The best business idea will, without a solid business plan that helps to secure finance, remain just that – an idea.
So, if you want to get that idea off the ground and start a new business or to grow your existing business further, what do you need to consider?
The first step is to qualify your idea, consider whether it will appeal to consumers and if it is a viable commercial proposition. This should include researching your potential market to analyse the demand for the service/product, the overall size of the market and your competitors.
Third-party advice will help you to evaluate your business idea – friends, family or professional advisers should be sought to provide you with a sounding board.
Once you've determined that your idea is commercially viable, you'll need to work out the vision for your business. Do you know what you want your business to achieve?
You need to be clear on where you want to go and how you are going to get there. Set yourself definable objectives in accordance with this and have your assumptions challenged to get an alternative perspective.
It is only once you've qualified your idea and considered what you want your business to achieve that you are in a position to write a business plan that will outline how you’re going to get there.
A business plan is the key to obtaining the much-needed cash to finance your business idea. Whilst a business plan must be written and owned by you, advice at this stage is crucial.
A huge percentage of enterprises fail to obtain financing because they write a poor business plan or approach the wrong people.
When drafting your business plan, it is important to remember that it should be written and owned by you reflecting your character because it will be you that will be answering the questions from the finance providers.
You must be clear about how much and what type of finance you need and who you should approach. Make sure you give them what they want to see, not what you want to write.
For example, whilst lenders want to see immediate success in order to meet quarterly interest payments, they generally seek a return on their investment over a long period of time.
When considering providing finance to a business, both lenders and investors will primarily look at three aspects: its management, its management and its management. A business stands or falls by the strength of its management and they will be looking for this to be communicated in the business plan.
Alongside demonstration of management strength, lenders and investors require a business plan that provides a detailed description of what the business does, what competitors in the market are doing and what makes this business better than its competitors. Investors and lenders both want to understand how and why it will succeed.
The key to any investor or lender's decision will be the financial projections for the business, both in terms of borrowings and in terms of earnings for the business.
Whilst a lender will also want to understand the projected cash flow and estimated sales and profits over the next three years, the investor will be looking more closely at the prospects for growth for the business.
Lenders and investors have to take a calculated risk when providing finance to a business, so it is only natural that they will want to consider the downside. When drafting your business plan aid this process by providing financial assumptions.
Draft two projections, including a worst-case scenario that at least shows the business being able to service the required funding. If you need maximum sales from day one, with money being paid exactly in line with your terms of trade to succeed – ie: no latitude for error – getting the money may prove very difficult. Halving the income and doubling the costs in the early days of a new business venture is a very useful piece of advice.
Never include complicated spreadsheets in the body of the plan and rely on the reader to make sense of them. Include a simple matrix of key information and set out in the text your key assumptions on which these figures are based. If necessary, include them in the appendices and invite the reader to refer to them if they so choose.
By raising as much money as you can from your own resources, friends and family you demonstrate to any investor or lender that you are "putting your money where your mouth is" and sharing the financial risk. There is no better way to demonstrate you truly believe that this enterprise will succeed.
It is also worth remembering that lenders will want to see that the predicted borrowings will be amply protected by security should the business not be the success everyone, including the lender, hopes it will be.
Consider the types of questions you might be asked about your plan and prepare responses to them. Finally, prepare and practice your presentation prior to the event.
The general rule of thumb is that you should spend three times as long practicing your presentation as it will take to actually present it. That should ensure your presentation is as polished as the plan itself.
Last, but not least, good luck! But don't forget that luck is when good preparation meets opportunity...
Thursday 29 May 2008
Thursday 15 May 2008
What Makes An Entrepreneur Tick?
Sooner or later in everyone’s working life we pose the question “If I’m so good at what I do and produce good business and profits for my employer, why can’t I do this for myself?”
Then it becomes a question of confidence and – to a great degree – courage in taking your financial resources and laying them on the line, knowing that there is always the seed of doubt saying “What if I get it wrong?” But countering this, there is always the hope that you can create something which, if it is successful, can afford a better lifestyle for yourself and your family.
A small business is usually run by a few people who have to take on a number of roles, who often have a personal financial commitment in the business, and whose success depend on results, not just the time that is spent in work.
The personal bond between the owners and staff must be essentially a strong one. Without sounding trite, it must encompass mutual respect and the realisation that everyone is working towards a common goal.
There are no numbers in small businesses – names and individuals is what it is all about. And there is no room for the blinkered attitude found in large firms of “it’s not my job.”
In a small firm, staff must be flexible in their working arrangements and have a belief in the business, which cannot just be looked at as a “job”. There must be good relationships between the owner and staff, and working as a team is essential to achieve these objectives. All members of staff must be ready to take on responsibilities outside their usual functions.
And people who run small firms need to be multi-talented, flexible and very hard working. Staff loyalty is vital in small business. Customers expect a better and more personal service than they do from large organisations. Courtesy and a willingness to work are essential at all levels.
A small business owner must always be alert to market changes and be planning well ahead. Too much reliance on one large company to provide work can be very dangerous. Small businesses can adapt more quickly to the market as decision-making is not burdened by the hierarchy of a large business – this is particularly true in the leisure and tourism market place.
A small business has to value every customer. A large firm can afford to simply choose not to deal with certain customers. Conversely, a small amount of payment defaulters can much more seriously affect a small business, so care is required in that direction. The small business has to be constantly aware of market trends and anticipate demand, whereas to a large extent big firms can create demand.
The importance of the owner is paramount. Their workforce must have the confidence in his or her business skills and the ability to render decisions for the continued well-being of the firm. However, sometimes difficult or unpopular decisions have to be made - it goes with the territory. Honesty with oneself, the workforce and clients is of ultimate importance as is a well-developed sense of overall justice and an ability to laugh at oneself and be humble enough to admit mistakes.
If the owner does not make the business tick, then it will fail. The owner must know their market inside out and has to be a “jack of all trades”. The owner must have the ability to carry out an on-going assessment that what you are offering is what the market wants. Having the flexibility to change quickly, monitor customer reaction, take advice as required and keep tight financial control are also crucial elements.
The owner’s contribution and participation is vital to success. In the absence of a full, professional management team, the owner is required to take all-important decisions and is relied on to maintain morale. People-management skills are very important unless the business either involves very few participants, or has a large staff turnover and obviously the latter is undesirable.
Small is beautiful and the decisions small firms make are based on personal experience, access to market research, and advice from professional advisors.
They have the flexibility to change tack to meet changing or new market needs quickly. The decisions they make in the next 12 months will directly have a bearing on their profitability and will ultimately determine their ability to continue to trade. What better incentive do they need to get it right?
They have the advantage of freedom over large firms because they have no management team, board of directors, or shareholders to answer to. They can make instant decisions and these are final. That is not to say that every decision they make is the correct one, but there is much advantage in being able to make a major decision without having to spend time consulting with others. Basically if they spot a trend, they can respond instantly.
In contrast, big business employs people to carry out specific tasks and there is often little incentive to put in more than is required within a set working pattern or to carry out functions for which they are not paid. But one big problem in a small firm is that professional advice or particular expertise is not often available in-house and has to be brought in as required.
A small business uses all of the management skills required by big business, however it does not have the luxury of appointing a specialist for each task.
A small business, by virtue of the fact that it is small, does not usually have a large marketing budget so it is essential that the owner is highly astute and precise in identifying potential markets. Large business is more concerned with corporate image while a small firm is concerned with the image, which the individual and the workforce present, as well as the products it offers.
Then it becomes a question of confidence and – to a great degree – courage in taking your financial resources and laying them on the line, knowing that there is always the seed of doubt saying “What if I get it wrong?” But countering this, there is always the hope that you can create something which, if it is successful, can afford a better lifestyle for yourself and your family.
A small business is usually run by a few people who have to take on a number of roles, who often have a personal financial commitment in the business, and whose success depend on results, not just the time that is spent in work.
The personal bond between the owners and staff must be essentially a strong one. Without sounding trite, it must encompass mutual respect and the realisation that everyone is working towards a common goal.
There are no numbers in small businesses – names and individuals is what it is all about. And there is no room for the blinkered attitude found in large firms of “it’s not my job.”
In a small firm, staff must be flexible in their working arrangements and have a belief in the business, which cannot just be looked at as a “job”. There must be good relationships between the owner and staff, and working as a team is essential to achieve these objectives. All members of staff must be ready to take on responsibilities outside their usual functions.
And people who run small firms need to be multi-talented, flexible and very hard working. Staff loyalty is vital in small business. Customers expect a better and more personal service than they do from large organisations. Courtesy and a willingness to work are essential at all levels.
A small business owner must always be alert to market changes and be planning well ahead. Too much reliance on one large company to provide work can be very dangerous. Small businesses can adapt more quickly to the market as decision-making is not burdened by the hierarchy of a large business – this is particularly true in the leisure and tourism market place.
A small business has to value every customer. A large firm can afford to simply choose not to deal with certain customers. Conversely, a small amount of payment defaulters can much more seriously affect a small business, so care is required in that direction. The small business has to be constantly aware of market trends and anticipate demand, whereas to a large extent big firms can create demand.
The importance of the owner is paramount. Their workforce must have the confidence in his or her business skills and the ability to render decisions for the continued well-being of the firm. However, sometimes difficult or unpopular decisions have to be made - it goes with the territory. Honesty with oneself, the workforce and clients is of ultimate importance as is a well-developed sense of overall justice and an ability to laugh at oneself and be humble enough to admit mistakes.
If the owner does not make the business tick, then it will fail. The owner must know their market inside out and has to be a “jack of all trades”. The owner must have the ability to carry out an on-going assessment that what you are offering is what the market wants. Having the flexibility to change quickly, monitor customer reaction, take advice as required and keep tight financial control are also crucial elements.
The owner’s contribution and participation is vital to success. In the absence of a full, professional management team, the owner is required to take all-important decisions and is relied on to maintain morale. People-management skills are very important unless the business either involves very few participants, or has a large staff turnover and obviously the latter is undesirable.
Small is beautiful and the decisions small firms make are based on personal experience, access to market research, and advice from professional advisors.
They have the flexibility to change tack to meet changing or new market needs quickly. The decisions they make in the next 12 months will directly have a bearing on their profitability and will ultimately determine their ability to continue to trade. What better incentive do they need to get it right?
They have the advantage of freedom over large firms because they have no management team, board of directors, or shareholders to answer to. They can make instant decisions and these are final. That is not to say that every decision they make is the correct one, but there is much advantage in being able to make a major decision without having to spend time consulting with others. Basically if they spot a trend, they can respond instantly.
In contrast, big business employs people to carry out specific tasks and there is often little incentive to put in more than is required within a set working pattern or to carry out functions for which they are not paid. But one big problem in a small firm is that professional advice or particular expertise is not often available in-house and has to be brought in as required.
A small business uses all of the management skills required by big business, however it does not have the luxury of appointing a specialist for each task.
A small business, by virtue of the fact that it is small, does not usually have a large marketing budget so it is essential that the owner is highly astute and precise in identifying potential markets. Large business is more concerned with corporate image while a small firm is concerned with the image, which the individual and the workforce present, as well as the products it offers.
Thursday 1 May 2008
Is Your Business An 'Ugly Baby'?
If there is one table the UK economy consistently comes top of it is the business failure rates in Europe. But why does this happen?
If someone told you your baby was ugly, would you throw it away? And would you welcome the advice of anyone who told you to do so?
There is a link between these two ideas, and if you stick with me I’ll tell you what it is.
Businesses rarely fail from lack of sales. A more common failure is to judge the market potential inaccurately. Much as we all love the concept of conducting market research, we are not so in love with the conclusions. Market research will provide the figures and facts to support a business’s plan – but are these businesses prepared to believe the results?
Two people have what seems to be ‘a good idea’. In the way of the world, one of them ends up pregnant. For nine months she carries the concept around.
She (or both of you) chooses a name and a location. On a certain day with a lot of shouting and screaming the child is born. People ring up to congratulate the new arrival. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
Some nine months ago you thought of a business idea. You carry the concept around and choose a name and a location. On a certain day the business is launched with a lot of screaming and shouting. People ring up to congratulate you. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
I meet you pushing the pram. ‘May I look at your youngster? Thank you. Can I just say that my extensive research shows this child is without doubt the ugliest infant I have ever had the occasion to meet.’
Are you pleased at my comment? Do you thank me for telling you that your child is not worth the bother? Do you leave the infant on the roadside and sneak away? You have not gone through nine months of effort simply to pack it in on the opinion of a so-called expert.
Thus it is with a business. Even if research conclusively proves the infant business will not reach maturity – dare you pack it in and waste all your efforts? No way – it may be ugly, but it’s your baby!
The brave decision if you have any doubt after your market research is not to begin.
The poorest of businesses will normally last for three years. In the first year you notice nothing as you struggle to develop. The second year brings vague doubts. Finally in the third year the doubts become reality.
In the international Global Entrepreneurship Monitor (GEM) survey of entrepreneurial activity, the UK’s overall score of 5.4 is well below the average of 8.0 and far lower than the scores of countries such as the US (10.5) and New Zealand (14.0). We rank 23rd out of 37 countries.
However, surveys by the World Economic Forum and Anderson rank the UK as having one of the best regulatory regimes in the world for starting a business. This suggests that it may be other factors, notably our attitudes and culture, which are holding us back.
The GEM studies support this conclusion, showing that individuals in the UK are less inclined to self-employment than in other countries such as the US and Germany and less aware of entrepreneurial opportunities.
Less than half of our population believe they have the qualities to start up a business and more than a third say fear of failure would prevent them doing so.
Entrepreneur Secrets’ aspirations are high: we aim to have a major impact, bringing about a sea change in attitudes to enterprise.
Some people regard “culture” as an immovable constant or a mysterious undercurrent immune to intervention. Yet our national history is rich with examples of major changes in social attitudes that have been brought about through co-ordinated interventions, often in the form of coalition-based campaigns.
From the abolition of slavery through to votes for women, the provision of free education, protection of the environment, condemnation of drunk driving and innumerable other shifts in the public mood, there is hardly a change that has not been at least partly due to concerted attempts to influence people’s views.
But Entrepreneur Secrets needs to bring about change relatively quickly. The development of an enterprise culture is widely acknowledged to be hugely important for our economy, for the cohesion of our society and for helping to empower individuals.
If someone told you your baby was ugly, would you throw it away? And would you welcome the advice of anyone who told you to do so?
There is a link between these two ideas, and if you stick with me I’ll tell you what it is.
Businesses rarely fail from lack of sales. A more common failure is to judge the market potential inaccurately. Much as we all love the concept of conducting market research, we are not so in love with the conclusions. Market research will provide the figures and facts to support a business’s plan – but are these businesses prepared to believe the results?
Two people have what seems to be ‘a good idea’. In the way of the world, one of them ends up pregnant. For nine months she carries the concept around.
She (or both of you) chooses a name and a location. On a certain day with a lot of shouting and screaming the child is born. People ring up to congratulate the new arrival. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
Some nine months ago you thought of a business idea. You carry the concept around and choose a name and a location. On a certain day the business is launched with a lot of screaming and shouting. People ring up to congratulate you. It is extensively advertised in the local paper, and you both spend the rest of your life spending money to watch it grow.
I meet you pushing the pram. ‘May I look at your youngster? Thank you. Can I just say that my extensive research shows this child is without doubt the ugliest infant I have ever had the occasion to meet.’
Are you pleased at my comment? Do you thank me for telling you that your child is not worth the bother? Do you leave the infant on the roadside and sneak away? You have not gone through nine months of effort simply to pack it in on the opinion of a so-called expert.
Thus it is with a business. Even if research conclusively proves the infant business will not reach maturity – dare you pack it in and waste all your efforts? No way – it may be ugly, but it’s your baby!
The brave decision if you have any doubt after your market research is not to begin.
The poorest of businesses will normally last for three years. In the first year you notice nothing as you struggle to develop. The second year brings vague doubts. Finally in the third year the doubts become reality.
In the international Global Entrepreneurship Monitor (GEM) survey of entrepreneurial activity, the UK’s overall score of 5.4 is well below the average of 8.0 and far lower than the scores of countries such as the US (10.5) and New Zealand (14.0). We rank 23rd out of 37 countries.
However, surveys by the World Economic Forum and Anderson rank the UK as having one of the best regulatory regimes in the world for starting a business. This suggests that it may be other factors, notably our attitudes and culture, which are holding us back.
The GEM studies support this conclusion, showing that individuals in the UK are less inclined to self-employment than in other countries such as the US and Germany and less aware of entrepreneurial opportunities.
Less than half of our population believe they have the qualities to start up a business and more than a third say fear of failure would prevent them doing so.
Entrepreneur Secrets’ aspirations are high: we aim to have a major impact, bringing about a sea change in attitudes to enterprise.
Some people regard “culture” as an immovable constant or a mysterious undercurrent immune to intervention. Yet our national history is rich with examples of major changes in social attitudes that have been brought about through co-ordinated interventions, often in the form of coalition-based campaigns.
From the abolition of slavery through to votes for women, the provision of free education, protection of the environment, condemnation of drunk driving and innumerable other shifts in the public mood, there is hardly a change that has not been at least partly due to concerted attempts to influence people’s views.
But Entrepreneur Secrets needs to bring about change relatively quickly. The development of an enterprise culture is widely acknowledged to be hugely important for our economy, for the cohesion of our society and for helping to empower individuals.
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