The most effective way to begin to set up your project or business is to write a business plan. These notes are intended to free you to do what you love doing and make a good living from it. Being businesslike when you need to be – and only when you need to be – will enable you to be so much more successful in following your passion.
So, what is a business plan? Quite simply, it is a description of how you will get from where you are now to where you want to be in a few years’ time. Think of it as a story - the story of your project as you see it unfolding and becoming real. Since it is your own story, you tell it in your own way, using your own language. You are not obliged to use business jargon – this will only distance you from what you are saying and you will lose interest in writing it. It does not need to be huge. You should aim to keep it succinct: long enough to cover the ground and short enough to be an interesting and stimulating read.
Yes, I mean that: a stimulating read. Your job when writing your business plan is to create a page-turner - something so exciting that anyone reading it will not want to put it down, will want to read to the very end. And when I say ‘anyone’ I include you. Because if you are not excited by your business plan, can you really expect others to be?
You may use it to get loans or grants, but primarily the business plan is a guide for you, filled with your insights, facts, milestones and targets. It will get your creative juices going and be your project checklist. A thorough business plan will highlight all the issues you need to consider in setting up your business or project and the problems you need to overcome. Expect them to change as circumstances unfold and new ideas emerge.
What goes into a successful business plan?
Here are some points on how to structure a business plan. See below for more details on each item.
1. Mission statement
3. Executive summary
4. The market/need
5. Addressing the market
6. The services/product in detail
7. The costs of delivering the services
8. The income potential
9. Actions and timetable
10. Cashflow projection
1. Mission statement
On the cover goes your Mission Statement – a few words that state what you aspire to in your business and a brief ‘taster’ that will make the reader want to continue.
List all the sections and the main sub-sections so the reader can get around the document easily.
3. Executive summary
This is a concise version of your business plan which can be read in about three minutes. It whets the reader’s appetite even more. It is aimed at those who do not have time to read the whole thing but want the basic information. It will help your reader to form a good first impression and then make them want to go deeper.
4. The market/need
This is an overview of how you will meet the market’s needs through your unique combination of skills, experience and personal qualities. Demonstrate that there is a market for your services – people out there who need what you do and will buy it.
It is fairly obvious that there needs to be a market – or markets – for your product or service, whether you are a designer or a fine artist. A market is a group of people who need or want what you do and are willing to pay for it. Of course, it will help if you are clear about what your product or service is. If you only have a vague idea of what you want to do, then it is likely you will be looking for others to work with (and to pool ideas with). A project can be socially focused (such as working with children to document their community through photography and an exhibition) or simply about you (such as setting up your own fashion label). In either case, the idea needs to be bold and original. You must demonstrate not only your passion for the issues or opportunities, but also your confidence in successfully delivering the project.
How can you be convinced that there is a market – or markets – for your project or service? The answer is simple: you need to know those markets really well. You need to assemble a fact file on your markets that is so thorough that you can see the opportunities or, as some call them, niches. Base these on real need, and your market will come to you.
This fact file you are assembling on your markets will include a section on where to locate them. Assemble information about them in as much detail as possible – what do these people read, where do they get together to party or to eat and drink? Where do they buy clothes or furniture? Where do they live? You need to know who is doing what in your field, with whom, for whom, where, how often, why and what they charge for it. That way, you will be able to spot the gaps. Gaps that you could fill. You need to feel the pulse of your patch. And do not assume that you can do this from inside your professional box. Looking over the edge was daring a few years ago. Not any more. Now you need to get right out of the box. That is, if there is still a box at all.
Study the magazines and periodicals that deal with your field. Read articles to develop a sense of whether people might be interested in your special product or service, what we call your unique selling proposition (USP). Visit a library with a large business section and go through their data. The British Library has a Business & IP Centre to help budding entrepreneurs start, run and grow their businesses.
Become a detective. Find out what other people in a similar line of work are doing. Where do they get together, who do they network with? Look at their advertisements, their promotional events and the way they have developed their image – their brand. What are they saying and who are they pitching to? Ring them up and ask them what works for them. Offer them a free product/service if you like; if they are impressed, they will become an ambassador for you.
5. Addressing the market
Once you have a clear idea of your markets, you will need to make contact with them to let them know that you have the answer to their needs. This is where you will need to promote yourself, your product and your services.
By far the best (and cheapest) form of promotion is networking, also known as ‘word of mouth’. Around 70 per cent of UK business gets transacted through word of mouth. There are a number of misconceptions about networking. It is not selling your services. It is not sending out huge numbers of flyers in the hope that someone will bite. And it is not brow-beating someone at a conference or a party with your business idea.
Networking is simply about being you. It is talking about yourself and sharing your ideas. It is also actively listening to and appreciating others doing the same. Because, if someone likes you, they will want to buy from you the next time they need what you have or do. You are your best marketing tool.
The only materials you need for networking are:
• Business cards: A simple and stylish way of helping people to get in touch with you easily.
• Website: This builds on what you have already started face to face, and makes it easy for people to contact you. In order to help you get your message across, it must be extraordinarily easy and quick to navigate and you must keep it up to date.
• Advertising: This can be expensive so check out what others have done, and where, before deciding your approach. Be critical about their efforts: does this really appeal to you – why? – does this put you off – why?
Whatever you do to promote your business, you will need to be able to justify the benefits and the costs in your business plan. You will need a promotional strategy, a way of satisfying yourself and demonstrating to others that you have really thought this through. This will help you develop a way of promotion that suits the needs and aspirations, habits and attitudes of your chosen markets.
6. Services and products in detail
This is where you demonstrate that you have thought through in detail how the business is going to work. Include here your ethical, governance and customer management policies, together with the rationale behind your location decision and such things as legal structure and promotion.
Now you have got a product, project or service that you know there is a market for, and a promotional strategy for reaching that market, you will need to know in as much detail as possible how the logistics are going to pan out. The details will cover things such as:
• Where am I going to work?
• Will I be working with or employing others?
• How ethical do I want my project/company/practice to be?
• What about Intellectual Property Rights and copyright?
• What is my client management going to be like?
• Do I need to register a company?
Where am I going to work?
Do you need to see clients in your office/studio? If you do, it will need to reflect your personal style and your company brand or image. It must be somewhere that clients will find easily, can reach quickly and which is in the ‘right’ location for your profession.
Increasingly, the question is not where you get premises, but whether you should get premises. Technology allows us to work more nomadically, to hot desk or to share office or studio space with others. We may not need our own office or studio with its own reception area and meeting rooms. At The Hub, which has properties in many cities, you can hire a desk or an office for an hour or a morning in a friendly atmosphere, full of creatives. The Mezzanine – started by the Community Action Network – is also a great place to work. You have your own dedicated space but because The Mezzanine is set up to support small projects, mostly social businesses, it is very simple to join, to leave and to operate there, amongst a crowd of motivated people making a difference. When considering premises it is worth remembering that clients – especially the bigger ones – will almost certainly want you to come to their place.
Will I be working with or employing others?
If you are going to be working with other people you will need to consider issues around responsibility and liability. Who is going to look after the ‘common parts’, the bits of the premises you share? What can you safely consider to be your own patch? A written agreement covering these things is important.
If your arrangements for working with others are more formal – if you constitute a partnership – you would be wise to have a partnership agreement. This does not need to be long or complex: just list what you have agreed and the procedures you have put in place in case things go wrong.
Will you employ others, either as contractors (freelance, self-employed) or as paid employees? What kind of ‘boss’ are you going to be? I recommend the book Maverick! (Arrow, 1994) by Ricardo Semler, in which he outlines some very interesting ways of managing employees, including asking them how much they would like to be paid.
How ethical do I want my project/company/practice to be?
You may have heard people talking about Corporate Social Responsibility (CSR). This is big business. In some cases, it is a sign of an organisation genuinely trying to do business ethically and taking its responsibility as a major player in the community and the environment very seriously. Innocent Smoothies is one such company; they set out to be as ethical as possible, carefully sourcing the fruit they bought, treating their suppliers and other workers fairly and reducing the carbon-emitting impact of their distribution. There are many companies who genuinely try to make a difference and who really believe in sustainable business (in other words, they make profits now but not at the expense of future generations). There is a growing trend – and market – for ‘green’ business.
Yet society still has an attitude which says: we will only help out with the community and the environment if we can afford it (financially). In other words, making money – and not losing it – is still the measure of how much we can care. Turn that on its head, and you have a very different approach: if we can afford it (environmentally and/or socially) we will make a (financial) profit. The trouble is that the value of money is propped up by the ready availability of natural resources such as coffee, sugar, iron ore, copper, titanium, etc. Until now. Enter Triple Bottom Line! TBL regards social, economic and environmental factors as being of equal importance. The impact and performance of companies is measured in the same way. Increasingly, government organisations – particularly the EU – are building TBL into their procurement policies, so it is a good idea to think along similar lines.
How much will your project, product or service embrace CSR and TBL? I would give it some serious consideration.
What about Intellectual Property Rights?
You need to be vigilant about your Intellectual Property. Many students have seen their work on billboards a few months after making a ‘free pitch’ to some unscrupulous advertising agency, or seen their ideas become products on sale under a rival brand. If you value your work, do not give it away.
What is my Client Management going to be like?
Clients are not really people. They are clients. You can be friends with them, take them out to dinner and go to gigs with them, but they are still clients. Sometimes after a good few years of working with them, they become almost your friends.
My approach to clients is to try to balance my needs with theirs: my need for my professional and financial boundaries to be respected and not transgressed; their need for a thoroughly professional – no, more – a thoroughly brilliant and professional job from me. I always give 100 per cent and I always focus on their needs and how I can help them achieve their goals before I focus on my own needs. They find they are doing business with someone who is not a pushover, but is dedicated to getting the very best outcome for both. I know from experience that if I get the task right, if I give that 100 per cent, the money will follow.
Do I need to register a company?
From a legal standpoint, if you are going to be working in partnership with others for any length of time, or if you are going to be handling large sums of other people's money, you should set up a limited company (which will protect you if the business fails). This needs careful consideration and depends a lot on what you will be doing and who you are working with. Your business plan will need to show why you have chosen this particular structure – or not.
Working in partnership is great. Everyone plays to their own strengths and lets others get on with their own ideas. An atmosphere of trust usually pervades. However, if a litigious client takes it into their head that you are a partnership and sues, you are all liable for any debts, claims, etc. You could lose your possessions or be declared bankrupt. To avoid this, it is wise to set up a limited company where – as the name implies – the partners’ personal liability is limited and, if everything goes belly up, they only lose their shareholding or other investment in the company.
There are a number of different legal models you can adopt, including a company limited by shares (shares being the way the company is owned); a company limited by guarantee (no shares and often used as a basis for social businesses, sometimes called social enterprises); a cooperative (usually based on the company limited by guarantee as there is no simple legal model for cooperatives in the UK); and a community interest company, which can be set up so you can attract both investment (through people buying shares in the company) and grants. For more details see the Companies House website.
As a general rule of thumb, the way to choose which model is best for you is to figure out where most of your money is coming from and whether or not you want a little nest-egg in a few years’ time. If you want to maximise shareholder dividends and build an early retirement fund, go for a Company Limited by Shares. If you are a bit more philanthropic, you could opt for the Company Limited by Guarantee or a Community Interest Company. Consult a lawyer if in any doubt whatsoever!
7. The Costs of Delivering the Services
Now you know in some detail how you are going to set up and run your company, project, studio or practice, it will be easier to work out what it is going to cost to do everything. This section covers how much capital you will need to set yourself up and how much it will cost you every month to stay afloat. Include as bold headings all the cost items, such as staff, travel, accommodation, equipment, etc.
You need to be very thorough here. And a bit pessimistic too. Below is a simple outline of some of the more common costs. Use it as a basis but add to it for your own needs and cross out the ones that do not apply to you. Start by listing the headings and do not get disheartened if you do not know what something costs. You can find out later easily enough.
You will need to decide whether you want to present the costs of running your business weekly or (more usually) monthly.
|Others’ incomes (employees)||£.....|
|Fees for part-time or freelance workers||£.....|
|Rental and business rates (if applicable)||£.....|
|Gas, electricity, water, telephone||£.....|
|Subscriptions to professional magazines||£.....|
|Attendance at conferences, seminars, courses, etc.||£.....|
|Printing, literature, photocopying, etc.||£.....|
|Other running costs||£.....|
|Emergency fund savings (suggest 5 per cent of income)||£.....|
|Total business costs||£.....|
Now you have an idea of what the likely costs are, you can start thinking about what your project, service or product needs to earn to cover these costs - and some. Always think in terms of thriving, not simply surviving. See Max’s Patent [nodepicker==node/26==What%20to%20Charge%3F==What%20to%20Charge%20Formula] - to be taken regularly, and guaranteed to purge doubt and build confidence.
8. The Income Potential
How much? How frequently? From whom?
Now you have calculated the costs, you need to work out how much you need to sell your work for to cover those costs. If you are proposing to sell products – for example furniture – you will need to work out how many pieces you can make a month, how much you can sell them for, whether you will be selling them through an agent or through a shop (in which case they will probably take a percentage) and whether this will cover the costs you have established above. You will need to compare as much as possible with other products which are reasonably close to yours in terms of size, quality, innovation, etc.
9. Actions and timetable
How long will it take to set all this up?
This section describes what needs doing – now and in the near future – and when you should do it.
Now you know your markets, how you are going to address them, what it is going to cost to do this, and what level of income you need to cover those costs. The next stage in your business plan is a timetable, to work out in detail how long it is going to take to establish your business, service or project. A good way of working this out is to do a Gantt Chart. Let us take building a house as an illustration. You would never build the roof before the foundations, and most things are dependent on something else being finished first. Sometimes there will be overlaps.
10. Cashflow projection
This brings all the information together to demonstrate that it works. Your careful deliberations and decisions reveal whether you will have a viable business.
Your cashflow – the flow of money in and out of your business account – is like the blood in your veins. It is vital to your success. In a business plan, it demonstrates clearly that you have made the right decisions about charging, cost control and all the logistics that go into running a business; it shows you have thought of everything, that the costs are covered and that the project is therefore viable.
Cashflow projection is a very useful tool which allows you to predict when the highs and lows in your bank account will occur and gives you enough time to plan to avoid or capitalise on them. If, in three months' time, your cashflow tells you that money is going to be very tight, you have still got time to spend less and perhaps do a bit more work to reduce the impact. If, on the other hand, it tells you that there will be a surplus in six months' time, you can plan to buy a new piece of equipment or go on a research trip.
If the cashflow projection shows you are going to make a loss, you will need to reconsider some of those decisions and do some tweaking until it works out.
In order to put the cashflow together in the first place and - very importantly - keep it refreshed with new information and developments, you will need to keep very thorough and accurate financial records. Knowing at all times about the way your money moves around, in and out, is the best way of checking up on the health of your business, the best way of seeing in advance what is likely to happen or not happen, and the best way of planning for success.
Financial awareness is essential. You should know at any time exactly how much money you have got in your bank account, how much you owe and how much you are owed - to within £25 either way.
Cashflow analysis is essential if you are going to be in control of your business, rather than the bank being in control. Below is an example of a cashflow projection. Numbers in brackets are minus numbers.
In order to maintain the narrative flow of your business plan, put all the detailed stuff (copies of testimonials, orders and technical diagrams) into appendices at the end. That way, those that crave detail can have it, but those that want the essentials are not interrupted by ‘boring’ details.