How To Plan Your New Business

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...

Teaching Our Next Generation Of Entrepreneurs

The perception of entrepreneurial opportunities and the capacity to exploit them are strongly associated with social norms that encourage venturing, such as the availability of risk capital, access to developing technologies, a quality diverse entrepreneurship education system and a sound professional infrastructure. This has considerable implications for the UK entrepreneurial economy.

Entrepreneurship education, at all levels, could very effectively prepare and train students to start and manage new businesses. This type of education is strong and getting stronger in business schools across the country, but it needs to proliferate outside of the business domain. Very few students undertake business subjects, and not every business school student is required to or chooses to take up an entrepreneurship course. Thus the number of people exposed to higher-level entrepreneurship education is relatively small in the UK. It is critical therefore that entrepreneurship education is expanded.

Engineering and other technology graduates have the capability to generate innovations that may be the basis for high-growth companies. They need to learn techniques for discerning whether or not such innovations have commercial potential. As such, universities need to encourage the integration of their degree requirements between entrepreneurship/management and engineering/technology.

There are often many hurdles to such collaboration, however, including issues of funding; credit allocations; faculty teaching loads; scheduling conflicts, and the lack of available facilities. While a handful of schools are facing and overcoming these issues, there is a real need to see more active collaboration on university campuses.

There also needs to be a more concentrated effort to introduce entrepreneurship and basic economic principles at the primary and secondary levels. At the primary level, these concepts could be integrated throughout the curriculum. At the secondary level, entrepreneurship skills and basic economic principles could be offered as stand-alone courses. Many people enter the workforce without a college education and have no responsibility for exposure to entrepreneurship training.

While not every school graduate has the capacity or desire for higher education, almost everybody has the potential to start a new business. The average high school graduate may not start a fast-growth, high-technology company, but he or she can start a landscaping business, a retail business or some other venture that will employ other people and contribute to economic adaptation. As such, it is critical to provide at least the basic instruction to ensure that these future entrepreneurs have the understanding of and a certain level of proficiency in the skills necessary to implement and manage a business.

To avoid problems of duplication, various national experts recommend the establishment of a ‘clearinghouse’ for government programmes. A clearinghouse, perhaps web-based, could provide an efficient means for entrepreneurs to gain knowledge of specific programmes and to access those programmes.

In addition, there is also the need to simplify compliance pressures on entrepreneurial firms. Simplifying compliance requirements would improve entrepreneurial efficiency at the most critical times in the venture’s life. Many new ventures report having a difficult time staying on top of all the reporting requirements. Furthermore, reducing the required paperwork would reduce manpower constraints on new ventures, thereby increasing their chances of surviving the early years.

There is also a reported ‘Gap’ in Seed Stage Financing. If the gap exists, it may be more pronounced in different industries, different geographic regions, or for distinct groups of entrepreneurs. The substantial amount of funding provided through informal channels, orders of magnitude greater than that provided by formal venture capital investments and hitherto unknown and unappreciated, suggests some mechanisms for filling the gap may have developed without recognition.

There may not be a gap in the availability of such capital but, rather, in the entrepreneur’s knowledge of where it resides and how to tap it. Experts may be split over whether a gap exists in seed capital because of the fact that many entrepreneurs choose not to endure the time, cost and bureaucracy involved in the search and seizure of such capital.

Increasing the visibility of entrepreneurs by highlighting their story could prove to be an attractive method of encouraging others to pursue their own entrepreneurial opportunities. It reflects widespread acceptance of entrepreneurship as a career option in the UK.

In the absence of a more comprehensive, long-term research programme on the entrepreneurial process, government policies in the UK regarding new and growth companies will continue to fluctuate in reaction to political whims and pressures from special interest groups. It is essential, therefore, that an increased understanding of the principles underlying entrepreneurship is secured in order to ensure that a sustained growth in the entrepreneurial sector is secured.

The Importance Of Making Money

The Global Economic Monitor concludes that as much as one-third of the differences in national economic growth may be due to differences in entrepreneurial activity. In America, as many as 8.4 out of every 100 US adults are right now trying to start businesses of their own. Looking at a business birth-rate strategy in the UK should be a priority for Government.

The fact is that small businesses create the majority of new jobs – 1.6 million (or 64 per cent) of the 2.5 million new jobs created in the U.S in 1996, for example. Since 1980, Fortune 500 companies have cut more than five million jobs while the rest of the economy has added 34 million new jobs.

These statistics are very impressive, but when compared with such statistics for the UK, it can be deduced that the British economy gains considerably more from the small business community. For instance, small businesses account for over 50 per cent of employment outside the public sector, and contributes half the GDP of UK Plc. It follows logically from this, therefore, that small businesses and their ability to create such wealth and employment should be focused on more favourably by our government.

Education in entrepreneurial skills is virtually non-existent in UK primary and secondary schools, as is economic knowledge in general: as a whole we lack a strong understanding of basic economics. But what should we do to address this? The best place to start is to look across the pond at the bastion of entrepreneurial activity: America.

Hundreds of US colleges and more than 90 university-based centres of entrepreneurship now offer entrepreneurship training. Twenty years ago, only a handful of colleges even offered entrepreneurship courses. Today, education in this arena is proliferating across the country.

The National Council on Economic Education has focussed on the teaching of complex entrepreneurship skills such as opportunity recognition, utilising resources in pursuit of opportunity, and mastering long-term vision.

Mini-Society is one of the programmes designed by the Kauffman Centre for Entrepreneurial Leadership to teach entrepreneurship to elementary and secondary school children. The programme is an experience-based approach directed at children ages 8 to 12. Through Mini-Society, children design and develop their own society and identify tasks for which they can earn money.

Ultimately, the children identify opportunities and establish their own businesses to provide goods and services to their fellow citizens. Throughout the 10-week programme, the instructor or course leader conducts in-depth briefings with each student to introduce and explain the concepts underlying the learning experiences. More than 3,500 teachers and youth leaders across the country have been trained to teach Mini-Society. Furthermore, the National Foundation for teaching Entrepreneurship (NFTE) has designed programmes (e.g. summer camps) to teach low-income teens how to start their own businesses.

There are also programmes that are attempting to bridge the gap between the science and business communities (e.g. Stanford University; University of Chicago; University of Colorado-Boulder; University of Iowa; University of Texas-Austin etc). Such programmes will serve as future role models for encouraging the integration of entrepreneurship and technical skills-based education.

A great example of American entrepreneurship can be seen in my following economic tip courtesy of my company Entrepreneur Secrets. Ink is known as ‘black gold’: at printer market leaders Hewlett-Packard, ink and toner supplies make up more than 50% of their annual profits, although they bring in less than a quarter of the company’s $80 billion in sales. At $34 an ounce, it is more expensive that Chanel No.5 eau de Parfum, Dom Perignon 1990 vintage champagne, and 22-year-old Rosebank single malt whisky.

But a new breed of fast-growing upstarts is out to crash the profit party. Across America, retail stores are cropping up in strip malls among the Gaps and Wal-Marts where consumers and small business owners can go to have empty printer and toner cartridges refilled – usually for half of what it costs to buy a new one.

The largest of these outfits, Cartridge World, based in Australia, just passed 1,000 stores worldwide, and its North America affiliate has opened 275 stores in the US. The company is signing up a new US franchisee daily and plans to top 3,000 stores in the country by early next decade, a phenomenal achievement.

There have been ways to reduce printing costs for years for shoppers willing to deal with messy do-it-yourself refill kits or buy from online outfits with iffy-quality products. But the new retail chains will make re-use an option for millions of mainstream PC owners. Customers can either wait for a few minutes for their cartridge to be refilled, or pick up a ‘pre-filled’ one in stock. Most refill franchisees also have their own vans to do pickups and deliveries to local businesses, usually at no extra charge.