30 31
how companies work
Start-ups
Motivation
Readiness to grow
Motivation
Innovating
Motivation
Feeding the family
Motivation
Intent to sell the business
on from the beginning
Example
Phone app
developer
Example
PC manufacturer starts
a separate business
providing cloud
data storage
Example
Small-town
grocery store
Example
Biotech
laboratory
Type of funding
Crowdfunding,
angel funding
Type of funding
Internal company
funding
Type of funding
Self, family,
bank loan
Type of funding
Outside
investment
S
m
a
l
l
b
u
s
i
n
e
s
s
I
n
i
t
i
a
t
i
v
e
w
i
t
h
i
n
a
l
a
r
g
e
c
o
r
p
o
r
a
t
i
o
n
S
c
a
l
a
b
l
e
s
t
a
r
t
-
u
p
A
c
q
u
i
s
i
t
i
o
n
t
a
r
g
e
t
s
0101010011
0100010101
US_030_031_Types_Of_Startup.indd 31 21/11/2014 16:37
How it works
Before a start-up entrepreneur can write a business
plan, they need to have done enough research to
identify a clear opportunity in the market for the
product or service, and to define how the proposed
new business will be uniquely positioned to capture
that market, given the services or products offered. An
outline of existing finances and an accurate projection
of sales and profit are essential components, especially
if seeking external funding.
Writing a business plan is one of the most important steps in
developing a start-up. The plan sets out the new business’s
goals, market analysis, and projected income and profit.
Business plans
Executive summary
Fill in this section last, bearing in
mind that it may be the only part
a busy person reads:
Business summary Company
structure, name, product or
service, and customer profile
Business goals Three objectives
over one, three, and five years
Financial summary Expected
sales and costs, and funding
Elevator pitch Two-minute talk
to sell your idea to a customer
Business
background
Provide details of each person
in the business:
Experience Relevant work
carried out to date
Qualifications Credentials,
such as diploma in horticulture
for a gardening service
Training Past and future,
including business skills such
as assertiveness
The market
Set out specific details of your
potential market:
Typical customer Businesses
or individuals and their profile;
local, national, or international
Market research What the
local market is for similar
products or services
Products and
services
Describe what the business is
going to sell:
Product or service With a
picture if product is new
Range If more than one, such as
garden design and maintenance
How it is different What makes
the product or service stand out
from the crowd?
Marketing strategy
Choose about three of
these methods:
Word of mouth
Advertising
Business literature
Direct marketing
Social media
Website
Key elements
Preparing a business plan can take
several weeks, and it is worth doing
thoroughly. It is a vital document
for securing funding, so the financial
forecast must be both realistic and
accurate. If showing it to others, pare
the executive summary down to two
pages, write it in plain English, and
explain any technical terms.
Start-ups in
the US are
2.5x
more likely
to go into
business if
they have a
written plan
US_032-033_Business_Plans.indd 32 21/11/2014 16:20
32 33
how companies work
Start-ups
Costs and pricing
strategy
Work out how much the product
or service costs and its sale price:
Cost How much each unit or
batch costs to make and deliver
Price How much each unit or
batch will sell for
Profit margin The difference
between cost and price per unit
Operations
and logistics
Describe from start to finish
how the business will run day to day:
Supply and delivery How the
goods or service will get from A to B
Equipment
Details of transportation
,
office items, and premises
Payment, legal, and insurance
How customers will pay and
how that translates into salaries;
compliance with the law
Competitor analysis
Show how the business idea
compares with the competition:
Table of competitors Who and
where they are, what they sell and
for how much, how good they are
SWOT analysis Including how
to remedy any weaknesses and
combat known threats, such as
a garden center opening nearby
USP Unique selling point of the
product or service
See Need to Know box, above.
SWOT analysis Stands for
Strengths, Weaknesses,
Opportunities, and Threats
Unique selling point (USP)
The feature that makes a product
different from the competition
Financial forecasts
Predict sales and costs over the year,
allowing for seasonal fluctuation, such
as spring demand for lawn services:
Sales calculations For each month,
the expected number of sales
Costs calculations The costs of
the predicted sales each month
Cash-flow forecast The money
coming in and out of the business
See How Finance Works, pp.98–175.
Back-up plan
NEED TO KNOW
TOP FIVE REASONS TO WRITE A PLAN
The process Working through each
element ensures nothing is forgotten.
Costing The only way to find out
whether the business is viable is to
work out details of costs and sales.
Funding A good business plan
improves chances of getting a loan.
Areas of expertise Making a
business plan clarifies where outside
help is needed—for instance, in
bookkeeping or marketing.
Getting to know the competition
Conducting market research is the
best way to give a business an edge.
Make a Plan B in case something
goes unexpectedly wrong:
Short-term changes Cutting costs
or boosting sales immediately
Longer-term changes Shifts such
as working online, not on premises
Closure Lessons learned and skills
acquired if the business closes
US_032-033_Business_Plans.indd 33 15/12/2014 12:55
32 33
how companies work
Start-ups
Costs and pricing
strategy
Work out how much the product
or service costs and its sale price:
Cost How much each unit or
batch costs to make and deliver
Price How much each unit or
batch will sell for
Profit margin The difference
between cost and price per unit
Operations
and logistics
Describe from start to finish
how the business will run day to day:
Supply and delivery How the
goods or service will get from A to B
Equipment
Details of transportation
,
office items, and premises
Payment, legal, and insurance
How customers will pay and
how that translates into salaries;
compliance with the law
Competitor analysis
Show how the business idea
compares with the competition:
Table of competitors Who and
where they are, what they sell and
for how much, how good they are
SWOT analysis Including how
to remedy any weaknesses and
combat known threats, such as
a garden center opening nearby
USP Unique selling point of the
product or service
See Need to Know box, above.
SWOT analysis Stands for
Strengths, Weaknesses,
Opportunities, and Threats
Unique selling point (USP)
The feature that makes a product
different from the competition
Financial forecasts
Predict sales and costs over the year,
allowing for seasonal fluctuation, such
as spring demand for lawn services:
Sales calculations For each month,
the expected number of sales
Costs calculations The costs of
the predicted sales each month
Cash-flow forecast The money
coming in and out of the business
See How Finance Works, pp.98–175.
Back-up plan
NEED TO KNOW
TOP FIVE REASONS TO WRITE A PLAN
The process Working through each
element ensures nothing is forgotten.
Costing The only way to find out
whether the business is viable is to
work out details of costs and sales.
Funding A good business plan
improves chances of getting a loan.
Areas of expertise Making a
business plan clarifies where outside
help is needed—for instance, in
bookkeeping or marketing.
Getting to know the competition
Conducting market research is the
best way to give a business an edge.
Make a Plan B in case something
goes unexpectedly wrong:
Short-term changes Cutting costs
or boosting sales immediately
Longer-term changes Shifts such
as working online, not on premises
Closure Lessons learned and skills
acquired if the business closes
US_032-033_Business_Plans.indd 33 15/12/2014 12:55
How it works
Capital for new enterprises comes
from two main sources: lenders
and investors. Lenders, such as
banks, provide debt capital in the
form of a loan that is returned
with interest. Investors, such
as business angels and venture
capitalists (VCs), provide equity
capital in the form of a share
in the business that may include a
proportionate share of control and
rewards. Both types of funding can
be corporate—from a company—or
more quirky and alternative, such
as crowdfunding.
Almost every new enterprise needs funding to get it going, and to
keep afloat until it turns a profit. Financial help is at hand from a
variety of sources, suitable at different stages of start-up growth.
Raising money
Term loan Paid back regularly
over a set period of time
Bank overdraft or credit card
Interest charged monthly if balance
not paid in full
Lenders
Debt capital most often takes
the form of loans paid back
with interest.
Bank Offers either personal or
business loans
Government Offers low-interest
start-up loans
Credit union Cooperative that
gives members low-interest loans
Peer-to-peer (P2P) lending
Unsecured personal loans
Friends and family May give
interest-free loans
Factors and discounters
Companies that offer advance
on unpaid invoices, for a profit
Factoring/invoice discounting
Unpaid invoices sold at a discount
to a company that collects them
for commission
Bank or credit company
Financial organization that makes
loans to commercial ventures
NEED TO KNOW
P2P lending Loans made
between individuals over internet
Crowdfunding Debt or equity
raised via internet platforms
Types of start-up funding
Corporate, traditional, and substantial funding
comes largely from banks and VCs, while smaller
sums come from more personal sources.
$
$
$
US_034-037_Raising_Money.indd 34 15/12/2014 12:55
34 35
HOW COMPANIES WORK
Start-ups
What they are Serious investors in technology
start-ups. Facebook was funded by super angels,
some of whom are now famous in their own right.
Who they are Former Silicon Valley professionals
who invest their personal money in new ventures.
How they differ from ordinary angels and
venture capitalists (VCs) Funding level straddles
the two, often reaching millions of dollars as what
started out as a hobby becomes a profession.
Pros and cons Super-angel investing acts like a
magnet to other investors, but individual super
angels can rarely provide the full funding of a VC.
SUPER ANGELS
5–10%
of small and
medium-sized
enterprises in
the UK need no
start-up funding
Investors
Equity capital is paid to the
start-up in return for a share
of the business.
Grants
Financial awards and
prizes are provided
by public bodies.
Founders, friends, family
(FFF) May buy shares in the
company rather than lending
money
Local, national, global
Funded by a local authority,
government initiative, or
international charity
Crowdfunding Large number
of supporters, each contributing
a small amount of money,
usually online
Business angels Investors who
give favorable terms because
their focus is on the company’s
success rather than profit
Venture capitalists (VCs)
Companies that provide capital
for new businesses in the hope
of making a profit
S
t
a
r
t
-
u
p
f
u
n
d
i
n
g
$
US_034-037_Raising_Money.indd 35 21/11/2014 14:23
34 35
HOW COMPANIES WORK
Start-ups
What they are Serious investors in technology
start-ups. Facebook was funded by super angels,
some of whom are now famous in their own right.
Who they are Former Silicon Valley professionals
who invest their personal money in new ventures.
How they differ from ordinary angels and
venture capitalists (VCs) Funding level straddles
the two, often reaching millions of dollars as what
started out as a hobby becomes a profession.
Pros and cons Super-angel investing acts like a
magnet to other investors, but individual super
angels can rarely provide the full funding of a VC.
SUPER ANGELS
5–10%
of small and
medium-sized
enterprises in
the UK need no
start-up funding
Investors
Equity capital is paid to the
start-up in return for a share
of the business.
Grants
Financial awards and
prizes are provided
by public bodies.
Founders, friends, family
(FFF) May buy shares in the
company rather than lending
money
Local, national, global
Funded by a local authority,
government initiative, or
international charity
Crowdfunding Large number
of supporters, each contributing
a small amount of money,
usually online
Business angels Investors who
give favorable terms because
their focus is on the company’s
success rather than profit
Venture capitalists (VCs)
Companies that provide capital
for new businesses in the hope
of making a profit
S
t
a
r
t
-
u
p
f
u
n
d
i
n
g
$
US_034-037_Raising_Money.indd 35 21/11/2014 14:23
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.