Thinking of starting a business
Business planning is a critical first step when thinking about starting a business or launching a new product.
A common difficulty faced by many entrepreneurs is that so much is unknown. Having never before encountered the business environment it can be challenging for new businesses to understand where they are going.
The Institute of Chartered Accountants in England and Wales (ICAEW) advises every new business owner to ask themselves these six questions:
1. Where do you expect the business to be after the critical first two years?
Over a quarter of all new businesses don’t live to see their second birthday. Often new business owners get caught up in the minutiae or the business takes on a life of its own. It is crucial that you know where you want to go and being in control with a clear destination in your mind will help a great deal in getting there.
2. What are the Unique Selling Points (USPs) which will deliver business growth?
There are literally millions of businesses out there. Be very clear on what you are about in your business and how that is distinct from others. Most people buy for one of four reasons: Make money; save money; convenience or status/social reasons. It seems simplistic but be very clear in pinpointing your USPs, the features of your offering that support them and the benefit to the customer.
3. Who are the competitors?
In the global market, the physical space and cyberspace between businesses are equally important. Compare prices. Most start-ups try to undercut the competition but sometimes the product or service has plus points for which customers will pay more. Make the reasons why clear in either case.
4. What do the cashflow and profitability figures look like for the first 2 years?
Tough times or seasonal variations need to be planned for. Cashflow may be great for ice-cream sellers in summer when the sun shines but the profitability for the whole year is what tells the true picture of the business. Projecting £100,000 profit in year 10 is of no value if you don’t plan to handle the £10,000 loss in the first year. You’ll be out of business before you get there.
5. What finance will be required in this period and where is it planned to come from?
Seed capital or any other start-up finance may be necessary not only initially but also to fund future growth. Clearly forecast the total amount of finance required. Flagging up from the outset all the milestones and any additional capital injection needed. Make sure the reasons why you need finance are clear and match the type of finance required to the purpose. For example if buying equipment, hire purchase or leasing is probably the first type of finance you should consider. For working capital, factoring or invoice discounting might be appropriate.
6. What aspects of the business plan will give confidence to key stakeholders?
You need to instil confidence in your stakeholders by being able to articulate what you have done and will be doing to ensure your business will not just survive but flourish. Tackle this question first!
For more information and support see businessadviceservice.com
Build your entrepreneurial skills on Barnet's free start-up programme. Barnet Council is working with Rebel Business School to offer free courses to anyone in Barnet interested in self-employment or growing their small business. Join Barnet's start-up programme.
The Prince’s Trust Enterprise Programme will help you to work out if your business idea is viable and whether self-employment is right for you if you are aged between 13 and 30 and unemployed.
Start-up London is a free programme funded by the London Business Hub. It's designed to support London residents who are interested in pursuing their dream in setting up and launching their own business and to help those that started to scale up and grow.
Enterprise Nation is an advice, training and resource service that can connect you to the expertise to help you succeed in your new business.
The following resources will help you to begin thinking through and testing your business idea:
- A step-by-step guide to starting your business
- Business Model Canvas will help you develop an initial short-form business plan on one page
- Lean start up is a method for developing businesses and products by experimentation and gradual product development
- The Start Up Loans Company is a government funded scheme set up to provide advice, business loans and mentoring to start-up businesses
- GLE start-up offers loans and mentoring for new businesses
- This HMRC e-learning course will help you if you have questions about tax, National Insurance, business records and expenses. There are also specific courses available on:
- The UK franchise directory provides a way for individuals to start their own businesses with the backing of an established brand and business process. It holds a wide range of franchise opportunities in many areas of business.
- Start-up factories is a guide to accelerator programmes. Which combine small amounts of investment with intensive mentoring and advice. Helping your business get the best possible start.