Planning your business journey
You should always know your business’ objectives, strategies, sales, marketing and financial forecasts.
A business plan helps you to:
- clarify your business idea
- spot potential problems
- set out your goals
- measure your progress
There are lots of terms for it; business planning is not a science, it’s an art and it’s about the process of thinking about all of the different aspects of your business – it’s not about producing a long and complicated document when you’re finished.
The most important factor is that it works for the person/people in the business, and anyone else who might have an interest – for example, a bank may want to see your plans.
A quick Google search will throw up lots of free templates, and guides offering you 6, 8 or even 10 key components to a successful business plan. All of these may be helpful to you, but it depends very much on your approach.
Who, what, when, where, why and how – the six foundation questions you need to ask of everything to know how it works.
- Who is your business for, who are your customers, who will supply you with any goods and services you need?
- What is your business? What are the goods, products or services you’re looking to sell? What makes you different, what’s your USP – unique selling point?
- When will your business operate? When will people pay you?
- Where will you sell things, or perform your services? Do you need your own premises, or space in someone else’s?
- Why would anyone use your business? Why would they come to you instead of any competitor, or why would they come to you at all if your concept is new? Why would they pay for your services?
- How will you carry out your services, or make your goods to sell? How do they get to the customers? How do they pay you? How do you pay your bills?
Alternatives to business plans
There are lots of online tools and software programs which can guide you through a version of a business planning process. Most of them are tailored to specific industries, sectors, or kinds of businesses, and they are often designed with startups in mind.
Especially in the early stage of idea development, these tools can be an excellent way of validating ideas and giving yourself a reality check.
Equally, they’re good for checking off the basics and helping you get feedback from others.
The Business Model Canvas distils your business down to one single page, helping you to describe, design, challenge, and pivot your business model.
Lean Canvas is a similar model but uses the principles of the Lean Startup ethos, a scientific approach to creating and managing startups which gets products to customers' hands faster.
Simple tools to help analyse business ideas will identify the key internal and external factors which are important to achieving goals.
SWOT analysis (or SWOT matrix) is an acronym for strengths, weaknesses, opportunities, and threats and is a structured planning method that evaluates those four elements of a project or business venture.
PEST analysis considers political, economic, social and technological factors relating to a product, a service, or a business overall.
PESTEL or PESTLE adds legal and environmental factors.
MOST analysis is used to conduct internal environmental analysis. This tool is used for projects within businesses and ensures that your project is aligned to the 4 attributes: mission, objectives, strategies and tactics.
In the UK there are several recognised structures you can use to run a business. It’s also possible to change your structure whilst you’re trading without it causing too much disruption to you.
The most common structures:
Sole Trader - If you start working for yourself, you’re classed as a self-employed sole trader- even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You keep all your profits after you’ve paid tax on them.
You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you must work alone.
You’re personally responsible for any losses your business makes.
Partnership - In a business partnership, you and your business partner/s share responsibility for your business as individuals.
You can share all your business’ profits between the partners as you decide. Each partner pays tax on their share of the profits.
You’re personally responsible for your share of:
- any losses your business makes
- bills for things you buy for your business, like stock or equipment
You can set up a limited partnership or limited liability partnership if you don’t want to be personally responsible for a business’ losses.
Limited company - A limited company is an entity of its own that you can set up to run your business - it’s an organisation responsible for everything it does and its finances are separate to your personal finances.
Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits. Directors are responsible for running the company, but there are many legal responsibilities involved.
Limited companies are categorised as either private (Ltd) or public (PLC). Private firms either have shareholders, or by the guarantee of another entity; public firms have shares that are traded publicly on a market, such as the London Stock Exchange.
It’s also possible to trade as an unincorporated association, a charity, a co-operative and a community interest company (CIC), amongst other things. These are less common and regulated differently.
There is no specific legal structure for social enterprises. By definition, they are firms which help people or communities, usually by reinvesting profits, but there’s no specific body they are accountable to which would differ to their chosen way of incorporating.
Every business faces risks which could threaten its success, although some trades carry more inherent risks than others. We’re looking here at risks on a strategic level – other risks are more practical (health and safety, for example).
When you own a small business, you know you're accepting risks - some you're aware of, and some will be surprises. Weighing up the facts and making the best possible choices are the key to managing risk, and being prepared in case things don't go as planned.
It’s never nice to have to think of the ‘worst case scenario’, but it’s an important exercise to do in any business planning phase: examining the ‘what if’ situations so you can understand how to manage and avoid them.
A crucial part of any planning process is to look at all of the business process areas, and see what can go wrong:
- Strategy – what if our assumptions are wrong? What if someone invents a technology that makes our business obsolete?
- Finance – what if nobody pays us? What if the bank rejects our loan application? What if we don’t pay our tax on time?
- Goods and services – what if we can’t find a manufacturer? What if my competitors copy me? What if my work isn’t of a good quality?
- Sales and marketing – what if I don’t get any customers? What if I can’t sell myself? What if I get lots of orders that I can’t fulfil?
- People – what if I become dependent on staff and they leave? What if I can’t find the staff that I need?
By examining these, you’ll be able to spot ones that you can easily mitigate and ones you can’t.
For your business, you can decide just how likely risks are, and how big an impact they would have should they ever happen. This will help you to decide how to manage them – and equally, means you can monitor them to see if they become more likely, or more impactful, over time.
Doing nothing is a valid option – sometimes there isn’t anything you can do, and sometimes your only options would be so expensive or impractical that they’re more harmful than helpful.