Are you thinking "I ought to write a business plan", but don't know where to begin?
It's not as frightening as many might imagine, but it does take time, and the help of other people to test the strength of your ideas and assumptions.
The first questions you have to ask are:
It's good to be ambitious, but you also need to understand your strengths well. Getting a big idea off the ground is like lifting a large weight. You can lift a large weight if you have a long enough lever. The three types of 'lever' in business are:
Most people don't start their careers with even one of these levers, but little weights (more modest business ideas) only take short levers to lift. Why not start with something you can do, and build your experience, skills and capital as you go? For many entrepreneurs it's an upward spiral where the challenges keep getting bigger, but their ability to meet the challenges keeps growing too.
Having started to identify some of the key characteristics of your business above, you need to make sure that they have validity. Fundamentally, do other people agree with you? There's no harm in starting by asking family and friends, but they will often give you favourable responses. You need to start researching your market more thoroughly and should seek the advice of experts or a business mentor.
1) First, it's worth trying to define your 'elevator pitch'. Can you explain what your idea/business is, and why someone would want to support you or buy from you, in just thirty seconds? Try it!
2) Next, start to 'fill in the blanks' by writing a business plan (see below for template ideas). The discipline of writing a business plan will force you to answer the trickier questions and will guide you into asking the right questions and doing some thorough research. However, you don't need a work of art. What you need is an 'living' document that grows and develops as you find out more. Don't get stuck on any one section. Write down what you do know, then break down what you don't know into manageable tasks for further research. It's an iterative process drilling down into deeper and deeper levels of detail.
3) Then, you need to find out if it really stacks up financially. If someone is investing money in the business, you need to know that a) there will be enough funds to get going, and b) you will at some point start to make more money than you are spending. The best way to do this is with a cash flow forecast (see templates below). It's the ultimate model for planning a business. Basically, this is just a table (best created with a spreadsheet) of your month by month income and costs. You should forecast at least the first 12 months.
It's difficult to know where to start, and so many things depend on other parts of the table. Start by just filling in what you know and making guesses at the rest. You'll soon see whether your prices are high enough, or costs low enough to make it work.
Many costs (such as insurances) can be estimated by asking people for real quotes.
You have to make lots of assumptions, such as how many customers/orders/products you can process in a month, what people will be prepared to pay you, and how long it will take to get going. Keep going around the table over and over until you are happy that you have made your best guess at everything AND that after a reasonable period of trading, it's clear that your income will exceed your costs.
4) Finally, take your draft plan and cash flow forecast to someone with real business experience who can test your assumptions and give you feedback on the viability of your proposals. There are no guarantees, and they, like you, will be making educated guesses. However, they may help you to spot things you just hadn't thought about.
This whole process could take a few days, or it might take you a year or more as you thoroughly prepare yourself for starting up. Only you can decide whether to go ahead or not and what risks to take. Make sure you take plenty of advice from a wide range of people, always weighing what they say with what you know about their experience, credibility and authority to comment on any particular topic. Beware - there are plenty of people who will offer you an opinion, whether or not they are really able to do so.
The proof is only in the doing. Your cash flow forecast will tell you how much capital you will need to get going. Make sure you can get hold of enough money and always in time. Allow a sizeable contingency fund for when things take longer or cost more than you expected. As you trade, keep accurate records of income and costs, put them onto a live cash flow chart and compare this with your plan. In the light of real experience, constantly update your plan to make sure that you can pre-empt problems, especially running out of money to pay your bills.
If you are applying for one of our funded programmes, we may ask you to complete a business plan and will send you a pro-forma for doing so. However, there are many places you can get a business plan template from, including:
In the first instance though, we'd suggest you visit BusinessLink's web site and look at the very comprehensive guides on:
Find out more about support for business startups at www.businesslink.gov.uk
