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RETIREMENT & LIFESTYLE PLANNING | |
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| ISSUE - 25 - Summer 2006/2007 | |
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Your business
How to stop dreaming and write a plan
With almost 70 per cent of start-ups failing within five years, it's clear high hopes, a good gut feeling and a half-empty piggy bank are not enough to build a successful business. You need an accurate and comprehensive business plan based on answers to tough questions like these posed by
Stephen Johnson.Business plans fail in two areas: either they sell a bad concept,
or they fail to sell a good one.You can improve on any business plan by using the process of creating it to question and ‘tweak' your business idea. It's an excellent opportunity to evaluate your business idea honestly.
These are the questions to ask.
1. What's my market?
Don't build your plan around an idea. Build your plan around a validated market. Consider your proposed product or service, decide which people you think it's good for, then visit these people and ask them what they think.
Would they buy it? Do they like it? How would they want to transact with you? How much would they pay? What would they expect? What do your competitors offer? And, importantly, what do your prospective customers want that nobody is offering?
A questionnaire with simple tick boxes and choices will give you statistical or ‘quantitative' feedback. In-depth questions will help you flesh out areas of interest and give you ‘qualitative' feedback.
From this, you will learn the market
gaps you need to exploit and key messages to influence your market, pricing and packaging.2. Can I supply the market?
A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis done well is a powerful tool for tackling this question. The key is to recruit friends, associates or advisors to work on it with you. The more minds on it the better.
First, jot down on a whiteboard all the strengths you enjoy in terms of supplying the market (e.g. uniqueness, quality, cost, after-sales service), then all the weaknesses, opportunities and threats. Don't judge or fudge. Ensure an exhaustive list before you cull it.
Second, cull the list and grade the remaining items 1, 2 or 3, with ‘1' denoting a priority issue, while ‘3' is less important.
Third, look through the list for key issues that you need to address: weaknesses to work on now, threats to prepare for now, strengths to capitalise on immediately and opportunities to prioritise.
Can you supply your market with what they are asking for? Which of your key strengths mirror the unmet needs you have discovered, and which key points of difference should you focus on? For instance, if your research found a gap in delivering your service online, and your SWOT identified great contacts or skills in websites and online transacting, harnessing these contacts/skills would be a priority. In fact, any new business plan needs to address the online world if it is to be taken seriously.
3. What are my objectives?
Next, address your personal, financial, operational and customer objectives. You need to address all four, because you need to ensure your business achieves what you really want from going into business.
Your personal objectives and needs should be your first priority: make sure you both set them down formally and keep them front of mind. Otherwise you may end up disappointed (e.g. because of insufficient returns), burnt out (e.g. you made no allowance for your health or recreation needs) or broke (you omitted to allow for paying yourself a salary you can actually live on). You also want to make sure your business operates well, since this influences your financial and personal aims. And you want to achieve certain standards for your customers, or you'll lose them and lose pride.
For example, if you want a modest income but a saleable asset in five to 10 years, and you want to deliver management consulting to smaller companies in the retail sector you used to work in, that's just the start. You also need to establish customer-service objectives that secure their satisfaction, or you won't thrive. Certain operational realities, like communication infrastructure and written systems, will also help secure that service, and help secure a business structure you can sell to someone else with retail exposure in five to 10 years. Your goals for one area help you achieve goals in another area.
Get five years' worth of these objectives together, then break them down into individual monthly entries – make them measurable.
4. What will my company look like?
Write down what you want your company to be like in five years. You'll have certain roles that need filling. Describe what each one covers, because they still need doing even if you wear all the hats in the beginning.
Where will you be based, what will your resources be, and how will you operate? Expand on all these details here, because they will dictate the realities of doing business. You need to have worked it all out.
5. What are the details of my products and services?
Now you know your market, your competitors and your company and, based on this knowledge, you'll have reshaped your original product/service concept. Next, describe your product/service in detail, first in feature terms – what it actually looks like and incorporates – then in terms of the benefits to your customer – what the product means, achieves or solves.
Compare this to your competitors' product or service. How is your produce or service better?
If there are lots of details in your product or service, or in how and why it's different from your competitors, include this material in your plan. It's a good exercise for you, and if you need to use the plan to obtain finance or recruit partners, it'll help you to prove the viablity of your idea.
6. What's my market in detail?
Expand on your market. You've verified that you have one, so put that detail here, and formalise your vision.
For example, what's your total market and how is it growing? Do you have an understanding of demographics? Does the ageing population benefit or threaten your target market? Do you need to split or ‘segment' your market into chunks that are more meaningful for targeting (e.g. by age, location, industry sector or size)? Remind yourself – what exactly were those market needs? Who's addressing those needs? What are the gaps that your product or service is going to fill?
7. What's my growth/marketing strategy?
This is how you're actually going to find, educate, compel and convert your customers. It's your strategy and all the individual step-by-step actions that turn that strategy into reality.
Identify your key messages and how you'll take these messages to the market (e.g. advertising, direct mail, networking, email). Use this information to create a spreadsheet that sets out monthly activities, their estimated costs and expected conversion rates.
8. What are my financial details?
By now, you have what you need to build the financial section of your plan, taking the following steps.
First, list your assumptions: what costs, events and availabilities have you taken for granted? You need to acknowledge openly which ones might change.
Second, work out your break-even point. Looking at all the costs to set up, all the running costs, the fact that your sales will be slow at first and will take time to ramp up, what will you spend and when and what will you earn and when?
Is it sobering? What financial back-ups or assets do you have to support this lean period? If things are 30 per cent worse than you predict, will you end up at the soup kitchen?
And third, get together with your accountant and establish your profit and loss and your cash flow. Plot these as totals across that five-year plan.
What's left?
Summarise it all in a powerful one-page document that you'll place at the front of your business plan. That document is your corporate mission statement. Learn it by heart and share it with your staff.
But also remember we live in a dynamic world. Successful businesses revise their business plans regularly – and if their market changes, they may need to reinvent themselves to stay relevant.
More
Stephen Johnson is a partner in marketing consultants Strategy and Action; visit the company's website for reports that can assist start-ups on strategy and marketing.
Web www.strategyandaction.com.auAnother source of good advice on start-ups and business planning is the relevant state and territory government sites. For links to all states and territories, visit:
Web www.australia.gov.au/314BEC Australia Incorporated supports a national network of Business Enterprise Centres that work with the micro and small business sectors.
Web www.beca.org.auDownloadable business planning software which includes a SWOT analysis is available from the website of Palo Alto for approximately $200 AUD.
Web www.paloalto.ukAnd for those who like their planning free of charge, the Victorian Government business website offers an excellent downloadable template to assist your thought processes.
Web www.business.vic.gov.auMust-read books are:
The E-myth Revisited: Why most small businesses don't work and what to do about it by Michael Gerber (1995)
The 7 Habits of Highly Effective People by Stephen R. Covey (1989)
Both are available as new or used books from www.amazon.comFor More Articles on Finance - Click Here!
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