The business opportunity (or proposition) is one of the fundamental elements of your business plan and as such it should be completed ahead of almost anything else. Some people include this as part of a feasibility study, others on its own, and many not at all! But if you are going to end up with a professional business plan you are going to need to address this early on.
But how is your opportunity best identified and supported? How can you ensure the business opportunity is compelling?
As I said in my last blog the easiest person to fool is you. You have every right to put your own money where your mouth on the basis of your "gut feel" but if you are looking for a bank or investor to do the same, your gut feel is not going to be enough to secure funding. As far as possible you need to put aside your motivations and personal conviction and become objective.
So, one of the best approaches to this core area of the business plan is to ensure that you derive the opportunity from objective independent market data where possible. The bottom line is that the more evidence that you have supporting your business opportunity, the more credible will be your business plan.
The first option to explore is freely available internet-based research and freely published information from industry & professional bodies. Even press releases may give you some top level market data. Make sure you cross reference sources and ensure they are reliable. There are also market research reports available from a number of sources that cover different industries and sectors. Be sure you know what you are buying before you start paying out hard cash.
Once you have some useful data then carry out some analysis and financial modelling to see how the opportunity stacks up under different scenarios. Once you have this complete you will be able to “qualify” your opportunity – define it and put it in the context of the market. In some cases where the market is large and diverse it is as important to say what your opportunity is not as much as what it is.
The next stage is to “quantify” the opportunity – establish the size of the opportunity. This can be done in several ways depending on the nature of the market (unit sales, demand for services, survey data) but is often based on a set of assumptions and should always include an estimated value in terms of revenue potential.
So, once you have a qualified and quantified opportunity all you need to do now is show how you are going to execute on this opportunity in the rest of your business plan.
Good Luck!
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
Sunday, 7 February 2010
Monday, 25 January 2010
Do You Need To "Let Go" So Your Business Can Grow?
In providing business plan services we deal with many entrepreneurs across a wide range of industries and we are regularly inspired by their commitment and enthusiasm for their business whether it is a start-up or a growth business. We often see entrepreneurs with a clear vision for the business that will drive it forward but in the execution of a business plan this can also be the limiter of its potential if it means an inability to “let go”.
In these cases we see business opportunities that look sound and have great potential but are limited by the entrepreneur’s desire to make judgement calls in areas of business where they lack experience, knowledge or relevant skills. The critical need is for the entrepreneur to be able to "outsource" in these areas and draw on experience of others, trust their judgement and act on their advice if the business is to be a success.
In some cases the entrepreneur is unable to take that leap of faith and remains in their personal “comfort zone” of control where they rely on their own judgement and at best pay lip-service to advice. The result is often delay, prevarication and poor decision making.
Why is this? Well, firstly the easiest person to fool about your business is yourself. It is easy to stay within the bounds of the vision you have created and stick to your plan – opening it up to others exposes it to the risk of someone identifying weaknesses and putting your vision under threat. For someone who has already invested much time and energy in getting to where they are this can be a big risk.
In addition, the entrepreneur can often be reluctant to face up to their own limitations and cede some control of an area of business where someone else is better able to make judgements. For some people there is a reticence to trust another person and act on their advice – and there is no point in engaging with an expert if the advice is then disregarded in preference to one’s own assessment. This inability to “let go" can constrain, or even prevent, a business starting up or growing.
So how can you get to the point of "Letting go"? This not only requires some element of self-awareness but also an ability to have the confidence to acknowledge this to others, be able to source a better qualified person, and manage their input effectively. At the end of the day it is about being a good manager, as well as a good entrepreneur, which can be lost in the excitement and passion for a new business.
So, don't fool yourself ! A third party independent opinion (which doesn't need to be expensive and can sometimes be free or subsidised) can often help by putting your approach in a broader context that will make the decision making process effective and increase the chances of success. In our business we are open about how we think you should choose business plan services and measure ourselves regularly against these criteria. Whatever role or project you are going to outsource you should ensure you choose your counsel wisely and be clear on what basis you are prepared "let go".
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
In these cases we see business opportunities that look sound and have great potential but are limited by the entrepreneur’s desire to make judgement calls in areas of business where they lack experience, knowledge or relevant skills. The critical need is for the entrepreneur to be able to "outsource" in these areas and draw on experience of others, trust their judgement and act on their advice if the business is to be a success.
In some cases the entrepreneur is unable to take that leap of faith and remains in their personal “comfort zone” of control where they rely on their own judgement and at best pay lip-service to advice. The result is often delay, prevarication and poor decision making.
Why is this? Well, firstly the easiest person to fool about your business is yourself. It is easy to stay within the bounds of the vision you have created and stick to your plan – opening it up to others exposes it to the risk of someone identifying weaknesses and putting your vision under threat. For someone who has already invested much time and energy in getting to where they are this can be a big risk.
In addition, the entrepreneur can often be reluctant to face up to their own limitations and cede some control of an area of business where someone else is better able to make judgements. For some people there is a reticence to trust another person and act on their advice – and there is no point in engaging with an expert if the advice is then disregarded in preference to one’s own assessment. This inability to “let go" can constrain, or even prevent, a business starting up or growing.
So how can you get to the point of "Letting go"? This not only requires some element of self-awareness but also an ability to have the confidence to acknowledge this to others, be able to source a better qualified person, and manage their input effectively. At the end of the day it is about being a good manager, as well as a good entrepreneur, which can be lost in the excitement and passion for a new business.
So, don't fool yourself ! A third party independent opinion (which doesn't need to be expensive and can sometimes be free or subsidised) can often help by putting your approach in a broader context that will make the decision making process effective and increase the chances of success. In our business we are open about how we think you should choose business plan services and measure ourselves regularly against these criteria. Whatever role or project you are going to outsource you should ensure you choose your counsel wisely and be clear on what basis you are prepared "let go".
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
Monday, 18 January 2010
What an investor or funding organisation looks for in your business plan
I was recently discussing with a friend the best way to describe how investors often review business plans following my post below on the "Three Cornerstones of a Business Plan" and we decided that another really helpful way of understanding what investors look for is the "4 P's" - "People", "Proposition", "Plan" & "Payback" - generally in that order of priority. If the venture does not provide a good match in all 4 areas investors will not part with their money - they will see the risk as too high !
So how do they review these criteria for investing ?
People
Qualified, experienced, people with a track record of success represent a far higher likelihood of a company succeeding than a team with little commercial experience, an unrealistic plan &/or no track record of setting up or managing a new business.
Proposition
If the team have the necessary credibility & the proposition is compelling (with unique selling points & the potential to generate a healthy profit in its target market), the venture will start to look like an appealing investment opportunity.
Plan
The quality & practicality of your 'Business Plan' is a critical document for investors. If your plan conveys (in easy to understand terms) what is compelling about your venture, why it will make money in a competitive market & that you have a seasoned team capable of building a profitable business, the company will be worthy of serious investor evaluation.
Payback
If the investor can see an exit strategy through which they can achieve a good payback over the short to medium term (a multiple return on their investment for their shareholding, such as a trade sale or stock market flotation), the likelihood of the venture securing an investment at terms that work for both parties, increases significantly.
Thanks to Grant for our discussions on this
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
So how do they review these criteria for investing ?
People
Qualified, experienced, people with a track record of success represent a far higher likelihood of a company succeeding than a team with little commercial experience, an unrealistic plan &/or no track record of setting up or managing a new business.
Proposition
If the team have the necessary credibility & the proposition is compelling (with unique selling points & the potential to generate a healthy profit in its target market), the venture will start to look like an appealing investment opportunity.
Plan
The quality & practicality of your 'Business Plan' is a critical document for investors. If your plan conveys (in easy to understand terms) what is compelling about your venture, why it will make money in a competitive market & that you have a seasoned team capable of building a profitable business, the company will be worthy of serious investor evaluation.
Payback
If the investor can see an exit strategy through which they can achieve a good payback over the short to medium term (a multiple return on their investment for their shareholding, such as a trade sale or stock market flotation), the likelihood of the venture securing an investment at terms that work for both parties, increases significantly.
Thanks to Grant for our discussions on this
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
Monday, 11 January 2010
Is a good management team necessary to secure funding for your business plan?
On the face of it the answer is obvious - Yes! Of course you need the right people in place to execute on your business plan. When looking at business opportunities one of the key factors in any Angel or VC investor decision will be the strength and commitment of the management team. The ideal situation of course is that all the experience you need exists within your core management team, with the exception of professional services like legal counsel and audit services.
But what if you have a great idea but don’t have the experience to execute on it? Is it possible to build a team round an idea with little experience in-house? What are the issues around this? I outline a few of these below.
You At the Core of Your Business
In many cases your experience will likely have led you to your business opportunity. Any investor in the business, or source of debt finance, will want to see you operating at the core of the business. However, it is possible that whilst you have experience in the general market place it may be limited to one particular area of business – e.g. sales, marketing, operations or administration. In this case the key is to be able to build a team around you with the skill-set and commitment to drive the business forward.
Necessary Skills and Experience
The first stage is to identify the skills and experience you need on board to execute on the business opportunity. Identifying your own weaknesses and that of any co-founders will be key here. This will not only identify where you can best add value to the business but also those skills that you are missing.
Once you are clear where there is a skills gap build a profile of the type of person that would bring the skills and experience required to the team. It is also important to consider at this stage the personality of the person you want in place – you will have to not only work with them on a professional level but you may also be entrusting a key part of the execution strategy.
Recruiting the Talent
Recruiting people at a start-up stage where minimal funding is in place can be both expensive and time consuming. Using your business networks to reach people can be an affordable alternative so building your network over time will help with this.
The alternative to paying hard cash in salary at this stage is to generate commitment and buy-in to the business by offering some form of ownership in the business (e.g. shares, share options). This has the advantage, if they are structured well, to bind your management team together and align them with your long-term goals for the business. Again, networking and leveraging your contacts to find people willing to operate on this basis is the cheapest and often most successful approach – especially if they come via recommendation.
Incentivising your management team in this way has the downside of relinquishing some ownership of the business. However, if they are linked to performance of the business, specific milestones or personal performance you can ensure that you are only using this as a reward for the growth of your own shareholding. You should seek some legal advice about how to structure any incentives.
Making The Most of Free Resources
Seeking assistance from free start-up resources can be a big bonus. When I was developing a business a few years ago we were fortunate enough to become part of a fast-growth enterprise hub that offered free business mentors. We identified one with experience in a related field and were able to draw on this for a year during the very early stages of development. So, exploring free resources through government back organisations like Business Link or your regional development agency is definitely worth a call.
Other Ways to Build a Skills Base
In the same way that you may recruit and secure the commitment of an individual it may be possible for you to do the same with an industry-related partner. Companies operating in your space my have the skills base to help you execute on your business plan and in return may be willing to accept lower payments up front in return for some form of longer term gain.
Building a strong Non-Executive Team will also bring experience to the management team and guide the growth of the business. Aligning these people with the longer term goals of the business through some form of ownership in the business not only reduces cash-flow but also assures that their commitment to the end game will be aligned with your own.
In summary, to help build a solid management team identify your skills base and any gaps. Whilst keeping the founders at the core of business operations in a role that maximises their own skill-set ensure that you have sufficient skills within the management team to execute on the business opportunity. In these are not in-house bind people or partners in with incentives that aligns your interests and goals for the business. Make best use of free resources and leverage your network to its full extent.
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
But what if you have a great idea but don’t have the experience to execute on it? Is it possible to build a team round an idea with little experience in-house? What are the issues around this? I outline a few of these below.
You At the Core of Your Business
In many cases your experience will likely have led you to your business opportunity. Any investor in the business, or source of debt finance, will want to see you operating at the core of the business. However, it is possible that whilst you have experience in the general market place it may be limited to one particular area of business – e.g. sales, marketing, operations or administration. In this case the key is to be able to build a team around you with the skill-set and commitment to drive the business forward.
Necessary Skills and Experience
The first stage is to identify the skills and experience you need on board to execute on the business opportunity. Identifying your own weaknesses and that of any co-founders will be key here. This will not only identify where you can best add value to the business but also those skills that you are missing.
Once you are clear where there is a skills gap build a profile of the type of person that would bring the skills and experience required to the team. It is also important to consider at this stage the personality of the person you want in place – you will have to not only work with them on a professional level but you may also be entrusting a key part of the execution strategy.
Recruiting the Talent
Recruiting people at a start-up stage where minimal funding is in place can be both expensive and time consuming. Using your business networks to reach people can be an affordable alternative so building your network over time will help with this.
The alternative to paying hard cash in salary at this stage is to generate commitment and buy-in to the business by offering some form of ownership in the business (e.g. shares, share options). This has the advantage, if they are structured well, to bind your management team together and align them with your long-term goals for the business. Again, networking and leveraging your contacts to find people willing to operate on this basis is the cheapest and often most successful approach – especially if they come via recommendation.
Incentivising your management team in this way has the downside of relinquishing some ownership of the business. However, if they are linked to performance of the business, specific milestones or personal performance you can ensure that you are only using this as a reward for the growth of your own shareholding. You should seek some legal advice about how to structure any incentives.
Making The Most of Free Resources
Seeking assistance from free start-up resources can be a big bonus. When I was developing a business a few years ago we were fortunate enough to become part of a fast-growth enterprise hub that offered free business mentors. We identified one with experience in a related field and were able to draw on this for a year during the very early stages of development. So, exploring free resources through government back organisations like Business Link or your regional development agency is definitely worth a call.
Other Ways to Build a Skills Base
In the same way that you may recruit and secure the commitment of an individual it may be possible for you to do the same with an industry-related partner. Companies operating in your space my have the skills base to help you execute on your business plan and in return may be willing to accept lower payments up front in return for some form of longer term gain.
Building a strong Non-Executive Team will also bring experience to the management team and guide the growth of the business. Aligning these people with the longer term goals of the business through some form of ownership in the business not only reduces cash-flow but also assures that their commitment to the end game will be aligned with your own.
In summary, to help build a solid management team identify your skills base and any gaps. Whilst keeping the founders at the core of business operations in a role that maximises their own skill-set ensure that you have sufficient skills within the management team to execute on the business opportunity. In these are not in-house bind people or partners in with incentives that aligns your interests and goals for the business. Make best use of free resources and leverage your network to its full extent.
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
Wednesday, 16 December 2009
Securing start-up or growth funding: Is it best to write your own business plan or get it professionally written?
If you are raising funds for a start-up or to grow your business you will need a business plan - one that includes a financial forecast and a well written commentary. However, what is the best way to improve your chances of persuading a bank or investor to part with their hard-earned cash? Write the plan yourself? or get someone to do it for you ?
Writing Your Business Plan Yourself
For micro businesses raising small amounts of investment (say under £50,000) this is likely to be the best approach. Apart from anything else it doesn’t make sense spending 10% or 15% of the funds you are trying to raise on getting someone to help you write a plan! Most high street banks offer on-line applications or software templates to help you. Just beware that you may have to repeat the application process several times in different format if you don’t have a stand-alone business plan.
For larger businesses too there may be value in writing your own plan. If you write your own plan then you will know every detail of it which will help you when questioned by a bank or potential investor. Everyone wants to avoid those embarrassing moments played over and over on Dragon’s Den where the entrepreneur looks vacant when asked for details of their gross margin or net profits in the first year of trading!
Writing your own plan might also show your all round commercial ability to appreciate all aspects of the business and with that there is a good chance that you will understand how to drive it towards success. Business Plan Software & templates abound on the internet to support this approach and there are plenty of “Do’s and Don’ts” published free to guide this process.
The draw backs of this approach are that many people do not have all the financial, sales, marketing, operational skills and experience necessary to construct a good business plan. They may also lack the ability (or time) to integrate them into a solid business case. Some people may not have the writing skills to bring the plan together. Finally, some people may find themselves “too close” to the business to clearly and simply convey the business opportunity. Weakness in any of these areas may reduce your chances of securing funds.
Business Plan Writing Services
The alternative to DIY business planning is to get some help from an experienced hand. Historically accountants and sometimes solicitors as well as independent copywriting services have offered these services.
However, there are now an increasing number of companies specialising in providing business plan writing services. These companies bring specific independent expertise to the table. As well as writing skills they can have a broad base of commercial experience including financial forecasting and by nature of their independence can provide an objective perspective on your business.
As well as offering business plan writing itself (both financial forecasting and the written plan) they may also offer help with “pre-business plan” research and feasibility and “post-business plan” introductions to potential sources of funds.
When selecting business plan writing services there are a few good guidelines worth following:
1) Commercial Experience - The ability to write well is not enough to make your plan investable – this is not simply a copywriting exercise. If you are going to secure funds you need to construct a business case that integrates all commercial aspects of your business. So, be sure that the people writing your plan have several years of senior commercial experience – the broader the better. This commercial experience should include budgeting or forecasting – your financials are a critical part of your plan.
2) Track Record – Many business plans are confidential so do not expect to see many examples. However, companies providing business plan writing services should be able to provide written and attributable testimonials from clients.
3) Pricing – Services range from around £2,000 for small start-ups upwards to £15,000 for larger corporate plans. As with most things, you get what you pay for and the price generally reflects the complexity of the business model. Make sure you ask for a specific proposal that outlines exactly what you are going to get for your money, the timescale and price. Consider “virtual services” rather than “face-to-face” consultants to reduce your costs but not the quality of work.
4) Ownership – one potential disadvantages of having a business plan written for you are that you will not “own” the business plan and be totally familiar with it. So, ensure that you are fully involved in the process and that there is time scheduled for you to review and discuss the financial forecast and written plan with whoever is writing the plan for you.
5) Funding – Have plans that they have created secured funding? Whilst funding depends on a wide variety of factors and not just the quality of the business plan (state of the market, availability of capital, product, service, proposition, management team etc.) any specialist service should be able to quote a few examples where their business plans have helped to secure funds.
For most people who do not possess experience of writing business plans you may improve your chances of securing funding by engaging a specialist business plan writing service to help you create a plan. However, make sure you are fully involved in the process – you need to own the plan at the end of the day and know it inside out and backwards - your future is in your hands not theirs!
Good Luck!
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
Writing Your Business Plan Yourself
For micro businesses raising small amounts of investment (say under £50,000) this is likely to be the best approach. Apart from anything else it doesn’t make sense spending 10% or 15% of the funds you are trying to raise on getting someone to help you write a plan! Most high street banks offer on-line applications or software templates to help you. Just beware that you may have to repeat the application process several times in different format if you don’t have a stand-alone business plan.
For larger businesses too there may be value in writing your own plan. If you write your own plan then you will know every detail of it which will help you when questioned by a bank or potential investor. Everyone wants to avoid those embarrassing moments played over and over on Dragon’s Den where the entrepreneur looks vacant when asked for details of their gross margin or net profits in the first year of trading!
Writing your own plan might also show your all round commercial ability to appreciate all aspects of the business and with that there is a good chance that you will understand how to drive it towards success. Business Plan Software & templates abound on the internet to support this approach and there are plenty of “Do’s and Don’ts” published free to guide this process.
The draw backs of this approach are that many people do not have all the financial, sales, marketing, operational skills and experience necessary to construct a good business plan. They may also lack the ability (or time) to integrate them into a solid business case. Some people may not have the writing skills to bring the plan together. Finally, some people may find themselves “too close” to the business to clearly and simply convey the business opportunity. Weakness in any of these areas may reduce your chances of securing funds.
Business Plan Writing Services
The alternative to DIY business planning is to get some help from an experienced hand. Historically accountants and sometimes solicitors as well as independent copywriting services have offered these services.
However, there are now an increasing number of companies specialising in providing business plan writing services. These companies bring specific independent expertise to the table. As well as writing skills they can have a broad base of commercial experience including financial forecasting and by nature of their independence can provide an objective perspective on your business.
As well as offering business plan writing itself (both financial forecasting and the written plan) they may also offer help with “pre-business plan” research and feasibility and “post-business plan” introductions to potential sources of funds.
When selecting business plan writing services there are a few good guidelines worth following:
1) Commercial Experience - The ability to write well is not enough to make your plan investable – this is not simply a copywriting exercise. If you are going to secure funds you need to construct a business case that integrates all commercial aspects of your business. So, be sure that the people writing your plan have several years of senior commercial experience – the broader the better. This commercial experience should include budgeting or forecasting – your financials are a critical part of your plan.
2) Track Record – Many business plans are confidential so do not expect to see many examples. However, companies providing business plan writing services should be able to provide written and attributable testimonials from clients.
3) Pricing – Services range from around £2,000 for small start-ups upwards to £15,000 for larger corporate plans. As with most things, you get what you pay for and the price generally reflects the complexity of the business model. Make sure you ask for a specific proposal that outlines exactly what you are going to get for your money, the timescale and price. Consider “virtual services” rather than “face-to-face” consultants to reduce your costs but not the quality of work.
4) Ownership – one potential disadvantages of having a business plan written for you are that you will not “own” the business plan and be totally familiar with it. So, ensure that you are fully involved in the process and that there is time scheduled for you to review and discuss the financial forecast and written plan with whoever is writing the plan for you.
5) Funding – Have plans that they have created secured funding? Whilst funding depends on a wide variety of factors and not just the quality of the business plan (state of the market, availability of capital, product, service, proposition, management team etc.) any specialist service should be able to quote a few examples where their business plans have helped to secure funds.
For most people who do not possess experience of writing business plans you may improve your chances of securing funding by engaging a specialist business plan writing service to help you create a plan. However, make sure you are fully involved in the process – you need to own the plan at the end of the day and know it inside out and backwards - your future is in your hands not theirs!
Good Luck!
Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
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