Be your own boss/Business Planning Sell: Do you have what it takes? Do you know how to identify your strengths and weaknesses and whether there’s a niche for your product or service? MICHELLE FORMBY has the answers.
We’ve all dreamed of breaking free of the corporate shackles and going it alone but before you actually turn the dream into a reality ask yourself: have you really got what it takes to be your own boss?
You may have the necessary money and capability, but if you’re going to be successful in running a business you’ll need a certain flair and a generous helping of good luck. Otherwise you run the risk of becoming one of the 315 budding entrepreneurs who are estimated to go bust each week. Avoid that by focusing right from the off on how you can fill a market niche, and ways in which you can make your expertise work for you or how you can turn your hobby into a money-spinning business.
The good news is that it’s never been easier to set up your own business and there’s plenty of help out there to lighten the load. A recent survey by Barclays Bank discovered that 453,000 firms started trading during 2004, the highest figure recorded since it began tracking start-ups in the late Eighties.
As ever, groundwork is important, so researching your bright business idea is vital, as is developing a business plan that will assist you in your planning and business development as well as convincing investors that you’re a safe pair of hands for their money.
Before you take the plunge, though, ask yourself the following questions to see if you’ve got what it takes to go it alone: Are you motivated to succeed? It’s not enough just to want to escape a boring job or demanding boss – you need to be committed to being successful in your chosen business and to making a living that will support your needs. Are you focused? Be clear about your ultimate goals. If you want to expand or start a chain, you must choose a business that is capable of such growth. Understand thatit will require perseverance and tenacity to set something up from scratch – you can’t be the type of person who gets bored when the chips are down. Will you be able to work hard?You’ll have to be your worst taskmaster yet – it’s no easy option. Running your own business means it’s hard to switch off from work. It can mean unlimited working hours, few holidays, even less money than before. Are you self-reliant? If you’ve worked with a bunch of people in the past, setting up on your own might mean following a rather more isolated path. Also you won’t have the luxury of financial cushions like sick pay and holidays that your previous job brought. Have you got family support?Going it alone is a big step – one that is made much easier if you’ve got the support of your family and friends. Their security will depend on your success, and they need to understand that and the pressures you’ll inevitably be under.
If that’s not deterred you, you’ll need to get the basics right. Whether your business involves making a product, providing a service or selling something, you will need: Adequate finance A sound business plan A suitable business structure A way of reaching potential customers An accounting system An understanding of tax
Where’s your niche? First off, you need to establish yourself a niche in the marketplace. Are you supplying a service, selling a product or marketing your own invention? It is vital to do your research.
A great idea is just the beginning. Before you launch a new business you must do the groundwork and research the market you want to be in. What’s the competition? What will make you special? Define your Unique Selling Point (USP). Who will your customers be? How can you broaden your appeal?
Try doing a survey of people in your target market and get their feedback about how your business or concept would work in their eyes. Visit your local library and access as much information about your sector as possible. Get your hands on reports from organisations like Mintel, which specialises in market research. The British Library runs a wonderful business centre with such specialist information, available mostly for free, which is also accessible via its Internet site.
Be creative and open-minded about your business opportunities. Increasingnumbers are being drawn to the global marketplace offered by the Internet – over 10,000 people in the UK are now making a living online. Could that be the way forward for your business?
Perhaps you’ve got an original business concept but you don’t want to deal with the business side yourself. Consider approaching a manufacturer about making your product, while you retain a part of the operation which suitsyour own skills – such as design or marketing.
Join any business clubs in your area, and make the most of your localBusiness Link for help and advice – even at this early stage. If your business idea is something that you’ve not been involved in before, consider whether it’s feasible to starting it off in your spare-time, before you leave your current job and jump in at the deep end.This research will pay dividends in the long-run – not only will you know your market inside out, you’ll impress the bank manager and any investors who will need to support you in your venture.
Strengths and Weaknesses Take stock of your strengths and weaknesses. Be honest. If you’re missing a key skill (e.g. bookkeeping) then it is often cheaper and more efficient to buy in that skill from an expert. Definitely learn basic accounting and computer skills. Check out local evening classes or correspondence courses that will give you a competitive edge. Find out if there are local ‘startingyour own business’ courses in your area – they are often subsidised and are an excellent way of making contacts with other entrepreneurs as well as great learning tools.
Don’t be too proud to ask for help or advice – even if you think it’s something so basic that you should know it already. Speak to friends who have professional skills or who are running their own business and ask for their guidance. If you’re naturally a shy person, swallow your inhibitionsand start learning to network – you’ll meet more clients that way and your business can only benefit. Don’t be afraid to acknowledge that you need ahelping hand – find a mentor who can help guide you through the ups anddowns. But be positive and enjoy yourself – and take heart from a recent survey by Panasonic which found that 80 per cent of self-employed people believed their lives had improved since becoming their own bosses.
HOW TO WRITE YOUR BUSINESS PLAN
Once you’ve established what your goals and objectives are, decided on your business and carried out an honest assessment of your strengths and weaknesses, you’re ready to start work on what will be one of your keyresources in setting up your company – your business plan.
This is not simply a document that you need to throw together to satisfy thebank manager then consign to a filing cabinet – it should be a living, breathing plan that you build on when you’re making your business dream come true. It’s about setting down your longer term objectives and forecasts on paper and gives you something to measure your success against as well as being a vital document to show to outsiders who might be able to help raise money. It needs to include information about: What is your business What kind of market and its size Competition How you’ll market your businessFigures – your budget, profit and loss and cash flow forecasts for at least the first 12 months Relevant experience or qualifications Have you sought expert advice What money do you have available How much do you want to borrow (don’t underestimate your requirements)
You’ll need to: Cost your product or service – to find its selling price, add to the break-even figures an amount that will be your profit.Establish what your overheads will be – the standing costs of the business that you’ll have to pay regardless of whether you sell anything (factoring in wages, rent, heating, marketing, travel expenses, insurance, office costs, loan interest, professional fees, etc). Estimate the cost of materials which make your product, or cost of your time per hour if yours is a service business.
Profit and loss forecastChoose a target – the amount of sales you think you can achieve in one year. The minimum you’ll need for your business and personal expenses will be yourbreak-even figure. Decide how long that will take – not until you reach that will your business be moving into profit.Beware – nearly every first attempt at a profit and loss forecast is tooambitious – this is where your cash flow forecast comes in. Be realistic and don’t fall prey to wishful thinking.
Cash flow forecastThis is essential – it calculates the difference between your outgoings and your income. It shows when money is likely to flow out of your business and when it is likely to flow into it. A lender will look at this to assess howyou’ll be able to control your finances. Income can be hard to predict – use an estimated amount in each month if necessary. Outgoings are morepredictable – they include wages, materials, VAT, irregular overheads such as bills.
Make it interesting! Don’t let your business plan be a boring list of figures. As vital as they are, you need to be able to convey the exciting prospects of your businessat the same time. Many investors receive countless plans – yours needs tostand out to stand a chance. Some people prefer to write two plans – one for outsiders, with conservative estimates of growth and success, another with higher targets designed to spur you on. Do what feels right for you.
Remember – pay attention to the presentation. Some investors will draw their own conclusions about your attention to detail if your business plan is scruffy, dog-eared and its layout is confused.
A basic example of a working plan: (to accompany your detailed spreadsheets)
Chocolate Heaven will be the only chocolate shop in Peckham, selling cakes and confectionery in a shop that will also serve hot and cold drinks, as well as selling branded chocolate boxes to gift stores across London.
The applicant Lauren Henderson, 37. Before I had children, I worked as a manager in the confectionery section of a large department store. I have also worked forthree years as an assistant in a café. My husband runs a plumbing business, and I have looked after the bookkeeping for the last 15 years.
The Loan A loan is required to create the shop, in a prime high-street location attracting local shoppers and business people, who will be the main target market. Beverages will be served all day, from 9am to 6pm, alongside specialitycakes, short menu of sandwiches, and chocolates – all handmade.The total cash required is £* of which £15,000 is available from savings.The loan required is £* over a period of 10 years. (* dependent on loan interest and repayment and final cost of project)
The Business and PropertyThe property in question was previously a café, therefore it has the right planning permission. It has been vacant for 18 months. Discussions with shoppers and neighbouring tenants have established that it was open sporadically because of the tenant’s ill-health and closed abruptly. The available lease is for five years during which time the rent remains fixed. The main shop area will accommodate six four-person tables and four two-person tables. The kitchen and storage room is adequate and meets regulations, as does a male and female toilet. It requires redecoration and rewiring. All refurbishment will take six weeks.
Market Research A survey of 100 shoppers and local workers I carried out via a questionnaire established that there is currently a lack of somewhere to visit for acoffee and cake on the high street, which has two other cafés – both ‘greasy spoons’. Women in particular thought a chocolate and cake shop would be a welcoming and friendly place to visit, and a much-needed place to purchase gifts. Several local businesses expressed interest in catering business for lunches and meetings.
Marketing Strategy A leaflet drop to all businesses in the area, with two coupons offering a discounted coffee and cake and a reduced price for a box of speciality chocolates. Advert in the local paper, supported by suppliers involved in the fitting out of the shop.Press Release – to local newspapers as well as to specialist confectionery magazines and to lifestyle magazines that cover the area.
Staff I will manage the business full-time, in charge of marketing, buying and overall control. Initially, I intend to employ a cook who would be responsible for all kitchen activities, as well as a part-time kitchen assistant/waiter to cover lunchtime periods.
Contractors and Consultants I intend to open a business account with my present bank, ** My solicitor is ** My accountant is ** but I will look after the day-to-day bookkeeping myself
Cash flowEstimated number of people served on weekday – 100 per dayEstimated number of people served on Saturdays – 80 per day (fewer business people but more shoppers)Estimated average spend per person – £4 (£1.50 on beverages, £2.50 on food) (this could be split into morning and afternoon sessions)
Overall sales Annual sales potential of £*** However, all the calculations in my cash forecast and profit and loss are based on achieving 75 per cent of the above figure, providing for an annualsales prediction of £*** Obviously, that figure will not be achieved in the first year, and that is accounted for in the financial analysis
Direct Costs The raw material costs have been calculated by producing all the menu items, so are accurate. The resulting figure is 40 per cent of sales.
Staff Costs The annual cost is £*** including employer’s NI contribution Fixed CostsRent Business RatesInsurance Vehicle upkeep Overhead Costs Telephone Travel Stationery Advertising Bank Charges SundriesWhich amounts to a total of £***
Refurbishment programme has been estimated as £*** Purchase of machinery and fittings – £*** A fully costed stock sheet has been prepared and is available if required
Financial Costs The calculations in the attached financial forecasts assume an interest rate of 9 per cent, with a loan repaid on a monthly capital and interest payment basis.
Personal drawingsI intend to take £600 from the business on a monthly basis if this proves possible.
Financial Analysis Attached are spreadsheets showing: Consolidated Cash Flow forecast (for year one and two) Profit and Loss forecastAlso attached is a sample menu and sketch of the layout of the shop – and a sample box of the wonderful chocolates that will draw my customers in!
"That’s entrepreneurship: it’s survival, when your back’s up against the wall and you need to provide a livelihood." Anita Roddick