January is a month known for making personal resolutions and planning for the year ahead. It’s no different in the world of business.
Businesses use January to decide what their priorities are. It’s a time for making improvements, learning from others and having big ideas.
If you’re keen to start your own business, you should learn from the pros. Make January your new PLANuary and use it to fine-tune your business idea. We’ve designed a four-week business plan to help you get started. Once it’s complete you can then present it to potential investors, and kickstart your business.
Week One: Master your target market
To start with, you need to see what is already out there in the market.
Delve into your competitors’ worlds and find out how they work. Look at direct competitors (that sell the same product, or provide the same service) and indirect (those selling alternative products but in the same market space). Google what they do, visit their websites and check out any recent advertising campaigns or research they’ve released. To differentiate a business, you have to know what it’s not, as well as what it is. This is a big task so keep it up over the four weeks, businesses carry this on all year to keep up to date.
See if you can find three things the main brands in your sector have in common. In the chocolate market for instance it might be a strong name, eye-catching colours and a recognisable parent confectionary company. Researching what success looks like will give you a better idea of what you’ll need to do.
Consider how you’re going to win over your competitor’s customers and what your USP (unique selling point) is. When you’ve identified this, make some changes to your initial idea.
Now, see if your future customers will think your business is special enough. Spend a couple of days asking your family, friends or neighbours. Free online survey companies like Survey Monkey, can give you a chance to survey your social media contacts. Maybe set up a market stall to get feedback or visit local groups to collect opinions.
Make any final changes to your idea based on feedback; a business plan is all about preparation, so be prepared to adapt your original ideas. The customer is always right, remember. Conduct a SWOT analysis, mapping out the strengths and weaknesses of your business idea and then any external opportunities and threats that could impact your plans.
A final research tip is to check the legalities of starting your business. It’s easy to get caught out on simple things like not having a patent, or food licence certificate as legal rights and requirements aren’t as well advertised. If you’re a sole trader you don’t need to register with Companies House, but if you have a limited company you need to register and file annual reports.
Check if you’d be personally liable for business losses, what insurance you need and the type of tax you need to pay. Common business taxes include corporation tax, Pay As You Earn (PAYE), capital gains tax, business rates, income tax, national insurance and VAT. You would also need to complete a self-assessment tax return so check the deadline. You can find further help and information on this via the Start Up Loans Company website, the Business Support Helpline or Gov.uk.
Week Two: Figure out your finance
Figuring out your finances takes priority in week two. Make sure that you’re in a financially secure position – starting a new business is not without risks so make sure you have a realistic grasp on what income there will be to support you in the first year. When starting up, almost every business has hiccups along the way.
To help, assign your own personal finances a ‘health’ rating – on a scale of 1-10 of how secure you are financially. This will give you a good idea of where you stand when you look for additional funding and if you can afford to provide money yourself.
Finding funding for your business idea can seem daunting, but make sure you get the right funding source for you. Different types are on offer so take your time. Companies, like ours, for example, offer low-interest funding for start-ups as well as mentoring support. But there are many other ways to fund your idea. Gov.uk has a useful online tool to help you find the right finance for your needs.
But getting the initial funding isn’t the only time you need to think about money. Many small business owners don’t have an accountant so managing money on a daily basis is all up to them. Ensure you have a good understanding of cash flow, profit and turnover figures. You need to know how your business will make money and if it’ll have a good bottom line.
Next, think about pricing structure and how much you expect to sell (you can come back to this in the second week). Write a list of estimated expenses if you were up and running. Putting together a sales forecast, an estimate of how many units of your product or service you will sell every day, week, or month, gives you a first estimate of how much money you need to make, and your profit margin.
Week three: Bringing your business to life
You understand your market, know your financial situation and your legal rights. But how are you going to tell everyone about your business?
Beginning a start-up business can, at first, seem a bit like shouting to a room of people who aren’t listening. A business plan should include a marketing activity timeline for how to showcase just how great you are.
A good first step is to decide whether or not to have an online presence and, if so, think what your website will look like; it should be professional as this will be customers’ first impression of your brand. Don’t be afraid to ask around your friends for any IT skills you can call on. Produce a couple of preview slides for how you’d like it to turn out.
Move onto social media next, having a Facebook page, Twitter handle and Instagram account will attract attention. Write a couple of potential posts you could use once set up. Take a look at other start-ups for inspiration. For example, Shortcuts, a start-up children’s hair salon, uses Instagram to show happy customers after their haircuts.
Once you’ve done this, you can think about other ways you’d reach customers. Local papers or radio stations may be a good place to start. Write a short list of stories you could go to the local press with in your first year of opening.
This could be simply the launch of your business, sharing an interesting back story behind the business, announcing your 1000th customer, opening a shop or launching a new website. If you do launch your business, you can then approach the paper with some ideas and photos. Hosting launch events and networking also work well.
Finally, at the end of the week spend some time hunting for any upcoming opportunities to shout about your business over the next year. Are there any relevant local markets or festivals? If so, add them into your business plan.
Week four: Growing your business
It’s important to think ahead in your business plan. If sales suddenly pick up and you find yourself struggling to fill orders, you need to be able to respond quickly. Growing your business is all about judging when it is the best time to upscale and expand.
Think carefully about your business goals and write down a list of the first thing you would do if the business was successful and you had more money readily available. Then make notes on the next stages, so you are thoroughly prepared to grow your business if the opportunity arises, rather than being caught off guard.
You need to think about how you would secure more funding to finance your growth. It’s normally a good idea to keep your funding with the same people, so first approach those who have already lent to you. Keep in touch with your original backers, let them know how you’re doing and maintain a good relationship so that if you ask them for financial help in the future, they’re more likely to support you again.
Those who struggle to secure funding from their original backers or other investors have the option to crowdfund. However, be aware it’s a competitive market, so while running your business make sure you have a full grasp of financials and put together a compelling appeal message in advance.
It might seem too soon to start thinking about future growth, before your business has even launched, but a business plan needs to spell out all the details. Twelve months down the line, when the time comes to decide whether to expand your business, you’ll already have a great foundation.
Tim Sawyer is CEO of The Start Up Loans Company.
Further reading on business in January