A business plan is vital if you’re seeking financial backing. But do you still need a business plan if you’ve already got the money you need? Yes you do – and here are 5 reasons why:
1. To define your business
2. To understand your market
3. For planning what you need to do
4. To make you do your homework
5. For more accurate sales and profits forecasts
What is a business plan?
A business plan doesn’t have to be a formal document unless you are seeking funding. You should see it as a roadmap to guide you. All it needs to contain is your business idea, what you need to make it work, and the likely financial outcome.
If you don’t know how to write a business plan, you can use a free business plan template to guide you. The government recommends downloading this business plan template from the Princes Trust. Even if you’re not young, this business plan template is very comprehensive so a good one to use, even if all the sections don’t apply to you.
1. Define your business
Everyone you meet from now on is a potential customer, so when you meet people you need to be able to sum up what you do in a single, enticing, sentence – your “elevator pitch”. Writing down what your business is and what your business aims are really helps.
And referring to your business plan can help keep you on the right track – if your shop fails to make great sales initially you may want to diversify. But should you let the hats you’ve been offered at a great price tempt you if your stated aim is to sell footwear?
2. Understand your market
The Prince’s Trust business plan template asks several questions around who will buy your product and what will motivate them to buy a product like that from you rather than the competition.
You need all this information when you come to writing up your marketing plan too.
3. Plan what you need to do
Your business plan will guide you to record what you need, what you need to do, in what order, by when, and what the costs involved are.
Do you need to find premises or suppliers? Buy equipment or insurance? How will you get your product to your customer – do you need to investigate postal services, couriers or hire or buy transportation services? Do you need to hire staff? Do you need legal or other professional advice? Do you need training?
You will find out if any of these items pose an impediment for you or to the success of your business, and what they are going to cost.
Your plan also comes in handy when your well-meaning friends and family give you advice they expect you to act upon instantly (and they will): ‘You should try y’ or ‘Have you thought about z? It worked for my friend’, you can say, ‘Yes, thanks, I will. It’s in my business plan – I just need to do x before I get to y and z.’ Of course, consider any suggestions that aren’t in your plan, and add them in if you judge them to be useful.
4. It makes you do your homework
As part of your business plan, you need to do market research. This is to demonstrate your business is viable, not only for financial reasons, but to prove it to yourself. Setting up a business involves a lot of hard work, stress, rejection, wasting money… Don’t put yourself through all that if your project is doomed to failure from the outset.
a) Competitors and your USP
Do your homework around competitor’s locations, offerings, comparable quality and pricing. What do you like about them and think they do well, and what do they do badly?
Then think about your own business by doing a SWOT analysis. What are your business’s strengths and weaknesses? What are the opportunities that you can take advantage of? What are the threats to your success?
This will allow you to identify what is, or should be, different about your business, which is your Unique Selling Point (USP).
All of this will also be a key component of your marketing strategy.
b) Will your product sell?
Collect feedback on your proposed product or service to gauge interest and establish your ideal selling price. This may be through surveys competed by your online network of connections. Or it could be out on the street if it’s a product that customers need to see or taste.
If you can, carry out some test trading by renting a pitch at a fair or market to prove that your product can sell, and also gain insights on how many, how quickly, at what price.
Pitches cost about £30, plus your travel expenses.
Susan Ma took 49 jam jars of her family recipe body scrub to Greenwich Market and sold out, taking home £980. Lord Alan Sugar was so impressed he bought into her business which is now tropicskincare.com
5. Sales and profits forecasts
Your pricing shouldn’t be based on what the competition is doing, what the product costs, what you think it should be worth, or what you think it will sell for.
All of the information you’ve gathered will provide you with a realistic selling price, based on realistic costs and a feasible profit margin.
It will also provide you with the information you need for your sales projections.
You may need to revisit your plan to reduce your costs so you can reduce your selling price if necessary. Can you use a cheaper or higher quality supplier? Can you change manufacturing materials? Can you rent cheaper premises, fewer staff initially?
A final point to remember
You need to update your business plan as your business evolves.
Need more help?
There are plenty sources of advice for starting up your business and writing your plan. Check out this great government site for plenty of leads.
If you know what you’re about but just aren’t great at putting it all down in words, contact me and I can write it up for you for £25 per hour.