Monthly Archives: August 2016

Do You Need a Business Plan Ideas

downloadWhen I am asked to explain why business planning is so important, my first inclination is to quote Lewis Carroll. In Alice’s Adventures in Wonderland, Alice comes to a fork in the road and asks:

“Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to,” said the Cat.

“I don’t much care where–” said Alice.

“Then it doesn’t matter which way you go,” said the Cat.

For me this scene encapsulates perfectly the problems of not having an over-arching goal and plan for your business. Without a plan, or using a cookie cutter business plan template a business is essentially rudderless, and day-to-day activities are likely to be haphazard and reactive, in stark contrast to those businesses implementing a well thought out business plan.

The following represents a list of my top five reasons a firm needs a business plan.

1. To map the future

A business plan is not just required to secure funding at the start-up phase, but is a vital aid to help you manage your business more effectively. By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals.

By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.

2. To support growth and secure funding

Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However, despite the fact that the market for funding is highly competitive, all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps investors understand the past, whereas the business plan helps give them a window on the future.

When seeking investment in your business, it is important to clearly describe the opportunity, as investors will want to know:

  • Why they would be better off investing in your business, rather than leaving money in a bank account or investing in another business?
  • What the Unique Selling Proposition (USP) for the business arising from the opportunity is?
  • Why people will part with their cash to buy from your business?

A well-written business plan can help you convey these points to prospective investors, helping them feel confident in you and in the thoroughness with which you have considered future scenarios. The most crucial component for them will be clear evidence of the company’s future ability to generate sufficient cash flows to meet debt obligations, while enabling the business to operate effectively.

3. To develop and communicate a course of action

A business plan helps a company assess future opportunities and commit to a particular course of action. By committing the plan to paper, all other options are effectively marginalized and the company is aligned to focus on key activities. The plan can assign milestones to specific individuals and ultimately help management to monitor progress. Once written, a plan can be disseminated quickly and will also prompt further questions and feedback by the readers helping to ensure a more collaborative plan is produced.

Resolutions for Entrepreneurs

The New Year is synonymous with resolutions and promises of making changes. If you are an entrepreneur, this time of year offers you a perfect opportunity to take stock of your business, as emails are probably at an all-time low over the holiday period. Here is my checklist of priority resolutions for all entrepreneurs for the New Year:

1. Review your business plan
One of the most important requirements for any entrepreneur is a business plan; not one that lives in their head or one that is consigned to an office cupboard- but a living business plan. If you have never written one, now is the perfect time to do so. If your business plan is in a drawer, take it out, read it and update it accordingly. Without a business plan, your business is essentially rudderless and you run the risk of not focusing on the key activities that need to be undertaken to bring you success.

2. Run through the numbers
For many people, numbers are not necessarily their strong suit and in small companies without dedicated in-house accounting departments this can result in serious problems. There is an old saying that what gets measured gets managed. So if you are starting a business, it is worth revisiting some of the fundamentals that are vital to your business. If you do not have any metrics in place, now is a perfect time to set them. These can include key financial ratios as well as customer and Web based metrics, e.g. £ value per customer, conversion rates, etc.

Topics to brush up on include:

  • Break-even Point
  • Profit Margins (Gross and Net)
  • Cash Flow Forecasts
  • Profit and Loss
  • Sales Forecasts
  • Cost of Sales
  • Creditor and Debtor Days

It is tempting to delegate the maths to others. However, you need to understand these concepts so you can manage your business effectively. For example Insolvency is one of the biggest threats to companies in the UK, yet cash flow management is an area which many entrepreneurs neglect. By understanding the numbers that are relevant to your business you can ensure that you are giving yourself every opportunity to grow and prosper.

3. Optimise your website
Most businesses set up a website when they start, but many entrepreneurs then ignore it. It is essential that websites are maintained and are mined for information. Where are your customers coming from? What are they looking at? What is the conversion level for visitors? All of these questions, and more, are easily answered using free tools such as Google Analytics. If you have not done anything with your website for some time, you should implement Google Analytics so you can understand more about your customers. Armed with this knowledge you can then tailor your website for the audience you attract and help achieve the objectives that the website was designed for in the first place.