How to get success in new Business

how business success requires memory and also how to success online business
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Published Date:03-07-2017
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WORKBOOK Planning — A do-it yourself kit for developing your own business plan for SuccessNEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Contents Chapter 1: BUSINESS Chapter 4: SKILLS, PEOPLE AND SYSTEMS BUSINESS OVERVIEW 2 GENERATING MONEY 2 SKILLS AND EXPERIENCE 14 MARKET NICHE 3 WELL-BALANCED TEAM 14 CORE COMPETITIVE ADVANTAGE 3ADVISERS 14 GETTING TO CUSTOMERS 4 BUSINESS SYSTEMS 15 COMPLIANCE ISSUES 5 PRODUCTIVITY AND TECHNOLOGY 15 BUSINESS STRUCTURE 5 Chapter 5: FINANCE Chapter 2: STRATEGY BUSINESS FEASIBILITY TEST 16 BUSINESS GOALS 6 CASH FLOW FORECAST 16 KEY COMPETITOR ANALYSIS 7 SUSTAINABLE CASH FLOW 17 SWOT ANALYSIS 8 PRODUCT/SERVICE PRICING 18 CORE VALUES 9 MONITORING PERFORMANCE 18 POSITIONING STRATEGY 19 FUNDING YOUR BUSINESS 19 Chapter 3: MARKET SUMMARY 20 CUSTOMER AND MARKET PROFILES 10 ATTACHMENTS 20 VALIDATING DEMAND 11 MARKET SIZE AND SUSTAINABILITY 11 PROMOTION PLAN 12 BRANDING AND IP PROTECTION 13 1 Planning for Success INTRODUCTION Tip CLARIFY YOUR PURPOSE This guide is designed to help you As you work through complete a basic business plan that your plan, imagine A business plan should have a specific yourself presenting you can adapt for different purposes. purpose, so begin by outlining the the information to exact aim of your plan. For example, others and how you Each chapter starts with a list of you may want to: might answer questions objectives you need to complete about the plan, such to create a convincing business plan. — start, buy, or sell a business as enquiries about your The objectives are listed in order of financial projections. — raise investment to expand importance, so you can allocate your — define the strategic direction of your available time and effort accordingly. business and your benchmark goals Each chapter also contains ideas, tips, — explore a new market or the resources and examples to help you opportunities of a new product complete each objective. or service. Your business plan represents the final Whatever the reason, you need to keep product of all your reflection, market this focus in mind as you go. research and planning. It is your map for business success, clearly identifying where you are now, where you are going, and how you plan to get there. You can download this workbook, a business plan template, and the tools and calculators described in this document from www.nzte.govt. nz/planningforsuccess.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Chapter 1: Business Your objectives from this chapter (in priority order) 1. Provide a brief overview of your business or business idea. 2. Outline how you will generate revenue. 3. Describe the market-segment niche you have identified. 4. Explain your core competitive advantage. 5. D escribe the distribution channels you will use to reach your market. 6. List any compliance issues you need to solve (such as OSH, consents or licences) to operate. 7. Explain the business structure you have chosen. BUSINESS OVERVIEW KEY ACTIVITIES Tip HISTORY These are any activity the business Keep the history of your is engaged in for the primary Explain how far you have got with your business brief. Unless purpose of making a profit. Business it helps to explain the business idea or how long you have activities can include things like current position of the been in business, and any major events operations, marketing, production and business, it will be of that have shaped the enterprise. limited interest. administration. OBJECTIVES State what you hope to achieve with REVENUE STREAMS the business in the short term (one to two years) and longer term (three to Revenue streams refer specifically to five years). the individual methods by which money Tip PRODUCTS OR SERVICES comes into your business. For most Ask a friend who knows businesses, this will involve volume Describe the products or services you nothing about the and unit sales, but you could also are offering in terms that the average business to read this generate revenue through licensing, section. If they can’t reader can understand. Leave a more gain a clear idea of subscriptions or franchising. technical description (if necessary) for what you intend to do, an appendix. rework your description KEY PARTNERS GENERATING MONEY Key partners are the suppliers, subcontractors or other partners who Tip The way you plan to make money (your help you produce and market your Keep looking for new business model) may seem obvious products and services. ways to generate new to you, but putting it down on paper income streams from will help you think about your business your business model. model in broader terms. As technologies and markets change, more KEY RESOURCES growth opportunities EXAMPLES are emerging. What are the resources critical to your Retailer A relatively minor success? Key resources could include change in your Makes money by selling products specialist equipment, Intellectual business model could bought from wholesalers. bring substantially Property (IP), and technology. more income. Include Software business any possibilities that occur to you. Makes money by selling subscriptions to its software online. Jet boating business Sells seats on its boats to tourists. 3 MARKET NICHE You should also explain why your It’s unlikely your product or service business idea cannot be easily copied will appeal to every consumer or to and what steps you have taken to every organisation. Most successful protect it. businesses have defined their market niche. This empowers them to target Tip Your competitive advantage/s might their marketing to get the best value Be careful about include (but not be limited to): for every dollar spent. choosing price as a — specialised knowledge competitive advantage. Show that you have sharply identified Being the cheapest may — unique or high-quality products seem the easiest tactic your market niche so you can focus your or services to implement, but it’s marketing effort with minimum wastage. often the hardest point — advanced or new technology of difference to defend. EXAMPLES Long-term survival in — innovative use of e-commerce business often requires Women’s fashion store — speed of delivery higher margins. Our target market for our high-end — responsible environmental practices fashions is upper-income professional — low carbon footprint women in the inner city earning — strategic alliances with customers between 100k and 200k a year. — suppliers or complementary We have located our store in an businesses area with a high percentage of these customers. — exclusive supply contracts. Double glazing company EXAMPLES Our prime target market for Coffee shop retro-fitted double glazing is owners of houses with valuations in excess Our competitive advantages over of 750,000 within a 50km radius the other coffee houses in our area of our business. include using an award-winning design firm to create a more inviting décor and atmosphere, employing a top barista, offering free Wi-Fi, CORE COMPETITIVE providing fast, efficient service, ADVANTAGE serving only organic coffees supported by a range of in-house Tip A competitive advantage is something baked goods, and allowing customers Very few businesses you offer or have that your competitor to order via our smartphone app. succeed long-term does not. Your competitive advantage without some type Adventure tourism needs to be both vivid and enduring. of durable advantage. We have secured a 10-year exclusive If you intend opening a coffee shop contract to operate our jet boats on in an area that already has 10 coffee the local river. This, combined with shops, you will need a compelling our proximity to the local airport and point of difference to stand out from resort town, our experienced sta,ff the others. and the safety certification we have gained, will give us an advantage over It’s just as important to show the other adventure activities in the area. advantage will be enduring. Many technology start-ups originate from Technology product genuinely disruptive ideas, such as Our product is a licensed spin-off the first website that aggregated from a university research unit, based one-day deals from a range of on five years of intensive research. suppliers. However, bright ideas that After accessing expert opinion, we can’t be protected can easily be copied are confident the product cannot by others. You need to show that there easily be reverse engineered because are barriers to prevent others from an imitator would have to invest starting similar businesses. These could considerable time, money and effort include patents, copyrights, registered to duplicate our algorithm. Our plans designs, or protected branding. for Stage 2 and Stage 3 versions of the product are already in motion and this should keep us well ahead of competitors.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS GETTING TO CUSTOMERS EXAMPLES Tip Describe the various distribution Avoid conflicts channels you will use to reach your Retail clothing store between channels market. Most businesses use of distribution. For A good location with convenient multiple channels. Some common example, if you sell parking is critical for our store. examples include: to retailers, but also We used demographic information decide to sell direct — a physical location, such as a retail from Statistics New Zealand (www. via your website, consider how your store or outlet to locate the best retailers may react. suburb based on the highest number — a website, which can include links of our desired customers (middle to to other sites or affiliate schemes top income brackets). We then sought — employing salespeople or a network advice from real estate agents on of sales agents suitable premises, and backed this — wholesalers and distributors up by observing people and traffic flows over two full weeks past three — viral marketing tactics, such as building possible sites before making our awareness through social media choice. We intend to supplement — collaborative marketing, such as the sales from our physical store with working with an established company a website to generate online sales. with a large customer database, or sharing marketing promotions Adventure tourism with other business owners Our main ways of finding customers — licensing your product or service will be our website and listings on to other businesses tourism website portals that link to our site. We will also display — franchising your business brochures in hotels, airports and — party-plan or other direct-channel regional tourism offices, and build approaches. relationships with major travel Briefly mention your reasons for agents and travel wholesalers both selecting distribution channels and any here and overseas. research that backs up your decisions. Online computers and accessories Our website will be our main distribution channel, supplemented by paid ads on Google and other search engines. We will also offer a ‘walk in and buy’ store location to boost credibility and customer confidence. 5 COMPLIANCE ISSUES BUSINESS STRUCTURE The reader will want to know about Explain the business structure you have any compliance issues you have chosen for your business. The most investigated, solved or need to solve common choices are: before you can start your business, — sole trader or expand it. These could include: — partnership — health and safety issues, such as any — limited liability company. requirements to install or use safety equipment/clothing and eliminate The key is to show that you have or minimise hazards; the safe use thought through your choice and and storage of dangerous chemicals have considered what would suit your and control of noxious fumes; and business in the future, rather than simply installation of safety signage choosing the easiest option of starting as a sole trader. — special consents or local authority licences to operate. For example, Learn more from the article the council might require a minimum ‘Understanding Business Structures’ number of car parks for staff and on the website customers, or resource consent for and show that you consulted your business operations that may cause advisers before making your decision. noise pollution, use dangerous chemicals, emit pollutants or harm the environment. EXAMPLES Home office start-up I have clearance to operate my business from home, but we intend to move the business once it takes o, a ff s the local council has limits on the number of people outside the immediate family who can work in a home office. We plan to move to a business hub within the first year of operation. Paint and panel shop We have secured suitable premises in an industrial area with permission to operate our paint and panel shop. We have taken steps to enclose the paint spray booth and installed filtered extractors and ventilators. We have also acquired the necessary safety gear, including toecap boots, leather aprons, shatterproof safety glasses and fire extinguishers.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Chapter 2: Strategy Your objectives from this chapter (in priority order) 1. Describe your specific and measurable business goals. 2. C omplete a key competitor analysis including tactics to reduce their impact on your business. 3. O utline your strengths and weaknesses, and any opportunities or threats. 4. Describe the core values that will underpin your business. BUSINESS GOALS EXAMPLES Tip Your business goals provide a clear Once you have set direction for the business and motivation Mediterranean food and wine major goals, work for you and your sta.ff delicatessen backwards to establish the stepping stones Provide two sets of goals for your Our goals for the next that will lead you to business: 12 months are: them. It’s easier and more motivating to 1. Short-term goals for the next — Gain resource consent for our store focus on this week’s or 12 months. by 15 October. this month’s objectives than on a more 2. L onger terms goals for the next — Finish fitting out our premises distant goal of 12 three to five years. by 20 January. months or longer. Markets are changing so rapidly that — Work towards an opening date there is little point in crystal-ball of 12 February. gazing beyond five years. In some — Build weekly turnover to 4,000 rapidly changing industries (such by 31 March. as technology), even three years may be a push. — Increase weekly turnover to 7,000 a week (break-even point) Goals are only useful if they are both by 30 September. specific and measurable. Rather than setting an abstract goal, such as: “We Business book-keeping service intend to grow the business substantially Our goals for the next within the next 12 months,” you need 12 months are: to set specific figures and dates. For example: “We aim to achieve 60,000 — Use direct mail to acquire five in turnover by 31 July, and increase this new customers per month, starting 35% to 80,000 by 30 September.” 1 March. These are benchmarks you can use — Build client database to 50 customers to motivate your team and review within 10 months (30 November). as you go along. — Bill out 1,000 per client per month by 30 April. — Reach our first-year revenue target of 80,000 per month by 28 February next year. 7 KEY COMPETITOR ANALYSIS Tip You must know what your key Avoid the trap of competitors are up to in the way assuming you have no of pricing, marketing and product competitors because development. What market share your product is new, do they currently have, and what share unique or patent protected. If your do you want to gain? Don’t expect business is successful, that they’ll let you take market share competitors will without a fight. emerge. What’s more, consumers or You have many options for researching businesses always competitors, including searching the have other choices for internet, analysing their websites, spending their money. studying their catalogues and advertising tactics, visiting their stands at trade fairs, mystery shopping their business, and speaking to their suppliers and customers. Focus on your top three competitors and identify how you will compete against their strengths and take advantage of their weaknesses. EXAMPLES COMPETITOR 1 Their strengths: Our response: — Large product range — Greater depth in niche products — Well established in market — Faster, nimbler, better tuned to 18—40-year-old market — Better buying power, lower pricing — Bundled add-ons, free on-site installation, responsive help desk Their weaknesses: Our response: — Low-wage staff who lack — Expert staff offering in-depth product knowledge product knowledge — Slow in-store service — Fast and responsive service — Clunky website, hard to navigate — Fast, new website, easy to order online — Website not suited to smartphones and tablets — Dedicated smartphone and tablet apps — Not using social media — Social media savvy, supported by a blogNEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS SWOT ANALYSIS Tip Build on the research you’ve done Weaknesses: Ask advisers and key on competitors (without repeating All businesses have vulnerable areas. staff to contribute to yourself) by completing a SWOT your SWOT analysis — Do you lack market recognition, analysis of your business. The first to help you identify credibility and a trading track record? two elements (Strengths and strengths and resolve or minimise Weaknesses) focus on your business; — Do you have poor buying leverage weaknesses. the second two (Opportunities and compared with bigger competitors? Threats) look outwards. — Do you have strong competition from Tip bigger or better-known businesses? Strengths: Refer back to how — Do you lack staff or suitably Consider these points: you defined your trained staff? competitive advantage — Do you have better products or and check that you superior service, or more product/ — Are you short of funding, capacity have included your service knowledge? and resources? point of difference. Use this opportunity — What main customer benefits do — Do you lack capacity and/or to refine your input you offer? capability? on both strengths and competitive — How often can you sell your product Try to outline a solution for each advantage/s. or service to your customers? weakness. For example, you will post — Do you have loyal customers who credibility-boosting customer feedback give you repeat business? as quickly as possible on your website; you are forming a buying syndicate — Is your business well located? with similar businesses to leverage — Do you have an excellent website lower prices; you are employing some that brings in useful sales enquiries highly skilled or experienced staff to fill or actual sales? knowledge gaps; and you have adopted — Have you found a marketing mix emerging productivity and marketing that’s increasing sales? technology faster than competitors. Additional points to consider: Additional points to consider: — Accreditations, qualifications, — Strong competitors certifications — Economy — local and overseas — Business capability — experience and — Environmental effects knowledge — Fashion changes — Business values — International influences — Innovative aspects — IT abilities — Location and geographical issues — Legislative impacts — Leadership and company culture — Key staff — Marketing — Market demand and developments — Price — New markets — vertical, horizontal — Processes and systems — New product development — Quality control — New technologies, services, ideas — Reputation, presence and reach — Niche target markets — Resources. — Partnerships, agencies, distribution — Political effects — Technology — Weather — Vital contracts and partners. 9 CORE VALUES Tip Opportunities Explain to the reader the core values One funder insists that that underpin your business purpose, Get help from your advisers to identify businesses applying for such as business ethics and integrity, more opportunities for your business, funds must express their treatment of staff and customers, and such as: purpose in no more than your responsibility toward the wider eight words. Could you — Expanding markets for your product summarise your core community and the environment. Make values in this way? or service. sure your core values are consistent with — Potential export opportunities. your strategic vision for the business. — Planned improvements to your One concise paragraph website. Avoid using abstract terms such — A competitor is struggling or as ‘empowerment’, ‘sustainability’ going under. or ‘capacity building’ without demonstrating how these actually apply Threats in your business. Instead, try to explain What threats does your business face? what you intend to accomplish and For example: the values that underpin your purpose. Do this in one concise paragraph that — The economic outlook is not positive. sta,ff customers, lenders and other — The possibility of running out of stakeholders can quickly grasp. access to capital. Post your values — A major competitor plans to open right next to your business. Once you are happy with the values you have defined, you can build them into — New road plans will cut down the a mission statement for your website, present flow of foot traffic. catalogues and other marketing As with weaknesses, try to outline ways material. Try to incorporate the major you could deal with the threats facing point(s) into your branding tagline, such your business. For instance, you will as: ‘Others may be cheaper, but we build a cash buffer to carry the business always offer better value.’ through an economic downturn; you have negotiated secure lines of credit EXAMPLE with the bank; you are negotiating a We are committed to supplying the lease termination with the landlord so best value products on the market you can move the business to a more and guarantee that our expert sta ff favourable location. will treat you with respect and professionalism. A portion of every sale goes directly to relieving poverty and hunger in our community.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Chapter 3: Market Your objectives from this chapter (in priority order) 1. Define clear profiles of targeted customer types or market segments. 2. Show how you have confirmed actual market demand. 3. Describe your research methods in terms of market size and sustainability. 4. O utline how you intend to promote and advertise your business. 5. D escribe how you have protected your branding and other intellectual property. This chapter covers the marketing tactics that will deliver the goals you want. CUSTOMER AND MARKET PROFILES EXAMPLE Understanding your customer types or market segments is critical. The A clothing business markets deeper your understanding the better, garments to customers of all ages, as this will empower you to target your and corporate clothing to businesses marketing messages, advertising and and larger organisations. The owner promotions more effectively. defines three important market segments and realises each requires Most businesses — especially start-ups a different approach. − have limited marketing budgets. This makes it imperative to focus each MARKET SEGMENT 1 marketing dollar on your targets rather Teenagers and young adults; than trying a scattergun approach. aged 17—25 years. If necessary, do more research on what Values your customers read, listen to, watch or do online, so you can reach them in the Influenced by celebrity dress and most efficient way. behaviour. Seldom read newspapers or view conventional TV, prefer to If your products or services appeal interact with their friends through to a broad range of customers or social media on smartphones and businesses, then segment them so you mobile devices. can tailor your messages more sharply. Messages Must use their language or risk being seen as irrelevant. Buying decisions are heavily influenced by their peers, communicated through social media. Best channels Social media such as Facebook, Twitter and Pinterest. 11 So what is hard evidence? It includes MARKET SEGMENT 2 proof that you have actively knocked Professional adults of both genders; on doors, spoken to key influencers or aged 30—55 years. buyers, and generally invested energy in proving demand. Values Looking for top-quality, smart Tip EXAMPLES fashion clothing that will enhance If you sell consumables You have: or can count on a their professional image. high proportion of — Made some sales already (provide repeat sales, be sure to Message tone mention this as it adds brief details) Up-to-date commentary on the a security factor to — Tested a direct-mail offer on a small cosmopolitan scene, referencing future revenues. segment of the market, with a 9 international, seasonal fashion trends. percent order response. From this Best promotion and advertising you can estimate larger demand channels — Secured advance orders or contracts Quality website with online shopping; — Shown samples to the buyers of four glossy fashion magazines for women; chain stores who have confirmed they metro magazines for males. will trial the product MARKET SEGMENT 3 — Sold your product part-time at weekend markets for long enough Larger businesses and corporations, to confirm good demand. banks and franchise chains. Values Looking for long-lasting, quality MARKET SIZE AND apparel that effectively projects their SUSTAINABILITY corporate branding. Message tone Also show that you have done some background research to support your Business-like, emphasis on good claims of market demand. value and well-designed corporate apparel. Display corporate client Market size logos for credibility. You need to confirm that the market Best channels is big enough to support your business. There are many ways to find the In-flight magazines; business information. Here are some ideas: magazines and newspapers; direct marketing; personal visits. — Go online to research competitor websites and other sources of market potential. — Search the website VALIDATING DEMAND for demographic data, such as where Confirming market demand is most of your ideal customer types live. important. It’s one thing to know from — Find equivalents to Statistics market research that you are entering New Zealand for overseas a large and growing market; it’s another market research. to know that customers actually want — Contact the local Chamber of your product or service — and will pay Commerce or your industry your price. You need this reassurance association for useful data. before you continue to invest more time — Commission a market research or money in the business. company or Statistics New Zealand Hard evidence to provide a market report. Lenders and investors in particular — Get help from experienced librarians will also want hard evidence that your at the nearest library. product or service will sell. They will not be convinced by wishful thinking such as: “If just 5 percent of the total market buys our product…”NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS PROMOTION PLAN Tip Tip Use the detailed customer and market Market sustainability If your business can segment profiling you have now The key to success in Ideally, you should be entering a be scaled, perhaps to marketing is to measure outlined as a guide to completing the growing market, not a mature or overseas markets, then every promotion so you downloadable 12-month Marketing describe this extra declining one. If your business (such can repeat what works Budget Timeline. potential, as it will and cease what doesn’t as a paint and panel shop) is restricted be of particular to New Zealand, and possibly to your Your choice of marketing initiatives will interest to investors. local town or city, show that the market relate to: is big enough to sustain your business. — Your customer and market segment Threats profiles. Note any threats that could affect — Events relevant to your business market sustainability, such as changing type, such as Mothers’ Day, Easter, technology, competitor reaction to your Christmas, school holidays, or market entry, or economic downturns. industry-specific events such as Describe how you might cope with an annual home and garden show. these threats. — Special events such as your business launch or a rebranding event, or For example, if you run a tourism co-marketing with other businesses. business, you might respond to a slump in overseas tourism numbers — How much weight you will give to by energetically marketing to local traditional advertising (print, radio, tourists who may not be able to afford TV, direct marketing) versus newer overseas holidays either. channels (online, website, social media). — Your marketing budget. Every business is different, so there are no hard-and-fast rules about how much to spend on marketing. A new business may need to spend more at first to make an impact on the market; an established business may find it can grow through word-of-mouth referrals with little need for extra advertising. Remember that you can extend your marketing budget through flair and creativity, such as launching your business in some unusual way that will generate free publicity. Keep on tracking how people find you and what advertising works. You may need to adapt your approach as new marketing tools emerge, such as the move to mobile-device marketing. 13 BRANDING AND IP PROTECTION Briey d fl escribe the intellectual property (IP) your business owns and show what steps you have taken to protect it. You probably have more IP than you realise, because many IP assets, such as copyright material, are not tangible assets like cars or computers. Visit the Intellectual Property Office website ( to gain a better idea of what you can or should protect. The value of your trade mark will grow over time, so at minimum you should register your branding (including your logo and tagline or slogan) as a trade mark to prevent others copying it. Show how you have protected your business from these common IP issues that can cause businesses to become unstuck — sometimes at considerable cost. Tip PROBLEM OR CONFLICT SOURCE SOLUTION Recording IP assets in an IP portfolio will show Another business copies your brand Register your trade mark as soon as other stakeholders that or slogan. possible. you take IP protection seriously and recognise its importance to the Others imitate your designs. Register your designs as soon as possible. business. Others copy your texts, drawings, Copyright is automatic but can seem artwork, photographs, brochures or ‘invisible’ unless you actively assert other materials, claiming there your copyright over the material. is no indication of ownership. An employee brings an idea into the Confirm that your employment business; develops an idea while agreements have specific clauses working; or develops the idea both clarifying ownership and protection at work and at home, then leaves for any intellectual property developed the company and starts a business in the company. using the idea. The partnership agreement should You develop valuable intellectual clearly identify who will own or jointly property in a joint venture with own any IP brought into the joint another business. venture, or developed during the JV. Filing a provisional specic fi ation as soon as possible can give you up to 15 months’ You show your invention to others protection time to continue developing before filing a patent application, the invention while avoiding the large opening the door to imitators. cost of a full patent application until you are sure the invention will be successful.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Chapter 4: Skills, people and systems Your objectives from this chapter (in priority order) 1. Outline your skills and experience to manage the business. 2. Show you have a well-balanced team. 3. List your advisory team members and the skills they bring. 4. Outline the business systems you’ll use to manage business processes. 5. Outline the productivity software and technology you will deploy. SKILLS AND EXPERIENCE Tip Good ideas are plentiful; people Give brief details of any training or If you lack business capable of executing them well are resources you have supplied, or will experience or scarce. Regardless of how much money be supplying, to staff to ensure they qualifications then you have, or how brilliant your idea can complete their tasks and provide consider postponing is, all is lost if you can’t manage the excellent customer service. your plans while you gain some experience business properly. Explain also any plans you have to keep by working in the industry you want to Explain your ability to run the business staff well trained, loyal and motivated. enter and taking some by describing both your experience small business courses. and qualifications. Describe your business track record, ADVISERS focusing on specific achievements that are relevant to this business plan. Starting and running a business can be Possible topics could include: a lonely endeavour, and feeling isolated can lead to stress and poor decision — Your qualifications and making. You will be faced with daily management ability. decisions — some in areas where your — Your money and ‘sweat equity’ knowledge may be shaky. It’s important investment in the business. to show that you have good advisers you can call on to help you make the — Competitors you have dealt with. right decisions. — Business challenges you have overcome. List your advisory team members and the skills they bring. A core team Also list any organisations or people would include: that will give you direct help. If possible, include references from them that — A lawyer experienced in business confirm their confidence in your ability. structures, contract law and terms of trade, and leasing or buying business premises. — An accountant preferably WELL-BALANCED TEAM experienced in your type of business, Tip and able to give business growth If you are starting with employees, Employing part-time advice in addition to preparing show you have gathered a staff or using accounts for tax compliance. well-balanced team. Detail their skills subcontractors can and experience, and the areas or tasks be a useful way to keep — A banker familiar with small-business costs down until you they will manage. Distinguish between challenges and able to offer resources are more certain the full-time employees, part-time and tools in addition to standard business can afford to workers and subcontractors. banking products. employ full-timers. — A mentor, such as a more experienced Few people are strong in all business or retired business person, or someone areas, so explain if you intend to recommended by Business Mentors employ someone specifically to New Zealand (www.businessmentors. cover for you in a particular area. For with whom you can build example, accounting or marketing may a productive rapport. not be your strong suit. 15 List also any other experts you have PRODUCTIVITY identified, such as a financial adviser, AND TECHNOLOGY an IT expert, a marketing consultant or others with specialist knowledge. Today, all businesses — not just If they come with recommendations large organisations — have access to from colleagues or others, mention this. technology to improve their efficiency. Tip Business support networks New productivity tools are constantly Show how you will emerging, and many are affordable. Describe the various personal, avoid the trap of Outline the productivity software and professional and business support becoming isolated in technology you will deploy and show networks to which you have access, your business. Quality how it will help to: advisers are important as these will impact on your business because they lessen success. Successful business people — speed up business the stress of leadership have a wide range of contacts, so show and help you make wise — deliver more quickly to customers that you are making the effort to follow decisions. — improve productivity their example. List the organisations you have joined, such as the Chamber — lower costs of Commerce, local business networks — improve quality and delivery. or hubs, and your trade or professional association. Chatting to people in Your list could include: business is worth its weight in gold. — installing more efficient production equipment — deploying advanced inventory BUSINESS SYSTEMS control systems — using customer relationship Good systems are a hallmark of good Tip management (CRM) software businesses. They help you avoid Develop easy-to-follow — implementing project management becoming so caught up in daily tasks operations manuals from day one. They software that you have no time for broader promote consistency, thinking about your business. They are — moving your digital assets to the speed up training, and also a key factor in delivering reliable cloud so they can be accessed from allow staff to cover for and consistent customer service. anyone who is away anywhere, anytime sick or on leave. — enabling remote working by your Outline any important systems you sta t ff hrough smartphones and have adopted or are developing to tablets deliver a consistent product, service or experience, such as: — implementing an e-commerce solution. — Production management Tip Technology advances — Administrative tasks Managing your business If you have assigned a staff member — Order fulfilment from a smartphone to research further technological or tablet is no longer — Accounting systems and budgets advances and innovations, mention this. a fantasy. There are apps available that let Customer service Tip you invoice on the go, Ensure all customer- Customer satisfaction is essential do your banking, view facing staff can clearly for securing repeat business and your accounts, respond express and promote to emails, work on word-of-mouth referrals. Briefly your value proposition business documents, cover how you and your team plan to customers. and keep touch with to deliver excellence at all customer staff and customers. contact points: phone, email, online responses and one-to-one discussions. For example, your plans could include developing proven sales scripts, supported by reliable order-fulfilment processes, and sending staff on sales-closing courses.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS Chapter 5: Finance Your objectives from this chapter (in priority order) 1. O utline your business feasibility (return on investment, or ROI). 2. C omplete a 12-month cash flow forecast and explain your cash flow assumptions. 3. Show how you will sustain cash flow. 4. Outline how you have priced your product/service. 5. Identify the critical KPIs for your business type that you will monitor. 6. Explain your price positioning strategy. 7. S ummarise how you will fund your business plan (start-up and growth/expanding). BUSINESS CASH FLOW FEASIBILITY TEST FORECAST Tip Tip Up to this point you’ve focused on A cash flow forecast is the prime tool you If your business idea clearing all the hurdles to starting will use to predict money flows in and out Work at improving is simply not feasible your forecasting skills. a business, such as market demand of your business. It will help you predict then it’s better to Cash flow forecasting and sustainability, business skill and the best time to make any required discover this now than is a prime way to show compliance issues. This final test is asset purchases and spot any cash flow to plunge ahead and lenders and investors lose your capital. Your a feasibility test. crunches in advance, giving you time you have sound money- time has not been management skills. to take action or secure bridging loans. wasted; the knowledge Use the downloadable Break-even will pay off next time. calculator to assess the feasibility Use the downloadable Cash flow forecast of your business project. to complete your 12-month forecast. Once you have completed the A forecast has two parts, with one calculations, ask yourself: Can we easier than the other. really sell that number of units per The easier part is forecasting running week or month? costs (business overheads), as you can — If you are manufacturing or research these and get advice from an retailing, the units would represent accountant experienced in your industry. products sold. Forecasting sales is harder. If you are — If you run a service business, already in business, you can use last the units would be billable hours. year’s sales records, making allowances for pricing changes, predicted economic conditions and any new marketing initiatives you have planned. If you are starting a business, forecasting becomes tougher and you will likely be asked by lenders and investors to justify your sales predictions. The work you have done to validate market demand (see Chapter 3) should provide support for your predictions. Research into competitors’ sales levels as well as the average performance for your type of industry can also help to refine your forecasting. 17 For example, if you are starting a café, — Locking in customers through and the average café in your area turns contract agreements or monthly over between 6,000 and 7,500 per help-desk charges. week, this gives you a broad guide — — Developing loyalty incentives or and a target to aim for. privileges to encourage repeat sales. Sources of information include — Actively pursuing a word-of-mouth Statistics New Zealand (www.stats. referral scheme to generate new leads., your industry or professional — Checking customer satisfaction levels association and your accountant and improving customer service. (another good reason to choose an — Setting goals with staff to increase accountant who has similar clients repeat sales. in your industry). EXAMPLES Prepare three versions of the cash flow forecast and present them to Accounting firm your advisers first for their feedback To avoid lumpy revenue flows and questioning: peaking around tax return dates, 1. The sales levels you honestly as with the usual accounting firm believe you can achieve (and can model, we will promote a monthly defend if questioned). charge for our services. We know this will be attractive to many 2. The sales levels you would like clients because it allows them to to achieve. spread their accounting bill over 3. T he worst-case or minimum sales 12 months. We will offer various levels that your business could levels of service, ranging from tax still survive. returns to a partnership programme where we will work actively with clients on building their business. The advantage for us will be more SUSTAINABLE predictable cash flows. CASH FLOW Tip IT service Many businesses suffer from peaks Predictable sales levels We plan to move our important that iron out peaks and and troughs in their cash flow, making customers from billing for each troughs in cash flows it harder to manage outgoing payments. call-out, to monthly fees for IT make your money- Cash flow fluctuations are caused management task services. We will offer a basic, by many factors, such as seasonal much easier and your standard and premium version at business more secure. demand, loss of customers, one-off different prices, with the premium sales and economic downturns. version guaranteeing an unlimited Discuss your plans to achieve 24/7 response for any IT issues. predictable revenue streams in your We also plan extra revenues from business. For example: consumables for the printers we sell, and from leasing deals on new — Marketing steadily, both in good times equipment (including installation and bad, to eliminate the ‘lead time’ and training) with guaranteed gap from less consistent marketing. upgrades to new technology. — Adapting your products or services to monthly payments rather than outright purchases. — Including or adding consumables that will require replenishment. — Selling warranties or service contracts based on monthly charges.NEW ZEALAND TRADE AND ENTERPRISE PLANNING FOR SUCCESS PRODUCT/SERVICE PRICING Tip Here’s a sample of commonly used KPIs: Describe how you have priced your If you can’t match product or service. Your approach Financial KPIs competitors’ pricing could be one of these tactics, or then look for ways to a combination of several: — Gross Profit (GP) strengthen your value Tests your gross profit margin. If the proposition, such as — You have carefully researched key by offering extras they GP percentage falls, you need to take competitors’ pricing, and chosen can’t or don’t offer. timely action, such as looking at ways a lower, higher or similar price to to lower input costs. their levels. — Net Profit (NP) — Your industry has a standard pricing A falling NP percentage should range for the products or services lead you to investigate which you offer, and you will operate within overhead costs are creeping up this range. and eroding profits. — You have priced your product on a cost-plus-profit-margin basis, while — Current (liquidity) ratio taking into account both competitors’ Measures the ability of your business pricing and the market’s expectations to pay short-term debts. for your type of product or service. — Ownership ratio The key point on a pricing strategy Shows how much of the business is to ensure your business can make you own, influencing both the a sustainable profit. There’s no point liquidity of the business and the pursuing sales if you are operating on likelihood of getting further loans. the thinnest of margins or even at a — Debt collection days loss. Check and double check all your Measures the average time you costing figures with the help of your take to collect money owed to the accountant to ensure you haven’t left business. Shortening this time should out any costs. be an important goal. Be careful of undercutting competitors Marketing KPIs as a strategy to gain market share. Your customers might simply assume you — Customer-retention rate are cheaper because what you offer Measures the loyalty of your is inferior. Show confidence in yourself customers, which keeps them buying. and what you’re selling. — Number of customer referrals (sales leads) Reflects the excellence of your MONITORING products and service and marketing tactics. PERFORMANCE — Lead-conversion rate Tip Key Performance Indicators (KPIs) Measures how efficiently you Monitoring carefully oe ff r critical insights into how well your are converting sales leads into selected KPIs business is performing. With hard facts customers. builds confidence in and figures in front of you, it’s much easier stakeholders such as — Average sale per employee to manage your business and make the banks, investors, and Keeps you informed of staff suppliers. It confirms right business decisions. that you are actively productivity. Note in your plan which KPIs you will managing the direction of your business through monitor or are already monitoring, and Industry-specic fi KPIs regular feedback. explain what they will tell you about the — Retail business. Get help from your accountant Stock-turn rate — usually the to identify the KPIs critical to your type quicker the better. of business and how to measure them. — Service Billable hours per week. — Manufacturing Units produced each week. — Tourism B & B Bed-occupancy rate.

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