BUSINESS PLANNING

What do I need to know about business planning?

When you are excited about the prospect of starting your business, the planning stage can seem tiresome, however I cannot overstate the importance of this part of the process.

Researching your idea thoroughly, preparing a business plan, and a cashflow forecast are vital components of a SUCCESSFUL business (even if you do not need to approach a lender for money – remember, this is for YOU)

Top tip - there is a temptation to worry that someone else will ‘get in first’ – however this fear is usually completely unfounded. Do not rush – it is better to take your time and get it right! (This will also give you a better chance against any competition if it does exist!)

Research your idea and your market

Time spent on researching will be valuable – whatever you discover! Do not be afraid to find bad news - it is better to uncover direct competition or flaws in your plan at this early stage rather than when it is likely to cost you real money. Use the internet, books, magazines, trade press, and libraries. Talk to business advisors, friends, relatives, other business people,

Top tip - learn as much as you can about your competition or how similar businesses work in other areas (there is no better way to find their strengths and weaknesses!)

Prepare a Business Plan

There are plenty of sites on the web who will try and sell you sample plans, some of the more sector specific examples may be useful, but if you do not want to part with cash, your bank will almost certainly give you a free template.

Did you know? - One Enterprise Agency undertook a survey of local people whose businesses had failed to start or had ceased trading in the early stages - over 90% of them admitted that they did not have a business plan!

Create a Cashflow Forecast

Sadly, money rarely comes in or goes out at the most convenient time (for example you may have to pay for your stock before you can sell it!). A cashflow forecast will help you work out roughly what you can expect financially in the future – even if some of it will have to be based upon guesswork! This is vital information, particularly if you are planning to borrow money – it is best to plan for the maximum amount that you will need rather than having to keeping going back to your lender asking for more!

Top tip - most businesses have peaks and troughs – planning ahead will help you survive the quieter times. A landscape gardener may be well advised to save some of his summer income to carry through the winter months when work could be harder to find! How does this relate to you?

Start Networking

Networking is a great way to make new business contacts and to put on weight! Often run as breakfast, lunch or social events, it is an opportunity to get to know other local business people and if handled correctly may ultimately lead to more custom.

There will be many formal and informal networks near you. Your local Chamber of Commerce may be a good starting point. Some national networks are BRE, BNI, Ecademy and the FSB. Click on the links to find out more.

Top tip - do not ‘sell’ to everyone who you meet – this is likely to put them off you and your business rather than entice them to buy from you. Your chances of obtaining new business are far greater if you genuinely try and find ways to help them!

Business Strategy

Business Strategy Defined

A full statement of a selected business strategy is a business plan defining:

• the company vision, overall corporate strategy,and objectives
• the strategy and tactics that will enable the company to reach those objectives
• the resources required, and how they are going to be obtained;
• what the main milestones and steps are along the way;
• who is responsible for causing each step to occur;
• what are the company's business risks and external factors that need to be kept under review for indications that a change in strategy or plan may be required.

Modern Theory of Business Strategy

Strategizing is much more than just visioning, forecasting and planning. In the new rapidly changing economy, all substantive issues of strategy have been redefined as issues of implementation. Today, strategizing is concerned with the match between the internal capabilities of the company and its external environment. "The modern subject of business strategy is a set of analytic techniques for understanding better, and so influencing, a company's position in its actual and potential marketplace".

As strategy today is a subject of application, rather than a discipline, the obvious underpinning disciplines for strategy are economics and organizational sociology. You should employ them to define a structure in which the process of strategy formulation and its implementation are bound together.


Working On Your Business

"Most businesspeople are so busy working for their business or in their business that they never find time to work on their business. Thus they fail to anticipate what might happen or what they might be able to make happen."9 Unless you regularly schedule time (one-day out-of-the-office meeting a month at least) to work on your business and answer critical questions, you'll never achieve your stretch goals.


The Methods of Business Strategy

According to John Kay4, methods of business strategy require:

1. Looking inward: strategic analysis of the characteristic of your company to identify your distinctive capabilities and surround them with a collection of reproducible capabilities, or complementary assets, which enable your company to sell its distinctive capabilities in the market it operates.
2. Looking outward: strategic analysis of the industries and markets in which your company operates to identify those markets in which your company's capabilities can yield competitive advantage.

The questions are twofold:

1. What are the origins and characteristics of the successful fit between capabilities and environment? Why do companies succeed?
2. How can companies and their managers make that fit more effective? How will companies succeed?

Basic Strategic Planning Approaches

The primary strategic options for a new or established business include the following:

Grow fast (and ahead of most competitors)

Grow in line with industry

Defend existing status (assumes a moderately strong starting position)

Catch up (with leaders & then grow with or ahead of them)

Turn around (from being an underperformer)

Hang in (go with the flow but don't expend much effort)

Harvest (milk the opportunity with a view to withdrawal)

The preferred option is likely to be very influenced by the dynamics and prospects of the sector in which the business operates. For example, if the sector is under serious long-term threat then the only realistic options might be to hang in or harvest.

The two main approaches to strategic development for an established business can be classified as either organic or quantum as illustrated below:

Organic	Quantum
Lower risk	Higher risk
Limited resources needed	Substantial resources needed
Absorbs less effort	May divert/deflect attention
Low immediate returns	Higher returns (?)
Incremental learning/progress	Excellent insights required
Strategic flexibility	Unforgiving of errors

In the case of a start-up venture, organic and quantum approaches translate into soft or hard start-up strategies. An example of a soft start would be a software company which evolves from a part-time business into full-time service provider and then progresses into software products (classic "back room" start). Another example, would be an engineering company which starts in a shed and gradually moves into a proper premises ("garage" start).

Soft start strategies can be very effective as they allow entrepreneurs to learn the trade (and make mistakes) without incurring major, irrevocable (and maybe premature) commitments. Hard starts are obligatory where substantial investments (in R&D, market or assets) or resources (technology, manpower etc.) are needed from the outset. It may be possible to soften a hard start by renting (rather than buying) premises; leasing equipment (instead of purchasing); acquiring a franchise (in lieu of developing a new brand, systems etc.); entering into a joint venture; or subcontracting manufacturing, distribution, accountancy services and so on.