Introduction

A business plan can be as simple or detailed as you make it but it can be invaluable. Here, we’ll look at why and how.

What Is a Business Plan?

In essence, a business plan is a description of your business; what it will do; what it will cost to run; how it will make a return, and written in such a way that a reader will understand your vision quickly and easily. That’s it!

Do I really need a Business Plan?

The short answer is ‘Yes’.

Over the years, I have started many businesses, but I’ve rejected even more of my wonderful business ‘ideas’.

My principal business has been running since 2003, and the creation of the business plan for that was spread over about six months.

When I was ready to start the business, I had all the information in a logical and presentable format that I could rely on to explain the idea, the funding and the projected income for five years, with the greatest detail in the earlier time frame. With this 27-page document, I was able to secure an immediate line of credit from a high street business bank, along with an overdraft facility. I was also able to use it to demonstrate to potential suppliers that I had a clear vision for promoting and selling their products in my market and secure exclusive rights for the whole Country.

Other ideas I have been able to study and discard as non-viable with little more than a couple of evening research.

I created one small business plan consisting of about four pages of detail, web links, and a simple income/outgoings spreadsheet. The whole thing took about three days, and I ran this business for around four years before selling it at a profit.

In 2016, I was keen on the idea of opening some launderettes. This was a totally new sector for me, so I put a lot of effort into understanding it. I attended a specific tradeshow, spoke to suppliers, joined a trade association and even located a former launderette that was available to let.

After around five months, everything looked perfect; however, a special business planning tool gave me all the essential numbers and cash flows, and it became clear that my Return on Investment (RoI) was going to be at least five years and the required cash at the beginning, even with using finance, made the project non-viable.

I chose not to continue. The premises remained empty for around three years before being taken on by a centralised laundry service. In the shop, they now offer far more than a simple launderette, and this is the only way that this could have been viable.

You can see that to take the time, albeit only a few evenings, to write out your thoughts, and crunch some numbers is time well invested, whether you go ahead or choose to walk away or something in between, like modifying your initial idea, you can’t really go wrong.

The seven best uses for a business plan

1. To clarify your business concept and goals:
   A business plan helps you clearly define what your business is and what you hope to achieve. It can serve as a roadmap for your business, helping you stay on track and make informed decisions.
2. To secure funding:
   A well-written business plan can be a key tool in securing funding from investors, banks, or other sources. It can help you demonstrate the viability and potential of your business, and provide a clear plan for how you will use the funds you are seeking.
3. To attract and retain talent:
   A business plan can help you attract and retain top talent by clearly outlining your vision and mission, as well as your plans for growth and success.
4. To identify and address potential challenges:
   A business plan can help you anticipate and address potential challenges or obstacles that may arise as you grow your business. By identifying these challenges and developing strategies to overcome them, you can better prepare for the future.
5. To track progress and measure success:
   A business plan can provide a benchmark against which you can measure your progress and success. By regularly reviewing and updating your plan, you can stay on track and make necessary adjustments to reach your goals.
6. To gain a competitive edge:
   A well-thought-out business plan can help you stand out in a crowded market and give you a competitive edge. It can help you identify your unique selling proposition (USP) and differentiators, and demonstrate how you can provide value to customers.
7. To communicate with stakeholders:
   A business plan can be a valuable tool for communicating with stakeholders such as investors, employees, and partners. It can help you clearly and effectively communicate your business concept and plans, and keep everyone aligned and on the same page.

The Pros and Cons of writing a business plan

Of course, like anything, creating a business plan can have both pros and cons.

Pros:

1. A business plan can help you clarify your business idea and goals. It can help you think through the different aspects of your business and ensure that you have considered all the necessary details.
2. A business plan can be a useful tool for communicating your vision and strategy to potential investors or partners. It can help you attract funding and support for your business.
3. A business plan can serve as a roadmap for the development and growth of your business. It can help you stay on track and make informed decisions about your business.
4. A business plan can demonstrate to potential employees that yours is a professional business led by thoughtful founders
5. A business plan can help in securing the exclusive sales rights for an OEM
6. A business plan should be a ‘Living Document’. Revisions from the plan at the time of launch can show that your original idea has evolved, and it is the ideal way to reassess the needs of the business and plan adjustments, such as expansion/acquisition/new products, etc.

Cons:

1. Creating a business plan can be time-consuming. It can take significant effort to research and gather all the necessary information and to write and revise the plan.
2. A business plan may not always be accurate. Your assumptions and projections about the future of your business may not always come to fruition, and you will need to revise your plan as you go.
3. A detailed business plan may not be necessary for all businesses. Some businesses may be able to succeed without a formal plan, especially if they are small or have a simple business model.

Where do you start?

This is the stumbling point that almost everyone encounters, and is often where great ideas go to die when people are discouraged at this point… Don’t be.

Today, I decided to use technology in the form of the free ChapGPT AI tool. Here’s what I did:

1. Went to the ChatGPT site and registered a free account: https://chat.openai.com/
2. Created a New Thread
3. Entered the following prompt in the input box:
   “Write a simple business plan outline for a small start-up business named Gleaming Driveways offering pressure washing services for driveways, footpaths, patios, etc. within a radius of 15 miles of Crawley town centre.The new business will need to invest £1500 in cleaning equipment and two days for training. It will also need a van for getting to and from clients at a cost of £3500 including business use insurance.

   Public liability insurance will be £750 per year, payable in 12 monthly instalments.

   USPs for the business are Fully insured, available any day of the week (including weekends), licensed to dispose of commercial waste, fully trained operatives.“

4. Pressed the ‘Generate’ button, and waited about twenty seconds for the following output:

And that’s it!

• Copy the prompt above and paste it into the ChatGPT prompt box.
• Edit it to suit your proposed business and press ‘GO’.

At this point, you have the skeleton of your business plan, and you just fill in the information needed. Clearly, the more information you can enter into the prompt, the more detailed your output from GPT will be!

If you’ve never used ChatGPT before, think of it as a conversation where you ask someone to do something and it gets done. The more detailed your instructions, the more closely the response will match your instructions.

Conclusion

If you are looking to secure funding or attract investment, a business plan is essential, but more than this, it will allow YOU to look at your proposed business from another, maybe more logical perspective.

There really is no reason to not create your business plan.

FAQ

Additional information:

1. For detailed information on the sort of things you need to know, see our Getting Started series.
2. https://www.gov.uk/government/publications/libraries-alternative-delivery-models-toolkit/stage-7-business-plan

Introduction

Following on from our first article in this series of Starting a business we’ll look at money.

There are a couple of grounded principles when understanding money in business.

The first is that ‘business money’ is not the same as personal money. Aside from who owns the money they have totally different values.

The second is that access to money and having cash are two different things .

In this article, we’ll look into these points in more detail.

What is meant by Business Money?

When initially going self-employed for the first time, be it as a Sole Trader or a micro Limited Liability Company,  many people see business money as an extension of their personal money, and this is a mistake.

Personal money is used to pay for living, whereas business money is a tool put to work to help the business operate and/or grow. Business money can be viewed as a screwdriver for an electrician or fuel for a delivery van; without either, it becomes difficult to operate.

Business money also has a different value from personal money. For example, you might buy an inkjet printer for printing the odd document or photo etc., for home use, and you might spend £150 on it. For business, though, you might want a laser printer that is faster, and cheaper per page, but it might cost £600.

The dearer printer is likely to be faster, more reliable and more efficient, and because it is tax deductible, might work out to be a better investment.

The customer is important, but cash is king.

The adage that the customer is king sounds great and one to tell the customer, but the reality is that cash is much more important. Without cash, you cannot service your customers, pay your bills, pay yourself or your staff.

In truth, you will likely need a mixture of cash and credit. If you need equipment, maybe a new machine, you could, if you have it, pay in cash, but there are tax benefits and cash flow benefits of using some kind of credit or finance deal to pay for the investment.

As an investment, cash is a poor tool. Dormant cash in the bank is decreasing in value daily, so it makes sense to use it, right? But, use too much, and you run the risk of being asset-rich but cash-poor, which is one reason many new businesses fail.

As with everything, choices bring compromises.

Look at the table below, and you’ll see that where small payments may be made with funding options, thereby enabling your business to invest in better, more expensive equipment, you will pay more in the long run and might lose control of the equipment. On the other hand, using cash eliminates both issues but might mean that you cannot afford to actually run the business!

Funding Options

Working Capital

As well as funding capital equipment, which may not apply to some businesses, you will certainly need operational cash (working capital).

Essentially, the cash that can be raised when needed, working capital can be seen as cash to pay your suppliers, put fuel in your vehicle, pay phone bills, pay subscriptions for web hosting, pay for business insurances, buy business cards, flyers, local advertising, etc. On top of this, you will also need to pay yourself, and any staff, and build a buffer to allow for dry periods… and they will come. You will need to make allowances for being off-sick or having family holidays [you will probably not qualify for SSP].

It is a truism that most startups cannot afford to cover their cash cycle from the beginning.

This is why I say that ‘Cash is King’… No cash = No business!

Types of access to cash

As you can see from the above, there are many options for financing your business. The skill is in:

1. retaining enough cash to allow the business to trade
2. investing in what the business NEEDS to grow
3. being canny about the methods you’ll use to source the required funding

That’s business money. Let’s take a look at the next step… administration and core skills, in part 3

Introduction

You’ve pondered, perused and prevaricated and now you’re ready to strike out on your own; to make your own path and work for yourself… you’re going to be starting a business!

Make yourself a cuppa and spend some useful time learning from those that have been there before. This article is the first in a series that will help explain and demystify the process of starting a business, in plain English… Let’s go!

First things, first

Before doing anything, you need to consider the long-term, which means defining the format of your business.

• Essentially, will your business be something you may want to sell in the future?
• Will your business need considerable investment in capital equipment?
• Will you cover all risks yourself, or do you need to limit your risks?
• Are you starting your business alone or with one or more partners?

Do I need to tell anyone that I’m starting my business?

The short answer is ‘Yes’. Whether starting your own gardening service, or an import/export business you will need to tell HMRC for tax and employment purposes and you may need to register your business with Companies House. If you think your taxable turnover is going to exceed the VAT threshold you will need to register for VAT, regardless of the format of your business.

The UK VAT threshold is currently £85,000 (October 2022) but is subject to changes so keep an eye on the level on the government website here.

Business Structure

In the UK there are four main types of recognised business structures:

1. Sole Trader
2. Partnership
3. Limited Liability Partnership
4. Limited Liability Company

Structure Options

Nice and Simple

Essentially, as a Sole Trader, you can just start working and begin billing for your work, something suited to someone that is providing a service that doesn’t require a large investment in equipment or stock. Just set aside enough of your earnings to pay your taxes, print some business cards and you’re in business. The same goes for a partnership but you should have some kind of written agreement about who does what and how money is split, etc.

Everything is nice and simple… but.

A local engineering firm began as a Sole Trader over 30 years ago, investing in more and more CNC equipment etc., but, when it came to retirement for the founder there was no business to sell or even to pass on to his son, just a collection of machines that were personal property. Throughout the decades, the founder had been exposed to 100% of the risks when financing equipment and potential bad debts that could lead to him losing his home etc.

Formal structuring

The alternative to ‘nice and simple’ structures are the LLP and LTD routes. Here you will need to form and register your business with Companies House. You will be required to formally declare the names and roles of each person (partner or director/company secretary). You will also need to confirm these people annually and record any additions/removals, and, of course, submit annual financial returns.

The upside of the formal structure is that you are separated from the liabilities the business may develop. Any supplier providing credit is doing so to the business entity, not to you. Any claims will be against the business entity, not you, provided that you execute your role as Office Holder correctly, legally, and ethically. And, because the business is an entity in its own right, it can be sold/transferred.

That’s the structure side of your business. Let’s take a look at the next step… money, in part 2