Have you got a brilliant business idea? Curious about how to take the next step in its development?
Look no further!
This month, business student Nicholas Butterworth explains how you can bring your idea to life by creating a business plan.
Starting a business can be one of the most exciting and challenging steps a person can take. Turning that bright idea that you had during a boring peak hour drive home from work, into a thriving business, is an amazing journey that we’ve all wanted to be a part of at some point in our lives.
But before your assistant is contacted by a Forbes Magazine representative for that classic front cover photoshoot and even before you’re able to afford an assistant, you need to start with a business plan.
What is a business plan and why do you need one?
Simply put, a business plan provides the base which you will build your business from. It is the best way to begin any business.
A good business plan should be designed to fit:
- the type of business you want to start,
- the stage that the business is at (idea, development, launch, etc.),
- and the type of clients or customers that the business is aimed at.
Also, a good business plan will help you to really understand and expand on your idea; and importantly, it will ensure you investigate key business areas so that you know what you need to fix, look-into and prepare for.
Those who spend time on their business plan will also understand their competition more, and may be able to take advantage of opportunities their competitors have missed!
Finally, a good business plan helps to prove your business’ true potential, and it identifies any reasons it may fail before you have invested even a single cent!
Below you will find the main points you need to include in your business plan:
1. Business summary
Your business summary is an overview of the business you hope to create.
This business outline will help you, your bank, lender, or potential investors, to understand what the business is about and what it offers.
When you set about writing this summary, make sure you paint a clear image of what your business will deliver.
Your business summary should include:
- The product or service the business will provide.
- Where the business will be located.
- What online and physical store options are available for you to take advantage of.
- The current economic climate and how this will impact on the business.
2. Strategic approach and sustainability
The next step in your business plan is to have a look at strategy and sustainability.
This section aims to provide an explanation of how your business will achieve its goals and generate income within a specified timeframe.
The strategic approach also expands on the business structure, for example, will you be a sole trader, a company or a partnership.
This section will also investigate the organisational structure of your business. Here, you will define the roles you and others, will play in your business. For example, you may be the product inventor and want to focus on product and service development, so you would be ‘Head of Research and Development’, while your sister may be amazing with finances, so she would be ‘Head of Finance’, and your best friend could sell anything, and so he would be ‘Head of Sales’.
Finally, in this section you will also investigate the processes that you will use to help your business be a success and continue to thrive, well into the future.
3. Risk analysis
The risk analysis should identify and report on the likelihood and consequence of anything that may harm your business. It is important to perform this task with extreme care so that serious risks are not overlooked.
Any risks that cannot be reduced significantly should be investigated to see exactly how much they will cost you and your business, and this should be included in your risk budget.
If the risk budget is insufficient to cover the cost of a particular risk, and there are no solutions to the risk, the business may have no choice but to close before it even begins.
4. Competitor analysis
A competitor analysis is one of the most important parts of your business plan!
Believing that your idea doesn’t have any competitors is unrealistic, even if there is nothing like it on the market. For example, if your business sells robots that do household chores, it would still be competing against cleaners and nannies.
It’s essential that you research your competitors extensively. Have a look at:
- What are the products or services they offer?
- How do they market their products or services?
- How much money do they charge for their products or services?
- How do they distribute or deliver their products or services?
- How do they treat their customers or clients?
- How do they win customer/client loyalty?
- Are their products/services higher or lower quality than yours?
- What are their returns, service and complaints policies?
- What are their brand values?
- How many staff do they employ? Are they high quality staff?
- Technology – do they have a website? And do they use social media? What are their strengths and weaknesses in these areas?
- Who is the business owner?
- Do they have an annual company report? Can you get your hands on a copy?
- How do they advertise, and what do they do with the media? e.g. Do they interview or advertise in newspapers, on radio, TV or on billboards, etc.
- How much money do they make?
- What are their outgoing costs?
- What is their profit margin?
Whilst researching, you may find that a number of your competitors have weaknesses, which can present an opportunity for your business to capitalise on.
5. Target market
Market research is extremely important, and like competitor analysis, it’s regularly overlooked. It’s far too easy to believe that your idea is a ‘must have’ item that everyone wants. True market research is essential.
Take the time to gather information that confirms who and where the market for your service or product is, and what the market actually wants.
Gathering this information will assist you to mould your product/service to meet the needs of your customers, and it will also improve your marketing techniques.
This market research may actually prove if there is, or isn’t a market for your business.
6. Required resources and recruitment plan
In this section of your business plan, you will accurately forecast what resources and staff you will need to start and maintain your business.
Make sure you look into what resources/staff your business will need in peak demand times, and what it will need when demand is low.
The cost associated with resourcing can make up a large percentage of your total outgoing cost. It’s important to get the balance right! An understaffed business can reduce quality and tarnish the reputation of the business, while an over-resourced business can erode your profits.
7. Finance – implementation and ongoing cost
Developing a thorough understanding of the outgoing cost associated with starting and maintaining your business, until it can financially stand on its own two feet is essential.
It’s important that you identify, record and analyse all costs involved, including the addition of a risk and contingency budget.
All cost estimates should be final, avoiding the need to ask investors or the bank for extra funds, which can quickly lose stakeholder confidence. Income estimates should also be noted.
It’s time to get started!
There are many ways to write a business plan and many online templates to choose from. The most important point to remember is, if you’re starting a business, you need to create a business plan that investigates as many avenues as possible, and that allows you to see the big picture.
You may need to tailor your plan to suit the intended audience (if you’re approaching a bank for a loan, or an investor) without losing the credibility of the facts contained within the document.
Don’t be afraid to work through issues that come up when you’re working on your business plan, and be prepared to accept that some ideas are just not meant to work.
Whichever way it goes, it’s all learning and life experience, so make the most out of it.
Interested in starting your own business?
Open Colleges has a number of courses that will teach you the ins and outs of business, from the ground up!