Strategic Business Planning - Turning Ideas into Reality

So you’ve come up with an idea for a business, within a corporate or independently. This may be into an established market, you may be planning to be disruptive by doing things differently in some way, or you want to market some new technology into a totally new market.

Commercialising technology is always interesting, whether it is what you are selling or what you are using to approach a market differently.

You’ve researched competitors, both direct and indirect, established there is a “pain” that produces a market worth pursuing, and identified the way you are going to approach it. You’ve clearly identified your customers or clients, and carried out segmentation of them to focus your efforts. Maybe you will focus on one town or region, or be looking to expand internationally.

If you’re in B2B (business to business), you’ve identified the roles of people, not just the businesses, and decided on which vertical markets (industries), horizontal (offering) and size you will target. Maybe you’re going for a niche which is the intersection of all three, if that market’s big enough. If not big enough, you’re spreading out on one of the three axes.

Maybe you’re looking at two seasonal businesses that between them cover most or all the year. Or some other combination, such as started Kent’s bus company, using the trucks to take farm produce to London markets overnight, and changing the body to take people to places in the day. Imagination counts.

You’ve got a first-cut marketing plan, your promotional mix, and reckon you can generate enough business from reasonable marketing spend to make it all worthwhile. You’ve looked at how you can leverage social media and other low cost techniques in addition to any major spend.

And now it’s time for the financials!

FINANCIALS

What is going to be your pricing? Would you be better off selling fewer at a higher price, or be more competitive and live off slimmer margins? The slimmer the margins, the tighter the systems need to be. Or is it a service where most of the costs are fixed, with the volume of subscriptions critical to success? Indeed what are the fixed and variable costs, and where is your breakeven point?

Will you be selling via retailers, resellers or other intermediaries? Can you get direct to end-customers via the internet or printed media, with a customer services team, or do you need a sales team on the ground? How much are you going to have to give away in sales commissions to agents or your own team, or how much margin will the wholesale/retail channel need? Will it be WIN-WIN for everyone? If not the business probably won’t succeed.

What staff and premises will you need? Can you work “virtually” with little or no business premises? How about associates and/or outsourcing rather than staff? If it’s a product, will you make it yourself or buy it in? Where does that leave you on patents and other intellectual property?

These questions are part of a set of 20 key aspects I recommend people to consider before launching a new business, as it either confirms what you are doing, or suggests you reconsider key aspects.

RAISING INVESTMENT

Inevitably a business will need some investment to get it off the ground. You’ll need to raise money internally, either from your own pocket or your company’s, or externally from banks and/or sources of equity capital. What about grants and other forms of government funding?

Putting the forecasts together is an art. You can use the back of an envelope or the seat of your pants if it’s your own money, and you can afford to lose it! But anything else needs a more formal approach. By setting up a model, you can vary aspects and see the effect on revenues, breakeven and cash needs.

A triad of P&L account, balance sheet and cash flow is best. Banks will often want to see a balance sheet, to identify assets that can be funded or used as security, and otherwise to identify the overall lending limit. Equity funders will be looking for substantial growth and how the cash needs change with different assumptions..

WHICH PLANNING TOOL?

A spreadsheet such as Excel can suffice for simple situations, otherwise a more sophisticated tool is best used to handle multiple contributors and/or multiple dimensions. There is now a choice of on-premise and cloud-based systems at a cost suitable for all sizes of business, as we discussed last week.

If you are planning the expansion of an existing business, then you’ll have historical information which is best forecast in a multi-dimensional tool. The alternative is a set of spreadsheets which will probably not add up correctly, however hard you try. The set will probably be “held together by sticking plaster” in the words of one of my clients who was trying to forecast a quoted group’s business through spreadsheets, and needed to do it differently!

NEXT STEPS

So before you go too far with your ideas, it’s worth assessing the business potential and to model the financials.

If you’d appreciate the help which Camwells can provide, do get in contact today.