How to Get Your Business Off to a Flying Start
Starting a business can be a maze of research, registrations and red tape. No amount of passion can guarantee your business success but the proverb, ‘failing to plan is planning to fail’ serves as both great advice and a warning for new entrepreneurs.
Preparing a business plan is an important step and the plan should provide an overview of your current business position, where you plan to go and how you intend to get there. Within the plan, you need to demonstrate your current financial position and how it will change over the next few years. To fund your business start-up (or expansion) you’re almost certainly going to need a business plan to convince the bank or investors that your business is a good financial risk. Accordingly, your business plan should demonstrate how much money you need, why you need it and when your investor is likely to get repaid.
It should instil confidence in your business and management skills to persuade your bank, financier or investors to lend you the necessary funds. To raise substantial capital your business plan must be clear, complete and realistic. While a poorly prepared business plan will impact on your chances of receiving the funding, your business plan can deliver more than just a document to satisfy your financiers. It can serve as a roadmap for your business that both business owners and staff can refer to for guidance and direction. Without a business plan you can’t measure your progress or establish your priorities.
Most business owners fail to make a start on their business plan because they are either too busy or don’t understand what is required in the plan. Too often they are working IN the business dealing with day to day issues instead of working ON the business with strategic planning. Devoting some time to work on your business is an investment that can pay substantial dividends. You need a clear vision for your business that outlines where you want to take the business in the medium to long term and can be expressed as a series of objectives. So many business owners fail to put pen to paper because they are waiting for more certainty regarding their funding, financials or sales. Your business plan should steer your activity, not the other way around.
Most business plans contain these 5 key components:
1. Business Description – You need to provide an overview of your business operations and keep it simple. Assume the reader has virtually no knowledge of your industry or operations. Outline your products and services and describe your ideal type of customers.
2. Competition - Clearly describe who your competitors are and why they have the lion’s share of the market. You should also explain how they achieved their status and how you intend to win a share of the market. Be realistic but conservative with your estimates and paint the picture based on best, worst and likely scenarios.
3. Marketing - Provide a detailed description of the marketing strategies, techniques and tools you plan to use to achieve your market share. Highlight your key points of difference, your focus on niche markets and provide an insight into the unique features in your website, the search engine optimisation techniques and marketing collateral you plan to create.
Cover off on your branding, launch and ongoing marketing activities given it could be the difference between boom and gloom. Convince prospective investors that you are not only confident and serious about increasing your sales but you also have the skills and marketing collateral to achieve your targets.
4. Personnel – Success in business can boil down to 3 key variables – strategy, tools and people. Without pro-active people on the management team the best ideas and products can fail. Describe your management team and include resumes of all your key personnel. You should also list people in other employment categories like production, sales, finance and administration together with an organisational chart to illustrate total employment numbers.
5. Financial Data – Illustrate your current financial position (balance sheet) as well as your other income sources including salaries. You then need to prepare projections for start-up costs, your first year’s trading results and a cash flow budget. They are designed to illustrate where you are going financially and ideally your projections should span several years.
Cash flow budgets are obviously critical to the lender to highlight the inflow and outflow of cash in your business and project bank balances at certain points in time. All of your projections should be supported by realistic assumptions that form part of the financial statements.