduce the inherent uncertainty and risk with good advice, appropriate planning and a dollop of experience. The following article contains some advice and recommendations for those starting up in the UK. While not a ‘bootstrappers’ guide per se, the assumed audience are UK-based entrepreneurs looking to set up with fewer than five employees and limited funding at their disposal.
Where to Start?
Given that one area of particular interest for us is business planning, it seems like a very good place to start. You must resist all temptation to skip writing a business plan. Preparing a business plan is a vital first step on the journey of all entrepreneurs. Sure, it may seem like a difficult proposition, especially if it’s the first time you have to write a business plan. However, the business planning process will really help you get a feel for the various elements that will determine your success, from cash flow, to sales forecasting to your personnel structure. You skip this critical process at your own peril.
Naturally, we recommend Business Plan Pro 15th Anniversary Edition (RRP £79.99) as the best means available to write a business plan. Business Plan Pro helps you to structure your business plan, is exhaustive (meaning you cover everything) and offers help at every step. Alternative methods include writing the plan yourself, using products such as Microsoft Word and Excel, or paying someone to write it for you. Unfortunately, these other methods either leave you staring at a blank screen, or simply help you avoid thinking through the conceptual and financial issues critical to your business.
Whatever method you choose, you will find more information on writing a business plan at our business plan site.
If the industry is relatively new to you, I’d recommend you purchase a Business Information Factsheet or Business Opportunity Profile from Cobweb. These fact sheets will help you understand some of the live issues within your sector. These profiles include options such as ‘How to Start a Coffee Shop’ to ‘How to Start a Restaurant’ and cost about £5.
I cannot stress enough at this point the importance of getting advice. The great thing about starting a business is that there are lots of experts who may be blogging about their experiences or have written about the issues they faced and some of the hurdles they have overcome. Here are some of my personal tips for some key areas in getting started:
Speak to an accountant early on in the process. They can help you decide the best legal structure for your business, explain VAT and also advise you on other financial obligations. Aims Accountants are a group of accountants that are scattered around the UK and are ideal for start-ups.
You must get a grip on finances from day one – don’t assume it can be all outsourced to an accountant or bookkeeper. I would recommend taking a look at products such as Intuit’s QuickBooks or Sage 50 Accounts 2008. The bottom line here is that certain things, such as cash-flow management, are often neglected by entrepreneurs. If you have to pay for things up front and only receive cash 30 days later you will have a potentially crippling financing gap. By ensuring you invoice promptly and manage accounts receivable/ debtors you will be in a better position to ride out any credit problems.
All computer users should have an antivirus package in place (at the very least) to protect against viruses, etc. Packages are available online and from stores such as Amazon and PC World. Market leaders include Norton and McAfee, but there are also good, lower-cost alternatives available such as AVG.
You will also need to open a bank account. There are many different banks offering good opening offers for start-ups, so do your research. You can also follow threads on websites such as UK Business Forums (www.ukbusinessforums.co.uk ) or Bytestart (www.bytestart.co.uk) to read reviews from current customers. Naturally, it is vital that the bank is competitive and has a good online presence so you can manage your accounts online. While you are researching bank account options, speak to them about other financial services products, such as company credit cards and merchant services (an ability to take credit card payments). Whatever you do, keep business expenses, costs and accounts completely separate from your personal ones.
Looking for some books to help get you started? We recommend the Pearson range and also The Essential Business Guide. To avail of discounted copies please go to the resources tab on BPlans (www.bplans.co.uk). Business Plan Pro includes Hurdle: The Book on Business Planning by Tim Berry free in PDF format as well as Tim’s latest book Plan As You Go.
Business cards can be easily ordered online from the likes of Vista Print or Moo. There is no reason not to be creative with the cards to try and help you stand out from the pack. A business card should contain the name of your company and contact information, at the very least, and once you get them printed be sure to carry sufficient quantities with you. The next step is to go networking and to attend events such as Growing your own Business and Business Start-up so as to get your name and your card out there.
Fast Internet connectivity is vital for any entrepreneur in the UK given the importance of the Internet for all businesses. Again, it’s a case of shopping around to assess which provider will give you the best option for your circumstances. It is worth noting that the cost of broadband is related to the speed plus the download size, so it is important to consider your likely usage in light of these.
Given the extent to which your business will probably rely on computers, you should put a data backup system in place. There are two main options: remote backup to an online server, or backing up to an external hard drive. Again, there are pros and cons to both. The cheaper option is probably to buy an external hard drive such as those offered by Maxtor. These come with a USB connection and you simply plug it in and back up the files to it (in essence you are just copying the files to another device). If your business takes online orders or has any significant digital data needs, you will likely want the additional reliability and security of a remote, online automatic backup. There are a myriad of data backup providers out there. It is really a commodity offering, so either get a recommendation from someone or go with a lower cost provider.
A domain name is the name that people type into their Internet browser to get to your site; for example, you would type www.paloalto.co.uk to get to our main business plan site. Having a good domain name is an asset, and ideally it will positively represent your company or product name. After that, it is a case of deciding which countries you want to have websites for. Most UK websites will end ‘.co.uk’ whereas in the U.S. ‘.com’ is the main domain suffix, properly called a ‘Top-level domain’. You can order domain names in the UK from providers such as Net Benefit; again however, as it is a commodity offering, shop around for the prices and offerings you want.
Email for Website
Once you get a website up and running and are receiving traffic to it, you will need to manage email from the ‘Contact us’ page. While it is tempting to route email to an Outlook account on an individual computer, this has many drawbacks: it’s not accessible remotely, you may have uncoordinated customer responses, and what happens if that computer is down for whatever reason? There are a number of new innovative solutions available that enable remote online access. We at Palo Alto Software were so dissatisfied with the other email solutions which we tried that we built our very own product! It is called Email Center Pro and there is a free trial available at the website; www.emailcenterpro.com .
Harnessing the power of the Internet means you do not have to invest in hardware, such as a fax machine, that you may use infrequently. Don’t waste your money buying a fax. Instead subscribe online to an electronic fax service from the likes of eFax. The number of people sending faxes has declined significantly with the advent of email, but in some professions they remain an invaluable tool. Once you set up, be sure to sign up for the Facsimile Preference Service to ensure you are on the list of those not opting in for unsolicited faxes.
All start-ups tend to be very careful with finance – after all, there are all these outgoings set against uncertain income. From a provider perspective, new businesses can offer a lifetime of purchasing so they are very attractive as customers. The key with all of this is to assess the nature of the competition in the industry from which you need to source products, and then to see whether the service provider is prepared to offer free trials, etc. See my bootstrappers guide to starting up for more information.
There are numerous different ways to finance a business. The bottom line here is that you do need to consider which options best suit your needs. You can find a lot more detail regarding the types of financing available by visiting BPlans. Similarly there is also a collection of financing PDFs available in the resources section there (www.bplans.co.uk). Finally, as with all larger decisions, it is worth involving a professional such as your accountant when deciding upon the optimal financing arrangement.
The Google search engine is one of the most powerful ways to market to customers. When users search for products such as ‘Business Plan Pro’ the results contain a mix of ‘organic listings’ and ‘paid for’ listings. Organic listings are simply the list of website links Google decides are important. These cannot be influenced by paying more to Google so as to make you appear at the top of the rankings. Paid for listings are the links that people pay for. The beauty of this setup, from an advertiser’s perspective, is that you only pay for adverts that are clicked on. The Google AdWords system also supplies significant amounts of data, so you can manage budgets, track Return on Ad Spend (ROAS) and so on.
Once you have identified your main competitors and the main search terms people use to find your goods or services, you should set up alerts. Google Alerts is a free process that emails you alerts when your chosen terms show up. This is a low-cost way to monitor the activities of competitors and competitive providers.
While Google is best known for its search engine, it has been adding to the breadth of its service offerings over the past few years. With Google Analytics you add some tracking code to your website and this enables you to obtain rich data about the behaviour of users. Marry this to AdWords and you can really get a bird’s-eye view of user behaviour vis-à-vis the effectiveness of your marketing. The best thing is that it is free, although Google does get access to all of your user behaviour data. So if you are concerned about your Internet data you may want to explore paying for a locally installed analytics tool.
Homeworking i.e. working from a home office is an increasingly popular means for people to start businesses in the UK. There are a number of advantages to this, not least the fact that overheads are kept down as the entrepreneur seeks to establish a ‘proof of concept’- generating sales to demonstrate that there is indeed a demand for the product or service. There are a number of specialised websites that help advise people looking to start a business at home. Enterprise Nation is one excellent UK based free resource to help you start and grow your business at home.
Along with email, instant messaging (IM) has proven to be one of the most used online applications for Internet users. By opening a messaging account, you are adding an extra communication tool to your portfolio, ensuring you can communicate effectively with colleagues and customers. If you want to offer an IM service to your customers, you can add applications such as LivePerson to your website. If it is just for in-house communication, free products such as Yahoo! Instant Messenger will suffice.
It is vital to ensure that you are adequately insured from day one. This is particularly important if there are obvious risk areas, such as public access to premises. In such instances, you will need Public Liability Insurance. It is also worth undertaking a risk assessment to understand where insurance is needed across the business. Obviously, buildings and other assets such as vehicles will need to be insured. If you are providing a service where people will be relying on your advice, you may also need Professional Indemnity Insurance. Thankfully, insurance is pretty competitive so it’s a case of just shopping around.
The main legal structures in the UK tend to be Limited Company, Sole Traders and Partnerships. Again the type of business you are in will play a role in helping you decide which best suits your needs. I would recommend that this is something your accountant would help you with, as there are various financial and accounting pros and cons associated with each.
With the increase in entrepreneurship, there has been a growth in the facilities available, from offices from the likes of Regus to people working from home offices to short-term lets. It is worth taking some time to work out both your immediate requirements and requirements 6 -12 months down the line. Be prepared to negotiate terms – have a walk around the building and try and assess occupancy levels. Obviously this will give you a feel for your bargaining power. Most office rental options will include phones and Internet, but make sure you have flexibility to leave if it just does not work out. Many providers will be keen to lock you into a 24-month contract with two to three months of rent up front. There has been an increase in hotdesking operations which offer you more flexibility if you are a new business and have yet to generate sufficient sales to suggest that you will have a guaranteed income to support longer term commitments.
Logos and Branding
You will need to design a logo and brand for your company. While the start-up stage is often characterised by expense after expense, it is important not to cut costs with your brand. Assuming you’ll have a website; it is worth getting a designer to create a site brand template and logo to ensure a professional feel. You can see how effective this can be by viewing our business planning UK website (www.businessplanuk.co.uk) created by Imagist in London.
Once the business is set up, a key requirement will be the need to market effectively so as to attract customers. A marketing plan will help ensure that focus is on the correct areas and that marketing activities are prioritised. Palo Alto Software produces Marketing Plan Pro (RRP £129.99), which is ideal for the creation of a marketing plan.
The cost of equipment has come down a lot in recent years, largely as a result of increased competition but also price transparency. People nowadays would not even think twice about sourcing office equipment from the likes of eBay. Again, it is a matter of personal circumstances. Are you going to be receiving onsite client visits? If yes, then it will be necessary to purchase good quality equipment. If, on the other hand, you are running a website without visitors to your physical location, the aesthetic qualities of the equipment are not as important.
‘Public relations’ is a broad term for activities that help get your name out in the open. It is a vital part of any marketing initiative, and for smaller companies it can be managed in-house. When you finally launch your offering, a press release is issued to draw attention to the offering. These press releases are fairly standard and can be released through websites such as Daryl Wilcox Publishing.
A number of specialist small-business websites exist in the UK. These offer a range of products and services and also contain articles, small-business forums, tools and calculators. The main ones to look at are Startups, UKBusinessforums, Bytestart and SmallBusiness.
The annoying thing about registering a Trade Mark is that it can be a costly and drawn-out process. Nonetheless, it is important to ensure that the brand name you have chosen is not already in use. One quick way to check is to use Google to see if there are any obvious conflicts that show up. After that it is a case of securing a trade mark for your product within certain geographic areas. Obviously you will also want to ensure that the trade mark is available as a domain name so people can find you. There are numerous companies that can help with Trade Marks including RM Online.
Practically every business nowadays creates a Web presence to market their wares. It is definitely a highly recommended option regardless of your business. Thankfully, it is a very competitive marketplace so the cost of getting online has come down significantly in recent years. It is worth doing a competitive review to assess the quality of competitor websites. You can then use these to help you map out the sections you require. Once you get a website live, the next challenge is to get traffic to it. This will be one of the key strands of your online marketing activities.
Summary and Conclusion
Starting a new business is a very exciting time. It is not a time to make snap decisions when investing a small amount of time can help ensure you set up on a solid foundation. Thankfully, countless other people have experienced the same feelings you are feeling now, and there are plenty of resources available, if you know where to look.
This guide is designed to help signpost some of the key resources you need to consider to maximise the chance of survival. As you will undoubtedly have heard, the first few years of a new business are the most challenging. While this guide was not designed to be exhaustive, I am hopeful it will have helped in some small way to reduce the challenges you face.
Finally, it is worth noting that the above recommendations are personal and are not based on any commercial relationships. One problem I feel that entrepreneurs in the UK face is the reluctance of some advisors to recommend services, given a desire for impartiality. I disagree with this notion and feel that recommending a few providers is a much better option, and hence, where I have used products or services I have benefited from or are familiar with, I have recommended them.