How to work on your business, not just in it.
For many small business owners, it’s a challenge just keeping the business afloat. They’re often too busy keeping their business ticking along to work on strategies to grow it and make it more profitable.
Research from the OECD and World Bank has revealed that many small businesses share the same challenges:
- Increasing revenue
- Growing their customer base
- Developing new products
- Consistently making a profit
- Finding funding for growth
By working on your business, rather than just in it, you can discover ways to overcome all of these challenges. It all starts with a solid, well thought-out business plan.
Why you need a business plan
Every small business owner needs a plan, which acts as a road map of where they want the company to be going.
A business plan forces you to think about all of the key aspects of your business and what it will take to move it forward. It should be a living document, constantly changing to react to your business’s evolving needs. It gives you the power to overcome challenges and is essential when you need a loan or investment funds.
What to put in a business plan
Business plans usually address several audiences: financial institutions, investors, your employees and yourself. Prepare it so that it can be easily tweaked to be relevant to different people.
While some of the contents may seem obvious to you, it is essential to get your vision down in writing, so it can be easily shared. It should be updated regularly and broken down into mini plans, for example for pricing, marketing, R&D, etc. Ideally, it should include all of the following information:
Your business in a nutshell – a brief description of your business, its products, target audience and plans for growth.
Who you are – details of you, the owner, as well as any other key personnel, including qualifications and the experience that you all bring value to the company.
What you do – a breakdown of how your business makes money, what it sells and to whom, plus details of new products and other innovations.
Your industry – an in-depth summary of the current market and where you sit within it. Demonstrate that you know and understand your market and are able to adapt to changes within it.
How you’re different – coming up with a unique selling proposition (USP) is essential. You as a company need to know what makes you unique so that you keep doing what brings your customers back. It should also shape your marketing efforts.
Marketing and sales strategy – what you’ve done to secure sales so far and your plan to grow even more. Include marketing campaigns for new products.
Your finances and forecasting
Other key components of a solid business plan include financial projections and plans for growth. Financial forecasts provide you with an estimate of future earnings and costs. They’re essential for good business management as well as securing funding.
Be sure to have data to back up financial projections, for example: “A sales growth of 5% will be achieved by…”. This will help you to measure if your business is on track, how it compares to competitors and if you need to catch up.
There are several key components to a financial forecast:
- Sales forecast – using historical data as a starting point and adding in any other key strategies that will impact it.
- Expenses forecast – include all of your costs, for example, rent/mortgage, staff wages, utilities, professional fees, marketing/advertising and the costs to produce, store and distribute your products.
- Costs of goods sold – working out how much each unit will cost is essential to know how to price it.
- Income/profit projection – essential when looking for investment or financing. You need to show how you will pay back the loan or investment.
- Cash flow forecast – an estimate of finances coming in and out of the business to demonstrate how you’ll avoid running out of money.
A growth strategy should be an essential part of any business plan. Decide what your primary, realistic and achievable growth goals will be (e.g., a certain increase in units sold). Keep them to a manageable number and include a timeframe.
Detail the ways you intend to achieve your goals, for example through a new product launch, staff recruitment or opening new stores. Costs will also likely increase, so align your growth plan with your financial forecast. Work out, as accurately as possible, how much these growth plans will cost.
Getting the capital needed to grow
With solid business and growth plans—and the financials to back them up—you will be in a good position to seek out the capital to pay for it.
If you’re looking for an investor to put money into your company, either as a loan or for an equity share, there are several ways to go about this. Crowdfunding websites are becoming increasingly efficient in bringing businesses and investors together. Sites such as Kickstarter, Fundable (dedicated to smaller businesses) and AngelList (mostly for start-ups) allow you to raise investment funds in return for rewards or equity in the company.
Organizations, such as the Canadian Venture Capital and Private Equity Association and the Venture Capital Association of Alberta, can also help you to find potential venture capital investors.
Growing with a loan rather than investment
If you prefer to keep full control and equity of your company, taking out a loan is your other option. While most financial institutions offer commercial loans, many small businesses are finding credit unions to be an increasingly attractive alternative to the big banks.
Credit unions often offer lower fees and interest rates for loans and typically have much shorter turnaround times for loan approvals. They’re also usually more flexible, offering smaller loans than banks are willing to give.
At connectFirst, our business banking team can provide a variety of options to fund your company’s growth. We offer term loans and secured and unsecured lines of credit.