Those familiar with the BBC2 show Dragons’ Den will be all too aware of the following scene. The entrepreneur is tasked with presenting his business plan to a panel of investors (i.e., the Dragons). The business plan pitch is going well, and then one of the dragons asks the simplest of questions,
”What was your turnover last year?” The camera pans in, the participant stutters, eventually he declares that he is ”not sure” and before you know it, he is sent packing. Why do entrepreneurs consistently fail to appreciate how important it is to have financials in hand when pitching an idea? Why do they consistently present a business plan without even a rudimentary knowledge of basic financial concepts, such as turnover or margin? This article highlights some of the financials that any aspiring entrepreneur needs to know before submitting or pitching a business plan to a ‘dragon’ of any hue.
Firstly, let’s consider the context. Investors have a range of investment options available to them. While depositing cash in a bank is low risk, it is not the most exciting option and associated returns
I recently watched Al Gore’s documentary, An Inconvenient Truth, and found it compelling viewing. It is an excellent production and helped shine a powerful spotlight on climate change, the challenges we face and some steps we can take to reduce the effects we are causing. It painted a very bleak picture for the future of the earth unless we all act to modify our behaviour immediately.
The documentary is produced in the form of a pitch and consists of a mix of PowerPoint-type visuals with Mr. Gore presenting (interspersed with video footage).
Aside from the powerful messages it successfully conveys, it also struck me that there were a number of very strong lessons in it for those of us interested in the field of business planning and specifically, the pitching of business plans.
Unlike most business plan pitches, the purpose of his presentation was not to secure investment. However, like those pitching business plans, Mr. Gore did seek to persuade, to gain mind share and to influence behaviour. In my view, in these he clearly succeeded. I left the film convinced of his assessment and keener to
Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate yourself from others that offer similar products and services. One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analysing Industries and Competitors”, has proven to be a useful tool for both business and marketing-based planning.
The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment.
- Entry/Exit Barriers
After a business plan has been written, the next stage often involves pitching the plan to prospective investors. This very fact means that the plan authors and management team should be one and the same and that ‘outsourcing’ the business plan writing process should not be considered. It is not just the content of the business plan that is being scrutinized. The capabilities of the management team are also on show and hence their ability to deliver a presentation in a clear, concise and convincing manner are vital to the overall objective – that of convincing an investor to invest in the business. These prospective investors are not investing in a physical document but in an idea and in those proposing to deliver the idea. The following is a list of tips to maximise your chances of success when pitching to investors.
1. Know your audience
All presenters are taught about the importance of knowing their audience and engaging with them on a personal level where possible. The Internet has enabled us to research more effectively than we were able to in previous years, so it is important to use this resource to our advantage. Investors have a range of asset classes
A marketing plan is a core component of a business plan. It relates specifically to the marketing of a particular product or service and it describes:
- An overall marketing objective
- A broad marketing strategy
- The tactical detail related to specific marketing activities
- The various costs associated with these activities
- Those tasked with delivering these activities by name
The starting point for any marketing plan is an analysis of the strategic context, as a typical objective for most plans is promoting a good or service as effectively as possible. An assessment of the company, its environment and its customers helps to ensure that the author of the plan obtains a holistic view of the wider context. In turn this helps them to focus their energies and resources accordingly. This is particularly important given that most marketing managers will be subject to that all-too-familiar constraint—limited resources (invariably financial). In effect, a marketing plan is produced to ensure that limited resources are allocated to activities that are likely to bring the maximum return.
An assessment of the context will include analysis of both internal and external factors. There are a number of frameworks and tools designed to assist you with this:
- A SWOT analysis forces you to consider internal Strengths and
For me this scene encapsulates perfectly the problems of not having an over-arching goal and plan for your business. Without a plan, or using a cookie cutter business plan template a business is essentially rudderless, and day-to-day activities are likely to be haphazard and reactive, in stark contrast to those businesses implementing a well thought out business plan.
The following represents a list of my top five reasons a firm needs a business plan.
1. To map the future
A business plan is not just required to secure funding at the start-up phase, but is a vital aid to help you manage your business more effectively. By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals.
By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.
2. To support growth and secure funding
Most businesses face investment decisions during the course of their lifetime. Often, these opportunities
The SWOT analysis begins by conducting a review of internal strengths and weaknesses in your organisation. You will then note the external opportunities and threats that may affect the organisation based on your market and the overall environment. Don’t be concerned about elaborating on these topics at this stage; bullet points may be the best way to begin. Capture the factors you believe are relevant in each of the four areas. You will want to review what you have noted here as you work through your marketing plan.
The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy.
Some experts suggest that you first consider outlining the external opportunities and threats before the strengths and weaknesses. Marketing Plan Pro‘s EasyPlan Wizard will allow you to complete your SWOT analysis in whatever order works best for you. In either situation, you will want to review all four areas in detail.
Strengths describe the positive attributes,tangible and intangible attributes, internal to your organisation.
The New Year is synonymous with resolutions and promises of making changes. If you are an entrepreneur, this time of year offers you a perfect opportunity to take stock of your business, as emails are probably at an all-time low over the holiday period. Here is my checklist of priority resolutions for all entrepreneurs for the New Year:
1. Review your business plan
One of the most important requirements for any entrepreneur is a business plan; not one that lives in their head or one that is consigned to an office cupboard- but a living business plan. If you have never written one, now is the perfect time to do so. If your business plan is in a drawer, take it out, read it and update it accordingly. Without a business plan, your business is essentially rudderless and you run the risk of not focusing on the key activities that need to be undertaken to bring you success.
2. Run through the numbers
For many people, numbers are not necessarily their strong suit and in small companies without dedicated in-house accounting departments this can result in serious problems. There is an old saying that what gets measured gets managed. So if you
Although the charts and tables are great, you still need to explain them. A complete business plan should normally include some detailed text discussion of your sales forecast, sales strategy, sales programs, and related information. Ideally, you use the text, tables, and charts in your plan to provide some visual variety and ease of use. Put the tables and charts near the text covering the related topics.
In my standard business plan text outline, the discussion of sales goes into Chapter 5.0, Strategy and Implementation. You can change that to fit whichever logic and structure you use. In practical terms, you’ll probably prepare these text topics as separate items, to be gathered into the plan as it is finished.
Somewhere near the sales forecast you should describe your sales strategy. Sales strategies deal with how and when to close sales prospects, how to compensate sales people, how to optimise order processing and database management, how to manoeuvre price, delivery, and conditions.
How do you sell? Do you sell through retail, wholesale, discount, mail order, phone order? Do you maintain a sales force? How are sales people trained, and how are they compensated? Don’t confuse sales strategy with your marketing strategy, which
1. Write from the audience’s perspective
The starting point for any business plan should be the perspective of the audience. What is the purpose of the plan? Is it to secure funding? Is it to communicate the future plans for the company? The writer should tailor the plan for different audiences, as they will each have very specific requirements. For example, a potential investor will seek clear explanations detailing the proposed return on their investment and time frames for getting their money back.
2. Research the market thoroughly
The recent Dragons’ Den series on BBC 2 reiterated the importance prospective investors place on knowledge of the market and the need for entrepreneurs to thoroughly research their market. The entrepreneur should undertake market research and ensure that the plan includes reference to the market size, its predicted growth path and how they will gain access to this market. A plan for an Internet café will consider the local population, Internet penetration rates, predictions about whether it is likely to grow or decline, etc., concluding with a review of the competitive environment.
3. Understand the competition
An integral component to understanding any business environment is understanding the competition, both its nature and the bases for competition within
If you, like many entrepreneurs, are time rich and cash poor, option 1 quickly removes itself from the equation, given the cost of having someone write a plan for you.
You are then faced with the choice between using Business Plan Pro or building everything yourself, from scratch, in Microsoft Word and Excel. Why are we not recommending other business plan software options? Because Business Plan Pro is the best business planning software available – without exception. Palo Alto Software (the maker of Business Plan Pro) has a proud history, has had category leadership for years and has extensive lists of testimonials and independent reviews on the website, all corroborating this view. By all means, consider other software options; however, we are confident that your own analysis will reveal that Business Plan Pro stands head and shoulders above the alternatives.
When it comes to using Word and Excel there are undoubted benefits – not least the fact that they are ‘free’ in the sense that they are bundled on most PCs. The interface is also familiar, given the popularity of their use. However, while these tools are excellent when you know exactly what you need to produce, they offer negligible assistance when
One of the greatest misconceptions about business planning is that a business plan is useful only for start-ups. While start-up companies are indeed one significant segment of business planners, business planning is being utilised by an increasing number of companies as a means to manage growth better, to ensure new ideas have been assessed for commercial viability, and to value a business on exit.
Secondly, the importance of the business planning process is often under-emphasized relative to the primary focus on the final output, the business plan. The very process of producing a business plan enables management to take a holistic view of their organization. It helps them give due consideration to the various factors that mesh together to create the opportunity they are seeking to explore, as well as the resources required and the key drivers needed for success. This article aims to justify a more expansive remit for the business plan, by highlighting a number of key areas where its application is of considerable benefit for all companies.
Companies are increasingly encouraging employees to create new growth opportunities as competition intensifies in their core (mature) business lines. Mature invariably means competitive, so the focus on growth opportunities is
Starting a business is an incredibly exciting time for any entrepreneur; however it can also be stressful with so much to do in so little time. The start-up phase is also characterized by significant expenditures against a backdrop of uncertain income. However, there are a number of products and services that can help you maximize your chances of success while also saving you considerable time and money. This article aims to introduce you to some of the less obvious ones that are available via the Internet. These products and services can help you set your business on the right path from Day One. While these recommendations will not be appropriate for all, those who need to bootstrap and build their business the hard way will benefit the most.
1. Create a website
Regardless of whether you intend to sell online or not, all new start-up businesses should secure a domain name and create a website as soon as they can. Thankfully, the cost of getting a site set up has fallen significantly over time and there are now a host of different packages and providers to choose from.
Where: Uni-Trader from www.unitechnology.co.uk Cost: RRP from only £99.99
2. Download a profile of your industry
On another level, the phrase “dog grooming London” had only 81 searches in April 2006, according to the Overture search, so the U.S. affection for this service clearly hasn’t reached UK shores yet. Half of the searches were for dog grooming courses, so any thoughts of opening a new dog grooming shop in London would need some more clear-cut evidence of demand, given the preliminary findings of this rough and ready search. By analysing the search terms for your idea with these tools, you can assess potential market demand, get ideas for appropriate names for your good or service, and use the findings as one reference point in your analysis.
If the intention is to set up a local service, then familiarity with the local area will be as powerful a resource as any Internet search method. The lesson here is also that ‘entrepreneurs’ don’t necessarily have to be inventors, merely people who can spot opportunities to do something better or more cheaply than others, or provide a local version of a business run elsewhere. Having decided upon the good or service to be provided, a wantrapreneur must research the opportunity to ensure familiarity with some of the key issues. You
The BBC2 show Dragons’ Den is now in its ninth series, and while the show is obviously edited to entertain (more than anything else), it seems as if the current bunch of contestants has not watched any of the previous shows! Week after week they appear – often repeating the mistakes of previous contestants. This article attempts to shed some light on the key mistakes being made and recommends some key changes required by future entrepreneurs pitching to investors. Obviously, the lessons here will apply regardless of which finance sources you intend to approach.
1. Complete a business plan in advance
The first thing that is evident is that many of the entrepreneurs appearing on the show have a business idea, but have no clue as to whether the idea is commercially viable or not. A business plan forces entrepreneurs to cover all aspects of the business – not just the idea. If a thorough business plan has been produced, entrepreneurs should be able to handle most questions the Dragons throw at them. They are not trying to catch the participants out. They are simply trying to assess the opportunity to determine whether it is a credible investment option for them. Usually