Research your plan
The homework you should do to write your plan confidently
Before preparing your business plan, it will pay to invest some quality time in researching your marketplace and competitors. As well as helping you to complete many of the items on your checklist and make the content more convincing to the reader, it will enable you to position your products and services more confidently.
�Researching your marketplace doesn't have to be that difficult or time-consuming�
"Researching your marketplace doesn't have to be that difficult or time-consuming if you approach it methodically and are prepared to pick up the phone or use the wealth of information freely available on the internet," says Duane Jackson, a partner in Key One, a London based IT solutions provider that recently launched KashFlow, an accounting program tailored to suit the needs of start-up businesses.
Duane firmly believes that knowledge of your marketplace is central to any business plan and maintains it has been a key factor in his own company's success to date. "Many businesses fail to do as well as they could because they are too focused on their products or services and give insufficient thought to how and to whom they will sell them," he says.
"Fledgling business owners would be much better off looking at things the other way round – researching first of all what their market wants, and is perhaps not getting, then looking at what they can do to satisfy that demand."
Duane believes that positioning your company within its particular area of expertise is also extremely important. He says: "Taking time to do some research into the competition will help you decide what is your USP – your Unique Selling Proposition. It will help you determine what factors make your products or services better, faster or more cost-effective than those of your competitors. It might be something as basic as offering overnight deliveries while your competitors take several days, or perhaps trading on Saturdays when others are closed.
�I never cease to be amazed at how much they are prepared to tell me about their operations�
"Researching your competitors will also enable you to identify any weaknesses they may have and help you to ensure your product or service remains a cut above theirs. Competition may be a healthy thing, but you need to constantly research the opposition and avoid being complacent," he adds.
Duane says that when he first set up his business, he was quite bold and would ring up his competitors for a friendly chat. "Obviously, you choose a good time, like a Friday afternoon when they're generally a bit more chilled out," he says. "But I never cease to be amazed at how much they are prepared to tell me about their operations and how much I've been able to learn from them about our marketplace.
"Competitors might be a bit cagey about discussing their customer base, which is understandable, but most will happily tell you about which of their initiatives have paid off, which haven't, and about the kind of market issues they are facing. At the end of the day, I find that most of our rivals are human beings just like me and usually prepared to be reasonably helpful."
Duane says his company has also been successful in using online surveys of business users to determine which software products his company should be offering to customers. "For instance, we surveyed 300 small businesses to find out which accountancy packages they were using, why they had chosen their particular solution, why they weren't using other leading brands and so forth.
"With quite minimal effort, we quickly had to hand a plenty of useful information about the products which were most likely to make us successful. It really is surprising how much you can learn about your market by using your common sense and a few basic tactics to extract the market data you require for your business plan."
�It is important to be realistic in your sales forecasts�
When it comes to predicting what revenues your company is likely to achieve in its early days, it is important to be realistic in your sales forecasts. "It's very tempting to inflate your figures on predicted sales in order to impress the bank manager or an investor," says Duane.
"But if the figures aren't achievable, then you are only fooling yourself. Not only will it look like you're underperforming when you don't reach your targets, but you could also end up with a cash shortfall. It's always better to underestimate your sales than to overestimate," he maintains.
Duane's final word of advice to all would-be entrepreneurs is to exercise common sense and to do your homework before producing your business plan. You need to demonstrate that you fully understand the market you're in, the competition you face, and your ability to create a successful enterprise. "After all," he says, "if you were going to build a house, you wouldn't dream of getting started without a set of accurate drawings and a detailed plan. Why should building a business be any different?"