You’ve decided to start a business, you have your idea, the drive and motivation. Now what? There are many next steps that will be easy for some people while others will find them more challenging. One thing that almost everyone should do is create a business plan. Creating a business plan helps you set out your vision and goals. It lets you map out how achieving those goals will work – what the milestones are, if any resources need to be acquired, etc. A good business plan also attracts investors and lenders who can provide you with much-needed capital for inventory or advertising. The business plan is essential no matter how much money you have personally invested in your new business venture.
Creating a Business Plan from Start to Finish
Brainstorming Your Idea: When it comes to brainstorming there are two types of people – those who enjoy it and those who don’t mind doing it but just aren’t excited by it or find themselves getting distracted too easily. If you fall into the latter category of people, why not recruit a couple of friends and colleagues who love brainstorming sessions and ask them to help you come up with ideas? You can provide them with some guidelines on what you want the outcome of this process to be – for example: “I am an accountant by profession and would like to start a part-time bookkeeping business. I need ideas as to how I might go about doing it as well as ways that I can promote my new venture”.
Is Your Idea Marketable?: In order for your new business idea or invention to work it has got to be marketable. If there is no desire from consumers then you will have a hard time finding funding. What makes your product, service or solution unique and desirable?
Answering this question will take some research as well as conversations with people who might be interested in your ideas. If you have a product to sell, how can it be differentiated from similar products already on the market? What features does it possess that companies would want to advertise or consumers may value enough to pay a higher price for? Is there a group of consumers that will only buy certain products – what makes them unique from other buyers?
How Will You Market Your Business?: Now that you have come up with a unique idea to present to the market it becomes necessary to think about how you will promote your new business venture. Who is your target audience? What are their key demographics? Where do they live? What times of the day or week are best for advertising to them? How much should be spent on advertising each month/quarter? These are all questions that marketers spend time thinking about and developing strategies around – this is half the battle won right off the bat because it has been taken care of long before you begin even selling your products or services.
Pricing Your Products and Services: If you are selling a product or service then this section will be important for your business plan. You need to get the price right. This is where doing research on the current marketplace is crucial. What products, services or solutions does your target audience currently purchase? Which of these companies’ products sell at what prices? How much competition do you have in your industry? Pricing can be an art form especially when it comes to intellectual properties like books, music, recipes and software; however, there are also some general rules that can help when deciding how many items should be sold for. Price low and you might attract more buyers but if they don’t value what they are buying enough then they will not be as loyal and that means you will lose out in the long run. If you price items at a higher level then your customers might feel like they are overpaying for something, which could lead to them being unhappy. It’s a tricky balance but if you can get it right people will have no problem paying top dollar knowing that what they are purchasing is of a high standard or unique enough that it is worth paying a little bit extra.
Your Business Model: Before a company releases a product or service into the marketplace, they need to have thought about how their business model works – who the target audience is, where the products/services will be sold and how profits will be. In most cases, companies will look at the opportunity cost of how much they might make (or lose) each year after expenses are taken into account. If there is no profit to be made or little potential for growth then it is unlikely an investor will want to put their money on the line. On the other hand, if a company is able to provide metrics that indicate future success and high earnings potential then they can expect some interest from investors who may be willing to fund their projects for between 5% – 20% equity share in return or offer loans with manageable repayment plans.
Are You Financially Viable?: A good business plan presents detailed information about your financial position including how much you currently have saved up as well as projected income and expenditure. Investors will need to know the expected monthly, quarterly and yearly income you will be making from your business venture so they can decide whether or not to invest. This information is usually included within a detailed business plan which goes into all aspects of the company including its strengths, weaknesses, opportunities and threats (SWOT). How much money you need to get started will depend on what type of business you have in mind.
How Will You Fund Your Business?: Investors might want assurance that you have a good understanding of finance and that you have taken the time to research what funding options are available. If you do not have enough money from your own savings then your business plan should include information on sources of alternative funding including grants, loans and venture capital. Venture capitalists might be willing to loan out funds in exchange for a percentage equity share but they usually expect a higher rate of return in comparison to bank loans or government grants. Grants are usually offered by bodies such as local councils or national governments but they will often need proof that your company or idea has potential for growth beyond the initial stages. Loans can work well if either the company is new and does not yet have a track record or an existing business plan to expand into new markets where there is potentially high demand for their products/services.
The main thing is to include whatever details you have on alternative funding sources in your business plan regardless of whether or not they are relevant because there’s never any harm in including information that might end up being useful later down the line.
Is it an Appropriate Time?: The business plan helps to illustrate how quickly your company can achieve what it needs to do in order for investors to get a return on their investment. If you are looking for funds from venture capitalists then they will expect you to be able to demonstrate that there is potential for growth within a specific period of time which could be anywhere between 3 months and 3 years, depending on the type of business.
What Type of Business Are You Setting Up?: Each business needs a different amount of money depending on what it is trying to achieve and where the cash is going within the company. Many small businesses use their own limited company which means that investors will want to ensure that they understand how much profit their investment will bring before committing any funds. A large proportion of these smaller companies do not involve equity investments for this reason because there often isn’t enough money involved. Investors might also consider whether you are asking them for enough money such as by only requesting a small amount of capital from each investor, therefore making it less likely that anyone will lose money.
Understanding What Investors Want: It’s no good just including the things you think people want to see in your business plan because you will need to research and understand what potential investors are looking for before pitching them an idea. Typically they will be interested in how much they could make on their investment and whether or not there is potential for further growth which means that if your business has already started then you should try and demonstrate how well it is doing over time as compared with other businesses in the same sector. If it is still at a very early stage then you should be able to describe any plans for future expansion such as opening new branches of your company in different parts of the country.
Investors might also be interested in how you are planning to market new products or services so perhaps include any new business development plans which could help your company expand beyond where it is now. If it is still at a very early stage then you should describe any plans for further expansion such as opening new branches in different parts of the country and target potential investors by explaining why they will benefit from investing in your business. For example, if you want to sell a product over a wider geographic area then you will need more capital than if you plan to remain localised or even limit yourself to selling online.
A Strong Team: The business plan helps to illustrate the level of expertise you have within your company. Many investors will look into what negotiation skills each business has or how open they are to new ideas, especially if they are looking for people who can bring something completely different to their company. Although money is obviously an important part of any business investment, it’s often about more than just finding someone with a large amount of disposable capital because they might not be willing to take up the risk if there aren’t potential returns on offer.
Make sure that you make clear which members of staff are key players in terms of active roles and research the profiles of any potential investors before pitching them your idea so that you can ensure that everyone involved is playing to their strengths. It might also be helpful to ask them if they could recommend you to other people who could help your business grow, especially if it is still at a very early stage because investors are often happy to share the knowledge that they have built up over time.
Having A Strong Business Plan: The majority of potential business investors will require some type of written proposal so make sure that you can demonstrate your business planning skills within this document. Each section should be clear and concise so try and include as much information as possible without overwhelming or confusing any investors with unnecessary jargon or long-winded sentences. Also try to structure your plan so that it flows logically from one thing to another rather than just having lots of separate parts which may not be linked together.
If you do need help with any parts of the document then make sure that you give yourself enough time to get hold of assistance before pitching your idea. If you can provide clear evidence that you have researched the problem thoroughly and produced alternative solutions then potential investors are likely to think more highly of what you have achieved overall.
What We Can Do for You: Having a business plan is crucial when starting out. It lets you map out your vision and goals, according to what’s needed in order for them to be achieved. A good business plan also attracts investors who can help provide much-needed capital for inventing or expanding your company. Contact us today if you want more information or questions on how we can create an effective business plan and strategy that will drive your business with less effort.