Starting your own business can be equally as stressful as it is exciting. Especially given the current economic climate, there has never been a tougher time for a small organisation to successfully work their way into the market and generate a consistent income. The situation has escalated to the point where the US Small Business Administration has reported that around 50% of businesses now fail within their first year.
This should not however be a deterrent to those with ambition and passion to establish their own business but rather a stark warning as to the now unquestionable importance of a well thought out business plan.
Why do you need a plan?
A business plan is a way of putting into writing exactly what your business hopes to achieve and how you intend to do it. It is a great way of keeping all employees working towards the same goals and identifying back-up plans should you encounter any problems along the way, rather than suddenly finding yourself struggling and with no means of resolving the issue. Trying to run a business without a plan is like treading water without a life jacket; there is only so long you will be able to last before you can no longer cope with the pressure.
What should it include?
There are a number of vital components to an effective business plan, each of which should receive the same level of care and attention to ensure they are of value in times of need.
- Market research: The first step in planning any business is finding out what is on the market already. This includes information regarding future competitors as well as opinions as to what the public want. Market research is the best way of identifying a niche and tailoring your product or service towards it but be cautious; there is a fine line between spotting a great opportunity that has so far been overlooked and targeting a niche that has been avoided by rival businesses for a reason.
- A definition of the business: This not only helps keep your mind focussed on exactly what your business is but is the main way of advertising yourself to possible future employees or investors who you may grant access to your plans. Within your definition, you should also include clear goals for the organisation, though some include this information within its own separate section.
- Company policies: Your business plan can include information regarding the processes behind the hiring and payment of staff as well as the attitude and behaviour expected of any employees. This once again lets people know where they stand and keeps everyone heading towards the same goal.
- Financial information: This section should not only include any current figures regarding sales and profits but also projected figures as to the future of the business. Perhaps more importantly, you should outline any external funding that the organisation has utilised, be it a loan, a company credit card or the owners own cash. Smaller organisations are more likely to require such financial assistance in their early days, making this information more important than ever. Businesses must always ensure they remain on top of any repayments they are due to avoid a poor credit rating and should also resist taking on more than they can afford to pay back, with issues like PPI claims highlighting the importance of this.
- The risks: Every business will have to take risks if it hopes to have any chance of success and so an element of bravery is often necessary. Still, major potential issues should be outlined within the plan, along with information as to how your organisation will cope in response. Small businesses more than any need to get back on track quickly when times get tough, as their profits simply cannot rival bigger competition, so being prepared for the worst case scenarios is vital.
- Marketing information: A good business plan will of course also highlight one of the most crucial aspects of any business – no matter how big or small it may be – and that is how it plans to market itself to the public. Any organisation with a product or service to sell must advertise and successfully convince consumers to use them rather than any other businesses operating within the market. A marketing technique really can make or break a business, building or destroying a reputation within seconds of going live. This means the importance of thinking it through and detailing it long before it is ever seen by the public is paramount.
How should it be used?
Business plans, especially those for small organisations, should constantly be updated in response to changes in the market; as competition heats up, new contingency plans should be drawn up and as cash begins to flow, figures should be kept up-to-date. Your business plan is your record of where you have been and where you intend to go in the future so its relevance being maintained is crucial, acting as not only the goal for your organisation but the link between you and potential investors.
A business plan is not a mere formality that must be completed to be able to start running your organisation but the very core of your business and everything it stands for.
This post was written by Gladstone Brookes, a UK based company that deals with PPI claims relating to mis-sold policies. With specially trained staff, they have managed to reclaim over £28.1 million this year alone at a success rate of 87%.