Writing a business plan
My brother-in-law Steve has just set up his own Internet consultancy business and someone told him he should write a business plan.
So he got me to help him do that - and I thought I’d share some insights we both came up with.
Why do a business plan?
That was the first question Steve asked me.
“I’m working on my own, I don’t need any investment, I’m working from home so I don’t need to rent an office. Why would I even think of writing a business plan?”
My reply was:
Focus and direction
“It’ll help you to focus your ideas, instead of having them all whirling round in your head you’ll get them down on paper. Then you can come back in 6 months’ time and see where you planned to go and where you are.
So did you think you’d have built 60 websites but actually you’ve been doing more social media consultancy? Did you plan to research 50 different projects but you’ve been spending more time writing blog posts?
Then you can think about whether you need to change direction, or whether you’d rather keep doing what you’re doing because either you enjoy it more or it pays more, or both.”
Good use of time?
Steve nodded. “OK, you’ve convinced me. But won’t it be a hassle to write a business plan on a fine Sunday afternoon? It’s time that I could spend building a website for a customer.”
Not keen on writing = not keen on doing!
“If you think writing about your business is a hassle, are you sure the business itself is what you really want to do? If you don’t like writing about your business, your enthusiasm for that business won’t last long. It’s not a crime to change your mind about starting your own business but much better find out now, than 6 months in!”
Steve grinned, fetched us a cup of tea and we got stuck in.
“How do I structure this business plan, then?” he asked.
Layout and resources
We used the layout for a simple business plan in Emma Jones’ book “Spare Room Start Up”. This was a great tool for Steve’s business because it fits exactly what he’ll be doing - running a solo business, which doesn’t need any investment, from his own home.
If this isn’t the kind of business you run, here are some other layouts I’ve found useful for other clients:
Wendy Pascoe’s book “Starting a Business in the Country” is very useful if your business is going to be based in a rural area or if most of its customers will be rural-based.
Steve Parks’ book “Start your Business Week by Week” is excellent for slightly larger, more complicated businesses. He uses the example of two friends who are setting up a sandwich shop together.
Contents of the plan
Emma uses the mnemonic “IMOFF” for the components of a short, simple business plan:
- Idea - what is your business idea?
- Markets - who are your customers and what is the competition?
- Operations - how will your business run on a day-to-day basis, what systems will it need?
- Financials - where will the money come from, how quickly will it make a profit, what costs will you incur?
- Friends - who will help you, who will be your support network?
Steve took 5 pages of A4 and headed each one with one of these headings, and we chatted through each one in turn together and he jotted our thoughts down on the relevant piece of paper.
He also added another page very quickly - a “To Do” list!
Once we’d finished chatting, Steve typed up his notes in short, punchy sentences and paragraphs, to bring the plan together in one document.
From the discussion
Some insights that came out of this discussion, which might be useful for your business:
Insurance for visiting customers
Steve’s customers will often visit him at his home. That means he will need public liability insurance in case a customer has an accident there. This is also a cost he must add to the Financials page.
Steve has chosen to use Skype for inbound phonecalls, but this means he will only pick up calls if he has the computer on when the customer rings, so he must make sure he has Skype Voicemail or he will risk missing calls and losing customers.
As a new business, Steve will be very unlikely to be able to get a business mobile phone on a contract. He will need to go for pay-as-you-go instead - or a personal contract. Personal contracts are fine if you’re a sole trader like Steve, but if your business is a limited company then avoid them as they can cause taxable benefit issues.
Terms and conditions
Steve needs to put in place terms and conditions for his customers, in particular what happens in the event of a dispute about a website he has built, and his payment terms as he will want to take payment up front.
So, was it useful to write a business plan?
“Definitely!” was Steve’s verdict. “Not only has it helped me identify my action points, I feel like I’m really in business instead of just playing, now!”
That’s a vitally important mindset to have when you’re running your own business, because there will be times when you’re tempted to let your customers get away with paying less or paying late, or when that pile of ironing looks much more alluring than completing a project for an awkward customer...
But when you’re in business, rather than just playing, you have to keep at it and work through or your business won’t last much longer.
So if your business plan helps you with that, then it’s worth it for that alone!
- A spring clean for FreeAgent Mobile
- Contractors, awaken your inner CEO! An accountant’s point of view
- Pre-election Finance Bill adds to MTD uncertainty
- How MTD will work for businesses with an accounting year that doesn't match the tax year
- New tax year: what has changed?