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The Parts of a Business Plan

Think about your hand. It has five fingers, right (hopefully)? Or just imagine you have five fingers. In the same way I want you to know that there are five parts to a business plan:

1. The Summary; also called “Executive Summary” or “Introduction”
2. The Marketing Plan
3. Operations Plan
4. Financial Plan

These are the names I have used and it is easy for me to remember them.
What Does Each Name Stand For:

1. The Marketing Plan – “What I Want To Do” – What type of business are you wanting to start? What market do you want to start your business in? Who do you want to cater to?

2. The Operation Plan – “How I Am Going To Do It” – What kind of business structure do I need for this enterprise? Who do I need to network with? Do I need a mentor?

3. The Financial Plan – “What It Will Cost To Do It” – What are the costs of production, cost of sales or monthly expenses? How much profit will the business make in 12 months?

Part 1: Marketing Plan

The marketing plan, when not written correctly, has far reaching consequences:

1. If the marketing plan is wrong, then every other part of the business plan will be wrong. i.e. if you create a product that people do not want, then the way you plan to structure the business (Operations) and what you think it will cost (Financial) will be wrong.
2. If the information you have about who your customers are is wrong then the business will not work.
3. If the information you have about your competitors are wrong then the business will struggle.
4. If the way you have defined your market is wrong then the whole business will collapse like a wobbly stool!

Trust me when I say the Marketing Plan is the most important part of the business plan.

What Is Included In The Marketing Plan?

Industry overview – Past, Present & Future
a. Let’s say you want to start a business selling baby food. Your Industry overview is the information you can find out that relates to the overall food industry. Information such as: what has happened in the past to food consumption, how much does the average household spend on food and what are the projections for the consumption of food? How many babies are born in your area; nationally or internationally? (Don’t worry this information is readily available online and at your Business Libraries; start there.)

b. Industry Overview is important because it exposes you to vital trends that may affect your business. Some businesses are so seasonal that this information can make or break the business.

Sector overview: – Past, Present & Future
a. Using the same Baby food sales business example: Baby Food is a sector within the Food Industry so this business will need to know how much food babies consumed in the past, what they are consuming now and what they are likely to be consuming in the future. You might want to know an estimate of how many children are born per year and what the projections are for the following 10-20 years.

b. Remember most businesses never consider the future. They are too busy trying to deal with the day to day aspect that they are not planning for the future. Do not acquire this mindset. Writing your business plan offers you the opportunity to think and plan ahead and position your business greater than what your competitors do!

III. Competitors: You can bury your head in the sand and convince yourself wrongly that there are no competitors for your business or you can take an active approach to learn from your competitors and use the information to further your business.

Competitors come in 3 shapes and sizes:
a. Direct,
b. Indirect
c. Future Competitors

Let’s break this down: If you are a Hairdresser located on a high street your Direct Competitor are other established Hairdressers in your vicinity 1-2 miles radius. Your Indirect Competitors could be those Mobile Hairdressers or those working from home or even those located 5-10 miles away that your potential customers can drive to. Your Future Competitors are those in schools and colleges studying Hairdressing.

Therefore investigating your competitors has become extremely important. The kind of information you want to know about your competitors include and not exclusively:

S.W.O.T. Analysis – What are the Strengths, Weaknesses, Opportunities and Threats of your competitors?
Manufacturers – Who are they working with?
Relationships with other – What type of business relationships do your competitors have?
Finance – How are they financed? By shares, loans or personal funds?
Suppliers – Who supplies their products? (Hang around outside their shop or business)
Consumers – What type of consumers do your competitors have? – age, sex, etc.
Promotion Strategy – How do they promote themselves?
Geographical Coverage – How far do your competitors operate?
Product Range – How many types of products do they sell or do they offer other attractive services?
Culture – What is their work culture?
Staff – How many? What ages? Sex? Etc.
Size – How big or small is this business in terms of sales or profits?
Cost Structure – How do they charge?
Reputation of the business – What do people say about your competitors both good and bad
Ownership of the business – Who is the owner of the business? Is it a franchise?
Distributors Used – Who are they?
Segment Served – Do they cater to a particular niche?
Motivators Beyond Money- Can you find out?
Management information – Who manages your competitors business? Do they have a Dragon giving them advice?
Industry Opinion – What do experts say about them?!

You might need to do some hard detective work but you are only able to develop your products/service once you know what others are doing. Otherwise you will set up a business that will just be like the rest; struggling businesses!

Where Do You Get This Information?
Visit Local Stores
Shared Customers
Shared Accountants
Lawyers/Solicitors
Suppliers
Reports Exhibitions
Internet
Local Business Libraries
Industry Magazines
Companieshouse.gov.uk (if they are a limited company they need to log their annual accounts here. You can down load it and find useful information about your competitor’s Sales, Finance, Staff, Loans etc. all for £1-£3

IV. Product/Service: Now that you have done the above research you are ahead of most people who have an untested idea and force it on the market only to discover someone else next door has the exact product/service and he is struggling.

Since you know what your competitors are doing, which has given you insight into the market, you know what the experts are saying about your industry and what/how your niche (sector) is doing. You are ready to create a Unique Product/Service.

Even if you have been working in an industry for years and you believe you will be the next Steve Jobs, research is still vital to your success.

Remember that your product must be solving a problem. People do not simply pay for a product; they pay for what the product can do for them! Invariable thinking like this will help you identify your target market when you consider “who has the problems I can solve?”

What to Look For When You Invest in a Business

In order to protect a business’ trade secrets, business models, and other sensitive information, a business attorney may advise a client to incorporate non-compete and non-disclosure agreements in a manner that makes sense for the particular needs of the business. Non-compete agreements and non-disclosure agreements (NDAs) can often create a more secure and trusted partnership between business professionals and their employees or business partners. This is especially important when trying to determine if a particular business relationship or employment relationship is in both parties’ best interests.

Creating a non-compete agreement can protect a business and help establish trust and security between two parties: employer and employee. A non-compete agreement often states that, if employment ends, the former employee will not enter into or start a similar business or profession in competition with his or her former employer. The non-compete agreement must state a specific and reasonable scope of such restrictions, a timeframe for the restrictions, and a geographic area in which the restrictions apply.

The motivation behind asking an employee to sign such an agreement is not to hinder his or her advancement in the business world; rather, a non-compete agreement can help clarify what the employer and employee are exchanging.

From the business owner’s perspective, the non-compete is the company’s way of saying, “I really want to hire you, and I believe that we will have a great future together. When I hire you I will be revealing valuable information about our products, services, clients, trade secrets, proprietary and/or confidential information, business model and more. This information is something that our company has worked hard, and invested significant resources, to develop. So in exchange for your employment with my company, I am going to ask that for a certain period of time, that you not use the information you obtain while working with our company to go start your own business or work for another business that is in direct competition with us.”

A non-compete agreement should be well written with clear and specific language. Contact a business law attorney to discuss when a non-compete agreement is appropriate, what language it must include and why.

To further ensure the security of a business, a business that wishes to protect sensitive information should strongly consider implementing a non-disclosure agreement (NDA). A non-disclosure agreement is a contract between two or more parties in which certain parties are going to be provided with specific information or knowledge (often proprietary or confidential information, trade secrets, business strategies and more) that the revealing party does not want to be shared with third parties.

Non-disclosure agreements are often entered into by separate businesses, or by partners of the same business. A non-disclosure agreement, may be crucial to secure the trust in a new relationship between businesses. Often, one business is considering partnering with another business, but in order to vet the potential relationship, one business must reveal valuable information about its plans, business strategy, product, service or otherwise. A non-disclosure agreement can secure the confidence and trust between the parties and allow them to discuss the full details of the potential relationship.

When two or more partners share ownership of a business, drafting a non-disclosure agreement can help to maintain trust between those partners. If there is no non-disclosure agreement and a partnership goes awry or the business ownership changes hands, business secrets and confidential or proprietary information may go unprotected. The consequences to the business could be devastating. A former partner might share sensitive information with competing businesses or otherwise use the information in a manner that damages the unprotected business. To avoid such consequences, consult a business contract drafting attorney business contract drafting attorney who can advise you on how to build trust among partners and protect the company’s most valuable information.

The Only Two Ways to Achieve Growth in Your Business

Business growth is essential. If your business isn’t growing it’s dying. That sounds dramatic, but the fact is if you’re not actively growing your business then it probably won’t be around for long. Why? Because a new technology, dynamic competitor, social trend or change in economic conditions will come along and eat away at your customer base.

We see it happening to independent local businesses all around us all the time. As an example, you just have to look at what is happening on the high street of every town across the country to see the effect that new technology and social trends are having on local businesses.

Every week I work with business owners who want to grow their business. And talk to others most days about the same topic. But for all the tactics we might employ to grow a business, when it comes down to it there are only two ways.

The first is spending more time on it.

If you want to grow a business faster you can put more time and energy into it. Basically, work harder.

Plenty of people work hard and most business owners I come across work exceptionally hard. They also have a great work ethic – if the end result is worthwhile, most are happy to work a bit harder still.

But really, who wants to work harder?

The other way to grow a business, then, is to invest money into it. With money you can buy other people’s time. Employees, temps, free-lancers, out-sourcing can all be bought to grow a business faster. Or you can invest in automation, technology and systems to get work done more efficiently. Or you can invest in developing your product lines to introduce more profitable items. And all the other ways to grow a business by investing money into it instead of your time.

But if you don’t have any or enough money to invest into growing your business? Then all you have left is time. Your time and the time of your existing employees. Finding ways to leverage that time most effectively with the aim of creating excess profits to invest back into the business is an essential first step.

As a business owner, probably the best way you have of doing that is to stop spending time doing low value jobs. If you find yourself regularly doing jobs that you could pay someone else to do for minimum wage, you could be costing your business a fortune!

There are many reasons for doing this work of course. There’s the immediacy of it – the work is there to be done. There’s also the comfort of it – the comfort of doing something you are an expert at. And there are the rewards both in being paid and the pleasure of achieving something tangible and helping a customer.

However, if you had spent that time developing a marketing strategy that worked it would have brought in enough work to justify recruiting someone else. Or if you had spent the time training someone else to do the work – that would free up your time for ever more. Time to spend on higher value activities.

One of the biggest barriers to making this transition is a lack of education in how to do the business related work.

Our education system just doesn’t equip people to run a small business. For the most part, it doesn’t teach you about sales and marketing, about financial management, about team leadership, about systems and leverage, about writing business plans and market research, about business strategy, about buying or the different types of cashflow, etc., etc.

Ask yourself, how many years you spent learning how to do whatever it is your business does: hairdressing, engineering, dentistry, web-design. Then compare that to how long you’ve spent learning about business.

As a result, the owners of many small businesses are ill-equipped to do these activities, so they continue to do lower value work. Which stops the business from growing as fast as it could. Or even stops it from growing at all past a certain point. And then the business gets overtaken by a competitor or the changing high street or technology. Or the owner settles for less than they could achieve given their skills and talents. Or they get so frustrated that they give up altogether and go back to having a job.

It doesn’t have to be this way. There’s loads of advice available on the internet in all sorts of formats to suit everybody’s preferred learning style. If you don’t like reading, there’s audio and video. And a broad spectrum of experts in different areas to help. Not all of the advice available is great advice, of course, but if you search out reputable websites and organisations, good advice is readily, and often freely, available.

Every day invest in learning something new. That has to be the best investment of time you can make in yourself and your business.

As Brad Sugars says, “You’ve got to learn before you can earn!”