What is a Business Plan? Why do I need one before I start my business?

What is a Business Plan? Why do I need one before I start my business?

Idris Salami

Ilorin

Answer: A Business Plan is a document, or body of information, that defines the business with some precision. It identifies the goals of the business. It is like the curriculum vitae (CV) for your business.

The basic content of a business plan are:

  • Market Survey.
  • Marketing and Promotional Strategy.
  • Current Balance Sheet.
  • Income Statement.
  • Cash Flow Analysis.

A business plan helps the business to properly allocate its resources.  It helps it make the right decisions, and prepares it to respond to unforeseen events in the operations of the business.

A business plan is even more crucial if the business is to secure a loan as part of its financing package. In that case, the business plan will provide specific and organised information about the business, including details of how it will repay the borrowed money.

The business plan also tells the management, staff, suppliers and other stakeholders of the business about the operations and goals of the business.

Four Steps To Naming Your Business

You must be used to the familiar and rhetorical question: What’s in a name? A lot, one would say, especially if it is the name of your business.

The name of your business is something you must give a great deal of thought. The name must reflect your products or your services, what your business represents, and should be easy to recognise and remember.

The recognition of your business as a brand in the public space rises or falls with the name you choose to call it, hence the seriousness you assign to choosing the name of your business.

Granted that there is no art or science in determining the name of your business. Yet, there are some basic stages you will pass through to ensure that you find the ‘perfect’ name for your business. Your goal, subject to statutory and regulatory approvals, will be to create a brand with the name that passes your tests.

Below are some simple steps you would need to follow in the process of deciding on the name to call your company:

Step 1: Visioning The Business. What is your vision for the business? What will the business look like when it matures in the marketplace? Your answers to these questions will help you crystalise the reason you’re starting the business in the first place, and help to keep you on track as you strive to build it towards growing into what you dream it to become. At this stage of finding a name for your business, you will be beginning with the end in mind. In essence, the names you are considering must reflect the picture of the business that you have in your mind.

Step 2: Brainstorming Possible Names. In line with your vision for the business, and as a reflection of the products or services you plan to offer and/or the target market you intend to serve, you will now compile a long list of possible names for the business.

With your list before you, you will brainstorm the names you have compiled. It will also be helpful to get trusted friends and dependable associates to be a part of the brainstorming process, as you search for, and build your list of, potential names.

Your objective here is to widen your dragnet before you narrow your choices to a short list of selected names, say five to 10, bearing in mind that any of the short-listed names will be good enough as your business name.

Step 3: Check Availability Of Chosen Names: Armed with your list of probable and possible business names, you will proceed to test each name, to determine whether it is available for registration as a company at the Corporate Affairs Commission (CAC) under the Companies and Allied Matters Act (CAMA).

Step 4. Poll Your Target Market. After clearing the checks for availability of the names under consideration, the time has come for you to test each of the available names, to pinpoint the one that is most popular in the market you plan to serve. You will present the available names in the form of a public poll among your friends, family and a cross-section of your target market.

Finally, after you count the votes, the name that grosses the highest number, and best approximates your vision of the business, emerges as the winner!

Three Ways To Maintain Control Of Your Business Idea

In the daily routine of entrepreneurship training and enterprise development, a common occurrence is the concern of budding entrepreneurs who are considering inviting co-investors to develop what they believe to be commercially viable ideas but worry about losing the business to the outside investors. What are the options available for start-up owners seeking ways to maintain control of their business ideas?

As the founder and prime mover of a business idea, your first option in the search for finance is your personal resources. Next is money you can raise from friends and family. When these are not enough, you can then consider inviting investors from outside your immediate circle.

This is where things get tricky, because you are beginning to move far afield, where you will have to deal with people you don’t know and who don’t know you. The only thing that is bringing you together is your business idea and the profit motive. In this situation, just as you are worried that the investors you are calling to the table may take the business from you, they too are concerned about the security of the money they are putting into the business. It is therefore clear that both sides need to be protected and prepared for the road ahead.

What to do? Here is a list of four critical corporate governance issues a founding team and external investors must settle in the process of procuring and injecting new money into the business.

1. Start With A Business Plan: A Business Plan is essential for a start-up. It is what the founders will use to market the business to potential investors. Whether it is a 100-page binder or a one-page plan, it ranks as a must-have, because the plan is the map for the journey. It is the layout of the terrain ahead, and outlines how the operation intends to move from where the idea is to the business it wants to become.

Specifically, the plan will serve the following purposes:

* Provide the reference points for investors to decide if there is a fit between the proposed idea and their profit motive

* Help the founders determine the amount they need to raise and how they will utilise it if they succeed in their funding efforts.

* Itemise expected expenses, estimate revenues and project profits.

The bottomline is that the business plan is the Founders’ primary fund-raising tool.

2.  A Shareholders’ Agreement: The shareholders’ agreement is the document executed between some or all of the shareholders that hold interests in the company being formed. It spells out who owns what shares and ow the company will be managed, with particular reference to the relationship between the shareholders.

The Shareholders Agreement should contain provisions that ensure the protection of the business from hostile investors and preserve the founders’ interests even where they are minority owners of the business.

3.  Work With Professionals. In formulating and presenting the business plan, in preparing and executing the Shareholders Agreement, it is important to seek professional advice. In this regard , tapping on the  expertise of  a  chartered accountant, a legal practitioner or experienced mentor will greatly facilitate the process and provide the required

Nine Steps To Starting A Start-Up

Some businesses take off to a quick start, and easily (so it seems) find the investors and customers that they need to grow. Others, not so lucky, struggle to establish their place in the market.

I have been involved in a number of start-ups, yet, I find that there’s still much to learn. In thinking through what the high-flyers seemed to get right before they got their shows on the road, I came up with a checklist which, I believe, will be helpful to anyone itching to start a business. Here are nine steps to take before you start your business:

  1. CLARIFY YOUR PURPOSE. We live a purpose-driven life. Your business must have its purpose in the general scheme of things. It must have a reason for coming into existence. To find your purpose, you must start with your Why. You must see, in your mind’s eye, why your product or service will help to improve the world and how it will make life better.

Do not mistake the purpose of your business with making money. That is the by-product of a purpose, clearly-defined, socially-relevant and clinically-executed.

Once you know the purpose of your business, make it your anthem. Let everyone know it. Engrave it in the minds of your staff, your mentors, your financiers and your customers.

  1. TAKE THE LONG VIEW. Start-ups don’t run in straight lines. Starting and growing a business is not a 100-metre dash. It is a marathon. With its purpose clear, you then attune your mind to the time your business will need to start gaining traction. You should be thinking in a time frame of five to 10 years.

This long-term commitment drives the purpose of the business, and gives it the staying power to wrestle with the problem it cares about. The thought of achieving overnight success is the stuff of story books. It rarely happens like that.

  1. THE HOME FRONT. Entrepreneurship is a lifestyle, not a job. If you are exiting 9.00 am to 5.00 pm work, where you leave office at closing time, and leave the work behind, until you return the next day or the next week, bye for good.

In your employee position you go through the motions of work, as required by your job description, from the beginning of the month to the end, and pick your cheque by the calendar on Day 30. Game over.

When you cross over to entrepreneurship, you work 24/7. You live, eat and sleep your business. You are first in, last out every work day, and the last to get a pay slip at the end of each month. There may be months you will not get paid, due to shortage of cash. More importantly, you have full responsibility for the employees that work for you. Everything comes down to you.

All too often, this burden, with its emotional ups and downs, gets to your family. The long absences, and the take-home work, tax your relationships. The un-steady income streams stress the family purse.

You are enthused by the spirit of enterprise, and strive to grow the business. You cut the image of a lone ranger, but entrepreneurship is not a solo game. It is a team sport. It kicks off from your home.

You, alone, cannot make the commitment to entrepreneurship. You must line your family behind you. Your family must support your decision to start the business, only then will they understand the downside implications before you strike out on your own.

  1. YOUR COMPANY CULTURE. Your purpose is clear. You are committed long-term. You have the buy-in of your family. Now, set out the work ethic of the business.

Do not expect the way the company works to evolve naturally, with little or no thought. It is best to carefully think through how members will do their work, towards achieving the goals of the business. This cannot be left to chance.

The culture of the company may be represented by its core values. These values will define the culture of the business, and make hard decisions easy. Culture rules and members must live by it in the business every day.

  1. CONFLICT BETWEEN CO-FOUNDERS. Co-founder(s) conflict can be a major cause of business failure. It is therefore necessary to consider and resolve, before the business starts, issues likely bring disagreement between its prime movers. Such issues include, but are not limited to, personal goals, equity, management, remuneration, contract terms, etc.

Settling and documenting these kinds of issues, up front, greatly reduce conflicts between the co-founders, and provide the collegial mien essential for the business to survive and thrive.

  1. FIND A MENTOR. Whatever the kind of business you are thinking of starting, there is a good chance that someone has started and made a success of that, or similar, business.

Find an experienced mentor who will literally hold your hand and walk you through the formative stages of your business. Any local entrepreneur, particularly if he or she is someone you admire, will be good fit for mentoring.

A good mentor will be one you are able to build a rapport with and has a feel for the business you are trying to start. Leverage this relationship to fast-track your start-up.

  1. FORM YOUR COMPANY. One way to give your business a hard start is to commence operations without formalising and documenting its status. That’s disaster waiting to happen.

Form your company. Give it a legal structure.

Get a lawyer to help you understand and erect the corporate structure of the business. Get the basic agreements to use with your first employees, contractors, etc.

  1. RAISING CASH. In weighing your financing options, the first questions you should ask are: Do you really need to raise outside money? Is bootstrapping an option?

Many times, if you think hard enough, you may be able to answer the first question in the negative, and the second in the affirmative. Consider bootstrapping as you plan to shake the financial bushes. Deploy your personal savings. Tap families and friends. You never know where the fruits will drop from.

If you need outside capital for your start-up, consider venture capitalists who invest on behalf of their partners and/or angel investors who put their skin in the game.

Should you consider going to a bank for a start-up loan? That is not the business of banks; unless they are playing broker for some soft intervention funds. Banks only loan money to those who have money!

Whichever options you choose, you must seek to work with people and institutions that you can trust to share your vision, and support the best interests of your business.

  1. DON’T WAIT FOR THE RIGHT TIME — START NOW. Starting is about the hardest part of starting a start-up. There is a natural inertia about starting, about waiting for the right time, about waiting for everything to fall in place. They never will.

When you have the clarity of what you want to do, when you are working toward what you want to create, the resources and opportunities that you need will become available.

Start where you are, with what you have. Start now!