How do I come up with a business plan?
How do I come up with a business plan? The first thing I advise when asking yourself this is…
What are you trying to achieve with this business plan?
Why? I hear you ask. You thought that everyone has to have a business plan. Maybe you just wanted to tick a job off your list.
Well, let’s have a look.
Do you need to raise funding or are you planning on selling your business?
No, you aren’t trying to secure business funding and you are happy owning the business for the foreseeable future. Right then, that has just made the process significantly more straightforward.
You don’t need anything complex right now. Who is going to read it? The answer to that question is likely to be nobody. It should, of course, be you! You are going to read it! If you write yourself a simple business plan then you might read it. However, if you write a dissertation of 10,000 words with fancy diagrams and charts interspersed periodically to break up the bore-fest then you aren’t going to look at it. This is because the painful memory of creating it will take over and it will collect dust forevermore.
So what do I need to do then?
How do I come up with a business plan? That was the original question? Obviously, it can alter slightly depending on where you are in your business journey right now, but the skeleton can remain the same. Break it down into the following key points.
- Basic business concept
- Goals and any specific actions you need to take to achieve them
- Products & Services – include in this what problems you are solving for people with your product or service, also your competitive advantage (Are you the best/cheapest/quickest provider, are you really honest in an industry with a bad reputation?)
- Who do you want to sell to? If you aren’t selling you are out of the game pretty quickly. So who do you want to buy from you?
- Key employees/Management team, you may not have a large team at this stage but thinking of planning ahead, which was the point of this document you are writing. Who do you need in your team to help your business to grow? Is it a trainee? Do you need an experienced bookkeeper or admin assistance?
- Your finance needs. This isn’t the time to let your ego run wild. You need to work out what you need to make as a minimum to be able to stay in business. You need to know your overheads and what you need to earn to live. This is really helpful for you to work out your pricing for selling your product/service too.
If you are still reading and you don’t have a cuppa on the go, I suggest you grab one, get comfy and read on for more detail on how do you come up with a business plan below.
So then…onwards with how do I come up with a business plan?
Firstly, you know what you are doing with writing your basic business concept. Just to add, keep it simple. You are likely to be the only person reading this and you know what you do already!
Secondly then GOALS! Where do you want your business to be in a year, 3 years 5 years? Yes, you can go on and do 10 years but be aware that the longer into the future you look, the more you are getting into the realms of crystal ball stuff.
It may be good to have a ten-year plan of, say, SELL THE BUSINESS & MAKE LOADS OF MONEY or similar but you don’t need to be specific with figures. If you look back in 10 years you are likely to have been wrong. That is assuming that you still know where you saved the file to look at it again by then!
Now, as this isn’t your Amazon Wish List you need to make note of any actions you need to take to make these goals happen. There is no good putting your 1-year goal of increasing turnover by 30% and leaving it at that. Because you have just given yourself 52 weeks to make that happen. You need to include how you plan on making that happen.
Are you going to increase your prices? Expand your product range? Increase your customer bases? Or a combination of the above.
Subsequently, you need to decide how much each of the actions above is going to add up to the total turnover increase. Putting your prices up by 30% would be the most straightforward option but if you do this I’d hazard a guess that your customer base is going down. That will directly impact on the 30% increase in turnover. You see, business is always a balancing act.
Products & Services
This starts off fairly straightforward, unless you are a start-up of course, as you already know what you are selling.
But it is good to include future products and services too. Always be thinking of scalability and of course keep in your mind that everything is online these days. If you aren’t selling your product or service online then start thinking about how you can do so. Products are generally easier than services in many cases but as we have all discovered during 2020, sometimes you can’t deliver face to face services. Also, it limits your scalability, this is because you always need a physical presence. If you can get your course online you can run it whilst you sleep in some cases.
It also pays to figure out where you sit in your market. Are you the cheapest? I don’t generally advise joining that race to the bottom as there is usually someone out there happy to come along and undercut you. If you are already at the bottom and that was your USP (Unique Selling Point), you just lost your competitive advantage. Therefore back to the drawing board. Do some market research and find out how your customer service matches up to others. Naturally, pricing is worth a look of course, as you may struggle to sell your product or service for 3 times what someone else does.
Right then, who do YOU want to sell to?
I say, who do you want to sell to, with YOU in capital letters because, ultimately, it is your business plan. You can decide who you want to be your customers. Then all you have to do is market to the right people.
There is a lot of advice out there at the moment around customer avatars (not the blue folk from the film). The advice is to create these customer personas. You are supposed to make them very detailed. Firstly giving them and name, age and picture even. Secondly, you create this whole life behind the name and picture, to include where they shop, what they eat, what they watch on the tv, and the list goes on.
You may feel like you are creating an imaginary friend. Personally, I feel that whilst you need to know who you are marketing to (so that you don’t use a pink colour palette and girly fonts when marketing to 20-year-old lads), it does feel a bit like you can take this too far. It is fantastic if you are a naturally creative person, but if not then don’t beat yourself up about it.
There are some fantastic marketing people out there who can somehow pull this information out of you and then make up the rest so don’t spend 3 days deciding what Alice or Mike has been watching on Netflix.
Niching can make it easier to get your product in front of the right people. The right people are ultimately the ones that are going to put their hands in their pockets. This is a business remember. It might be that everyone in the world could benefit from your product. You need to start somewhere and advertising to the whole world is going to set you back more than a few quid. It also makes the process less overwhelming and the main object is to make sales, not to plan forever. That basically just costs more and more moeny and time without earning anything. Also nearly everything can be ammeded if needed at a later time.
Don’t let perfection get in the way of progress!
Key Employees / Management Team
This should be a consideration for any size of business but bear in mind that this can change. This is because of the needs of your business, they change from time to time. You could, for example, gradually build a large team of people doing a certain part of your process, only to decide later on to go automated for that process. Hence there is a need to re-evaluate your staffing requirements. That said your people, your team are a huge asset to your business so you are always best to treat them as such.
Your finance needs
This is a giant topic on its own! I’m going to be concise, you don’t believe me I know!
Your business plan and your life plan are totally integrated. You can’t plan to grow your business to stratospheric levels if your life plan says you want to travel to every far-flung country in the world in the next 12 months. Fairly obvious in theory. All you need to do is cross-reference the two thought paths.
Let’s assume that you’ve done that and you are on the same page as your other self (your home-life self).
Pricing is not as complicated as some people will have you believe. Have a starting point. For example, find someone else selling what you sell and see what they are selling it for. You now have your starting point. You need to know your cost of sales (quite simply, how much it costs for you to sell the product, (labour, parts, these are your direct costs). Also your overheads. You are an overhead for these purposes. That is because you don’t get paid based on how many hours you work (it’s a shame you say, else you’d be minted – oddly, I’ve heard that once or twice before).
So your running costs, admin, computers, travel, phone, heating, corporation tax etc etc etc and your salary (including pension – yes you really must sort that out too).
So all you do is add the overheads and the direct costs together and you know your total costs, say £80,000. Now you know that you need to sell at least £80,000 of product to break even. You sell your items for £100 each and that means you need to sell 800 of the items in a year to hit your goal.
That was obviously a simplistic version of something I find really quite exciting, each to their own. But like we said you now have a starting point. You now need to decide if you want to undercut the competition or try to sell for more. To do that you need to offer something more than they offer. That could be in your customer service or your packaging or so many different things. You need to think about how your financial needs may change in time due to external commitments. If you know that you have increased demand on your earnings in 2 years (mortgage increase or childcare costs etc) you need to factor that in and plan ahead to ensure you increase your turnover or profit margin accordingly.
Notice I talked about demand on your finances not what you want to earn. Many people start off in business with money as a main goal but business is about taking risks. If you are very risk-averse, running your own business was a very brave way to get yourself way, way out of your comfort zone. However, in early business, you may need to reinvest a lot of your profits into growing the business, so if you can keep your earnings down to needs rather than wants, it will help your growth.
Having said that I also want you to focus a section now on financial wants. Where do you want your profit/turnover/earnings to be in 2/3/5 years? Make a note of this figure and work out how many widgets you need to sell to hit it.
You can use this as something to aim for and to motivate yourself when times are tough. It is good to have future targets in mind as it will keep you striving for improvement rather than stagnating if you are hitting what you NEED to.
I said to do it this way because many people in business put their desired figure or pluck a turnover figure out of the air for 2-5 year plans. Which is totally pointless for many reasons. By doing it the way I suggested, you now know your BEP (break-even point), you now know every month if you are making a profit or a loss. Very valuable information indeed.
It can seem a really daunting prospect, but the earlier you can get a good solid grasp on your financials in business the more successful you are likely to be. You can be successful by chance of course, but then you are likely to lose a good portion of your hard-earned dough to one or more of any number of places. Taxes you hadn’t thought of, poor investment choices, unscrupulous folks just waiting for an unsuspecting victim. The list goes on.
So how do I come up with a business plan? In summary, you don’t necessarily NEED a business plan
If you aren’t trying to secure funding, an investment or a grant you don’t NEED one. People think you do and there are many business coach/consultants that will tell you that you do. That is because it makes their job easier in essence.
It is easier for them to guide you where you want to go if you have a very long document that they can help you write, or at least read that tells them.
If you want to have it all kept locked in that grey matter of yours that is fine. You set up in business to be your own boss I guess, so you don’t really need me telling you to do something you desperately don’t want to do. You may enjoy it more than you thought though, so why not just try a really simple business plan at first and see what flows. Invariably these things are much easier to add to once you have something on the page, than when you start and are looking at a blank page.
A tip I do have is to know where you do your best thinking. That link may help send you off in the right direction. If you think best when walking the dog, go for a walk. If you like brainstorming, grab some paper and a pen and off you go. Nobody knows you better than you do (well your partner might so just ask them if that’s the case). Wherever you have your best ideas is the best place to start this project.
Also please remember that this is supposed to be a working document so look at it every few months and see how you are comparing to it. It is like a website in a way, it is never finished.
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