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Posts Tagged ‘Business Plan’

USP is much beloved on the Dragon’s Den. Often you’ll hear Peter Jones saying: “I like that, that’s your USP.” USP, of course, stands for unique selling point (or proposition).

To explain USPs, I’ll tell you a personal story. When I started my first business more than 20 years ago, I went on a high-growth, business start-up programme. The guy who was teaching us about marketing was obsessed with USPs.

Problem was, he was trying to apply multi-national corporate thinking to my small start-up. His approach was totally inappropriate. I was going to be doing the selling myself and he wanted to construct a fake sales pitch for me that followed a big business template.

Glasgow approach

If you’ve been to one of these start-up seminars, you’ll know there’s always some bloke or woman standing there telling you how important your USP is. So how do you identify your USP?

Well, today, you’re going to get the Glasgow guide to USPs. In other words, straight forward, no messing around.

Basically, a USP is something that makes your product or service different. It enables you to charge more or sell more because it separates you from the competition. A USP allows you to you make more money as a result of the competitive edge it gives you.

How do you find your USP? There’s only one way – get people to sample your product or service and listen to what they say. In the words of Gary Vaynerchuk – you “conversate”. You talk and you listen. Listen, listen, listen.

Matter of taste

Making cakes was my first business and the guy who was running the start-up course I went on asked me what my USP was. I simply stuck a slice of cake in front of him, he had a bite and replied: “Ooh – that’s delicious”.

My chocolate cake was vastly rich. It was made of pure chocolate, raw cane sugar, good chocolate shavings on the top, no preservatives, no additives and extremely high quality. That tells you that my cake was special, aimed at the top end of the market. It didn’t look perfect, so I stressed its homemade qualities, giving it a sense of authenticity and wholesomeness, both powerful USPs.

When you’re trying to find your USP, you need to identify something that makes your product, service or business distinctive. How do you do it? As I did with my cake, you should take your product or service and shove it in front of people as much and as often as you can. Ask people what they like best about your offer. You might find that certain phrases and words will be repeated. In the case of my chocolate cake, it was, “My God, very rich!” and “Wow – really chocolaty”.

Ever heard of Kobi beef? It’s the world’s most expensive beef – I think it’s looked after by nuns or whatever. Actually, I’m kidding, it comes from the black Tajima-ushi breed of Wagyu cattle, which is raised strictly by traditional methods. It’s renowned for its flavour, tenderness and fatty, well-marbled texture. Its rarity and great care taken in its rearing are powerful USPs, as well as its flavour and succulence. Its price is another USP (“The world’s most expensive meat”).

In conclusion

Does your business/product/service need a USP? Absolutely. Whether it’s chocolate cake or Japanese beef that you’re selling, if you can come up with something that marks your product and business out as different – as special – you’ve already got an important head start.

Iain Scott, Enterprise Café

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When to register for VAT

There are many excellent articles around on when to register for VAT, including the one on the Start Up Donut, so I’ll try not to repeat what is already available.

So, you’ve recently set up or are about to start your business and you want to know what to do about VAT. You should do this when you draw up your business plan and cashflow forecasts, because it could affect your profitability.

What’s the first thing you need to do? Find out the VAT treatment of what you’re selling. The key questions are: would you have to charge VAT if you were VAT-registered? If not, is that because your supplies are exempt from VAT or zero-rated?

This latter point is an important distinction. In simple terms:

  • if they are zero-rated, you can reclaim VAT you pay on your expenses.
  • if they are exempt, you won’t be able to register or reclaim the VAT on your expenses.

If you fall in the latter category, there’s no need to read on.

Otherwise, what you do is liable to VAT at 0%, 5% and/or 17.5%. How do you work out when to register?

The registration limit is based on the value of your taxable supplies (ie the value of what you’ve sold that attracts VAT, in the past 12 months).

Keep track of this by recording at the end of each month what your taxable turnover has been. Add up the past 12 months to see whether you’ve gone over the registration limit. If so, you need to apply for VAT registration within 30 days of the end of the month in which your turnover went over the limit.

If you went over the registration limit in less than 12 months, you should still apply to register at the end of that month. Don’t wait for the end of a 12-month period or you might find yourself liable to a penalty.

Should you apply to register for VAT before you go over the registration limit? That’s a very difficult question to answer and one that can only be determined by you with help from your advisers. There can be benefits to being registered for VAT, particularly where you customers are wholly or mainly businesses that are VAT registered. They will be able to recover the VAT you charge. Some suggest that being registered gives your business a certain credibility, after all, who would register for VAT unless they had to?

One thing that makes this decision a bit of a no-brainer is if you are only selling things that are zero-rated because you will get back the VAT on your expenses, but not have to account for VAT on your sales. This way you get paid by HMRC when you put in a VAT return. The only thing you should consider is whether you will be claiming back enough VAT to make the hassle worthwhile.

Robert Killington, VATark

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Market research is an essential part of any business plan, whether a fledgling business or a multinational organisation. Knowing that there is a sustainable market for your product and understanding what your audience expects from you is vital to a successful business launch. Market research can generally be split into two categories; primary and secondary, and during this article I will explain both and discuss their respective merits and appropriate uses.

Secondary Research

Secondary research makes use of existing data from whatever sources are available. There are government censuses, Mintel surveys, and many private market research agencies that allow access to their data; some of it for free. It can be hugely advantageous, especially as a place to begin. Secondary research more often than not, proves to be a solid base on which to develop your own primary research. It plays the same role as research in general does to your product launch, and should be seen as just as vital. Also, this is of course far cheaper and generally quicker than creating your own research from scratch.

The negatives

The other side of that coin is that you have neither picked the panel to suit your exact needs, nor the questions. It is feasible that you can find some research somewhere that corresponds to what you are trying to achieve but it will almost certainly require some tweaking, and will not necessarily be the people you wish to interrogate; the use of qualitative research designed by someone else will almost certainly make the target specialised away from your goals. Another main issue with secondary research is that by the time it reaches you it’s often outdated; markets change so quickly in business that the only way to be truly current is through new research. This is not to rubbish the quality of secondary research.

Primary Research

Primary research is, essentially, the creation of your own research, whether a question that you ask to your friends and family or a survey put together alongside an agency and administered to a wide panel. Primary research will instantly let you feel more in control of your project; and that is the exact position you will find yourself in. You choose the questions and select your panel through qualitative research, allowing you detailed responses from individuals. You decide how, when and where your research is administered. You can ensure that your research is focussed: the number of participants and their backgrounds, the number and nature of the questions, the amount of time that your survey is available. This is the most accurate way to research a market sector that is specific to you and your product.

The down side

It is of course, more expensive, whether financially or on your time. If performing primary research alone it will take a lot of time, refining and will need some experience in producing quality questionnaires. It will also take time for your questionnaire to be completed if you don’t have direct access to a ready panel. Most of this can be avoided by using an agency, but at a cost higher than performing your research alone.

So what’s the best option?

Neither type of research will take you to your goal alone; however, a combination of the two will give you all the information you need. Using primary research alone, without first seeing what has or has not worked for other companies and possibly missing out on important data from research that you couldn’t afford to perform yourself, is likely to lead to irrelevant questions or missed opportunities. At the same time, relying solely on secondary research is likely to leave you with answers that are vague or inappropriate to your specific audience. The two compliment each other well, and when used in conjunction will give you a well rounded and accurate portrayal of the needs and opinions of your market sector.

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If you have an idea for a business and want to progress it, you are probably thinking in earnest about your business plan. If you are looking for outside finance, you are no doubt keen that the business plan will be a great marketing tool for your idea to banks or other investors.

Years ago, when private equity was still called venture capital, I was involved in funding start-ups. I would look through countless business plans, trying to sort the ‘possible’ from the ‘dream-on’ varieties, with a view to investing in the best. Some plans were back-of-the-envelope affairs, with enthusiasm but no financial viability analysis; some described in depth inventive products, but showed no realism with regard to cost of production; others assumed world domination in a few months.

But what really put me off was the business plan that plainly had been written by someone other than the people who were going to make the idea happen. However slick the document, with every possible detail carefully analysed in beautiful spreadsheets, if the words do not reflect the essence of the entrepreneur – his enthusiasm, her conviction the idea will succeed, their commitment to the project – then the proposal will lack that essential ingredient that is the reason for making an investment. The basis of our decisions was mimicry of estate agents’ ‘location, location, location’ replacing the key word with ‘management’. Yes, of course we wanted to see that the projections made sense, and that the amount of investment required was adequate and would be wisely spent; that there was indeed a market for the product or service, and that it would be sold appropriately. But the key was always: is this the right person to make the proposed business succeed?

So if you do use professionals to help compile your business plan, make sure that the final result is imbued with your DNA, and that it convinces the reader why you are the one to turn the plan into the success you describe.

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When did you last take a step back and think about the YOU in YOUR business?

First some questions for you:

  • Why and how did you get started in business?
  • Would you start the same business today?
  • What did you hope to achieve with the business by now?
  • Is the business the one you imagined you’d be running?
  • If not what’s different?

One of the first things I do when I start working with a business is complete a comprehensive business review. One of the key points we cover (very early on) is asking the business owner the above questions. They are very important in finding out what drives the business owner, what their ambitions were, what they are now and also what the owners’ attitude towards their business is currently.

What I’m increasingly finding in small businesses is that the owner gets more and more caught up in the day to day running of the business. They no longer have the time to spend on the new ideas for the business or take time to focus on the long terms strategic vision for the business (they are working “in” the business instead of “on” the business).

They have also, in some cases, forgotten what it was that drove them to set up their business, or even worse they no longer enjoy working in their business. I think that’s a real shame, after all for many people it was the joy of being their own boss that was a contributing factor in doing what they do. It was certainly a positive factor when I took the plunge into self employment.

I am currently working with a business owner who has been running a reasonably successful business for about 3 years. They earn enough to support themselves and their family. They provide good service to their customers, who stay with them and the business has not really been affected by the recent recession. However in a recent conversation it became clear that something had changed. The owner was starting to feel resentful of the business but was unsure why. We went back to the original conversation we had 18 months ago, when I had asked them what their vision for the business was and what they wanted out of it. It turns out that as their family has grown up the owner now wants different things from the business and for themselves. Their vision of their future has changed. They are becoming more focussed on that future and what will eventually be their exit strategy (although this is still 15 -20 years in the future).

We revisited the questions above and actually wrote a new vision for the business and also a personal vision. How they want to spend their time as they continue to grow the business, but make it more independent of their input.

While this exercise was useful, the telling thing for them was the ability to compare it to the vision we had discussed 18 months ago and we had written down then. The outcome is that the owner now enjoys the new direction we’re focussing the business on and now knows that what we’re working towards is what they actually want to achieve. We have also set some goals in terms of time to get there. I’ll let you know if we achieve them!

So when was the last time you thought about what was important to you? Have you written this down? It may be that you never fully achieve what you’ve written down because life and expectations change, but isn’t it nice to be able to have a goal to aim for, even if we can change the goal whenever we want.

Just writing your original vision down and then reviewing this against your business today will allow you to see if you’re still doing what you wanted to do. Or do you need to write a new vision that is more relevant to you and your business today and more representative of where you want your business to be going for the future? Wherever you think you are with your business try writing this down and review it every few months (especially if you’re having a bad day). It’s amazing how it can refocus you and also brings a real sense of satisfaction!

Let me know how you get on, or even share your vision!
Philippa

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Sales forecasting is an integral part of business planning.  However, for many of us, we are now dealing with a level of uncertainty we have not encountered previously in our lifetimes. As a result, some managers are eschewing forecasting, given the volatile market conditions.

For listed companies there is an added complexity to their forecasting. They are fearful that if they publicly announce their projections for the year, as they usually do, there is then a chance that their share price will be hammered if they subsequently fail to meet their targets. As a result, some have chosen not to give annual earnings estimates for 2009.

However, as a recent article in The Economist, “To forecast or not to forecast?” (28 Feb 2009) declared, ‘Precisely because peering into the future is harder today than it was a year ago, managers should be using every available means to gauge what the world could look like in the coming months and to establish targets using this analysis’.

The reasons given by managers for not planning or not forecasting are simply not tenable; added uncertainty increases the need for planning, rather than diminishing it. A recent case in Ireland serves to illustrate the difficulty people find themselves in. It was reported that the new CEO of the C&C Group (Magners Irish Cider), John Dunsmore, had issued “a thinly veiled criticism of the Magners Cider maker’s previous management by hitting out at overstocking and over investment and writing down the value of the company’s manufacturing plant. ” In this instance the forecasting was imprecise and the result was overproduction and over investment against a backdrop of declining sales.

Sales forecasting, budgeting, and business planning are vital management activities regardless of the size of the business or the level of uncertainty we face. As the above example illustrates, sales forecasts are not just for the benefit of the business plan reader, but are a means to help managers make informed decisions. Looking to the future to help make decisions is always going to be an imprecise science, but there are ways to forecast sales with some degree of probability. The key elements are to (a) identify the key factors that are likely to impact on demand and (b) then consider a range of plausible outcomes. This is, in fact, scenario planning, whereby a number of plausible scenarios are considered, discussed, and then assigned probabilities.
While it is tempting to conclude that forecasting and planning is pointless in the volatile economic circumstances we face, the reality is that planning is more important than ever before. It is also worth remembering that the historic view of a business plan as a formal document is dated. Business planning is an ongoing process covering cash-flow management, sales forecasting and setting milestones, which business plan software products such as Business Plan Pro can help facilitate.

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In a world of increasing complexity and one with growing demands on our time, it can be challenging to create a business plan. In recent years, however, there has been a growing trend  in the production of ‘simple business plans‘.

What is a simple business plan?

A simple business plan is a business plan typically produced by start-ups. You write your business plan as normal but you reduce the breadth of content in certain sections of your business plan.

Why would I write a simple business plan?

Simple business plans are appropriate when there are a lot of unknowns or when you are simply at the idea creation stage. At this point you do not want to invest significant time and resources in a full blown business plan, but are looking to produce a business plan that will enable you to forward it to interested parties for further consideration. Once you have received feedback you can then proceed with a full blown business plan.

What does a simple business plan contain?

The simple business plan contains much of the same content of a standard business plan but certain sections can be put on hold at this point e.g. cash flow statement, balance sheet etc. Sections can be skipped and a greater emphasis can be placed on the idea, the market opportunity, the likely demand, the routes to market etc

What is the point of a simple business plan?

One frequent problem entrepreneurs have is that they can keep ideas ‘in their head‘ rather than commit them to paper (or to a PC). However, ideas are practically worthless when they relate to a product or service in isolation (or without providing a market and commercial context). By producing a simple business plan, the entrepreneur is taking the next step towards their idea reaching fruition.  A simple business plan will ensure that there is a holistic view of the business opportunity and an assessment of whether it is commercially viable or not.

How do I create a simple business plan?

Business Plan Pro has the option of a simple business plan built -in. By selecting the option within Business Plan Pro, the number of tasks you need to undertake is reduced from the number needed to produce a standard business plan.

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