Starting a Business in 7 simple steps

Five ways to fail

Waffle and use jargon.

Assume you know your market and competitors.

Cut corners when doing research and analysis.

Fail to get the maths right.

Write your business plan and then ignore it.

What is a business plan?

Put simply, a business plan is a set of goals and a roadmap of how you will achieve them. You may be wondering why you need a business plan, especially if you’re starting up a very small business, perhaps with only yourself working for it, and aren’t planning on borrowing any money to finance it. Well, the answer is simple: writing down your goals and plans will allow you to focus more clearly on your idea and spot any gaps or opportunities that you may not previously have been aware of. In addition, it provides you with a written set of time-specific goals for the business to be working towards, allowing you to track its progress. And of course, if you’re seeking investment or a loan, your bank or other potential investors will want to see a business plan and they will be your key readership.

You don’t have to be a financial expert or an experienced strategist to write an effective business plan. Indeed, your first one could be very simple and only a few pages in length.

How to do your research

It’s likely that you’ll need to do some research to complete your business plan. Research is often a confusing area for new entrepreneurs, so don’t be afraid to ask for help.

A good place to start is at the library: try the business section, which should contain useful resources, such as industry sector reference books or databases with information on the size of the market, detailed information on your competitors and market trends. Some cities have business and patent libraries that hold a vast stock of up-to-date reference books and databases on all industry sectors. In the UK, the biggest one is the British Library in London. Other cities throughout the UK and internationally have similar resources; check out the European PatLib network. Alternatively, try the Institute of Directors, which has an international network of branches and affiliates, or relevant trade associations, for example, the Chartered Institute of Marketing. These organizations can help you to get your idea off the ground by providing information on trademarking, intellectual property and in-depth information on your industry sector.

The internet is also a goldmine of intelligence, and there are hundreds of websites providing tools or templates to help you to do your research or write your business plan.

The all-important executive summary

Let’s begin with the summary of your business plan. Although you’re likely to write this section after you’ve completed the rest of the plan, it should appear at the beginning of your plan, so we’ll cover it here.

This is the single most important part of your plan and where you can capture your readers’ attention. Keep it clear, succinct and engaging. Anyone reviewing your plan will read this section first before deciding if they’re interested enough to keep reading.

In this section you should introduce yourself and describe your experience and any relevant skills or qualifications. Give a brief description of the business, its purpose and a summary headline overview of how this will be achieved. Highlight the following aspects of the business:

its strengths, for example, its USP, any intellectual property or registered trademarks held, upfront orders, management team experience

expected profitability and turnover

the market and the potential for sales

any funding requirements and potential prospects for investors

The length of your summary will depend on the length and complexity of your business plan. As a general rule of thumb, an acceptable length is somewhere between one and four pages. Before writing yours, it’s worth reading a few others to compare length, style and detail. Larger businesses often include their business plan on the company website, so look around at how others have written their executive summaries. If you’re writing your business plan to leverage investment, ask your potential investors if they have a particular style or format you should adhere to.

Business description

The business description section usually follows on from the executive summary. It should outline the vital elements of the business, including:

a history of the business or the history of the idea.

the ownership of the business.

any awards won or membership in reputable industry bodies.

the location of the business.

the structure of the business (e.g. sole trader, Ltd, LLP).

the company size.

the purpose of the business or mission statement if one has been developed.

your vision.

Be careful not to use industry or business jargon when describing these things as the reader may not understand it. Keep descriptions simple, using layman’s language.

Description of the products or services

Next, you need to describe your product or service. What does it offer the customer and why should they buy it? Does it have any unusual or innovative features? How will you make the product or run the service? How will orders be fulfilled? Make a brief comparison to any similar products or services on the market and describe what makes yours unique. If you have any intangible assets, such as trademarks, copyright or patents pending or owned, ensure you describe them here.

Market analysis

Your target market

Next, you need to think about the demographics of your customers. Think about their age range(s), location, gender, social groups, lifestyle preferences, purchasing habits, income level, education, hobbies, and indeed anything you can find that will help to define their characteristics as closely as possible. You must analyse each sub-group of your target market and develop a different marketing plan to reach each of them. (See Step 3 (#litres_trial_promo).)

Include the size of your target market and what the purchase potential might be (gathered from your market research and analysis – see here (#u19f36ae0-be6c-463e-ac75-80046dadc8d4)). Have you identified any key purchasing motivations that a particular group has? Do they need your product or service or is there a problem that it will alleviate? If so, include it. Where statistics or graphs are available, include them and reference where they came from. Trade associations and industry bodies can be useful here; they represent particular industries and trades, and it’s likely that there’ll be one for your industry or trade too.

Lastly, you need to provide information on how you expect to reach the market – your marketing strategy. Information later on in this step and in Step 3 (#litres_trial_promo) will help you to define this.

Market research

It’s important that you carry out market research on your business idea, products or services so that you get a good idea of how well they’ll be received by your potential customers.

There are two basic kinds of market research, quantitative and qualitative, and there are a number of different methods within each of the two categories. Both types can provide useful information and you might decide on a mixture of both, depending on your budget or time frame. Generally, qualitative research provides more detailed results from fewer people and can take more time, money or resources per person to conduct, whereas quantitative research usually provides less detailed information from much larger numbers of people within a shorter time frame and often at a cheaper rate. You should aim to use a mixture of both types to ensure you achieve reliable results from your research.

Qualitative

Focus groupsGather a group of potential customers together to garner their opinions on any aspect of your business. Questions should be structured according to what information you wish to learn. For example, if you need to understand what will make your customers buy your product, ask them what they currently buy that’s similar and why they buy it. Include questions about convenience, price, brand allegiance, customer service, etc. Then ask them what they like and don’t like about your particular product.

In-depth interviewsOne-to-one interviews can provide more detailed results but will require a longer time frame or a larger team of interviewers.

Field trialsThese involve placing your product with a group of customers or stores and allowing them to test it for a specified period of time. This can be very effective but ensure you obtain agreement beforehand that customers or stores will be willing to feed back results in a structured way. This could involve contacting a group of potential or existing customers and asking them if they’d like to trial your product for free for a period of time in return for completing a short survey on their findings.

Quantitative

SurveysSurveys can reach a larger number of people. Distribution might be in hard copy or online or conducted via telephone or in person. You should be prepared for fairly low response rates (5% would be considered a good response rate if you’re not offering an incentive for completing the survey) and less detailed responses.

Data collection and analysis