Write a Business Plan

images-37So, you have decided to start up a new business. You begin to do some research and find that almost everything you read recommends that you produce a business plan. Why is this so? Because the benefits of compiling a business plan are numerous – not least, the fact that committing your thoughts to paper dramatically improves your prospect of getting started in the first place. A business plan also helps you gain a holistic view of the business and helps you to devise a strategy to ensure a successful launch for your idea.

Having decided to produce a business plan, there are three main ways to write one:

1. Pay someone to write it.

2. Write it yourself using Microsoft® Word and Excel.

3. Write it using a task-specific software product such as Business Plan Pro UK Edition.

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 it comes to producing specific content, such as that required for a business plan. If the purpose of the business plan were simply to jot down a few notes to keep you on track, they would suffice. However, if you intend to circulate the plan to peers, colleagues or prospective investors, you will need to produce a plan worthy of your name. After all, you are the author!

Here are the reasons why we believe that using Business Plan Pro is the easiest way to write a business plan:

1. Offers significant time saving

Business Plan Pro was designed to help you write a plan as efficiently as possible. It comes with extensive help, lots of examples and expert advice.

2. Provides the structure

Business Plan Pro walks you through a list of specific tasks, step by step, in stark contrast to the blank screen and flashing cursor you face when you create a new document in Microsoft Word.

3. Includes hundreds of examples

Business Plan Pro includes over 500 sample plans so you can browse plenty of examples to help give you ideas.

4. Ensures you do not leave out any sections

Over ten years of history means that we know what sections to include, where they should appear in the document and what you need to put in them.

5. Makes the numbers part easy

We recognise that while compiling the financials is an essential part of any plan, it is a very challenging area. We have simplified this process with the inclusion of easy-to-use financial wizards and automatic calculations, linking together all the financials from Start-up costs to Sales Forecast to Personnel Expenses to Cash Flow to Profit and Loss.

6. Free support available

Alongside the extensive in-product help, we also offer a free support line and a comprehensive help facility on our website.

7. Signposts relevant resources at appropriate points

The software also includes links to relevant local resources where you can read specific advice on any areas with which you need further assistance, including trademarks, company formations, and more.

8. Designed specifically for producing a business plan

Whereas Microsoft Word is a general purpose tool, Business Plan Pro is designed specifically to help you write a business plan with the least amount of hassle.

9. Risk free

The time saving alone will easily justify the small cost you will need to pay for Business Plan Pro. However, you can avail of our 60-day money-back guarantee if you are still unsure as to whether it will benefit you.

Top 6 Priorities Resolutions for Entrepreneurs

images-38The 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 are starting a business, it is worth revisiting some of the fundamentals that are vital to your business. If you do not have any metrics in place, now is a perfect time to set them. These can include key financial ratios as well as customer and Web based metrics, e.g. £ value per customer, conversion rates, etc.

Topics to brush up on include:

  • Break-even Point
  • Profit Margins (Gross and Net)
  • Cash Flow Forecasts
  • Profit and Loss
  • Sales Forecasts
  • Cost of Sales
  • Creditor and Debtor Days

It is tempting to delegate the maths to others. However, you need to understand these concepts so you can manage your business effectively. For example Insolvency is one of the biggest threats to companies in the UK, yet cash flow management is an area which many entrepreneurs neglect. By understanding the numbers that are relevant to your business you can ensure that you are giving yourself every opportunity to grow and prosper.

3. Optimise your website
Most businesses set up a website when they start, but many entrepreneurs then ignore it. It is essential that websites are maintained and are mined for information. Where are your customers coming from? What are they looking at? What is the conversion level for visitors? All of these questions, and more, are easily answered using free tools such as Google Analytics. If you have not done anything with your website for some time, you should implement Google Analytics so you can understand more about your customers. Armed with this knowledge you can then tailor your website for the audience you attract and help achieve the objectives that the website was designed for in the first place.

4. Familiarise yourself with Google AdWords
The growing use of the Web is facilitated in large part by the use of Google as a signposting mechanism to resources and as a means to find answers to questions and issues. Google is the dominant search engine in the UK and AdWords is a powerful tool that can be used to target prospective customers. AdWords lets you show your ads only to people searching on a specific phrase related to your business, so it is highly targeted marketing. If you have an AdWords account, the New Year offers you a great opportunity to review campaigns from the preceding months. If you do not have one – set one up. The benefits of the system are excellent, not least in terms of accountability and targeting, but also marketing effectiveness and the ability to generate a good return on investment.

5. Identify a business book and read it
Entrepreneurs are typically very busy people, dealing with a whole raft of different issues and challenges. However, time needs to be set aside so as to consider the bigger picture as wider circumstances impact upon the prospects for businesses. It is important entrepreneurs remove themselves from day-to-day ‘fire fighting’ to assess future strategy. One means to assist this is by reading publications that either relate to the industry you are in or that will broaden your knowledge in a particular aspect of business. There are huge numbers of business books available at any bookstore (many written by business academics) and some will naturally be more relevant to you than others. Again the New Year offers the perfect opportunity to broaden your knowledge base with some relevant business books.

6. Summary
One thing common to all entrepreneurs is their perceived lack of time. Most are required to cover a huge breadth of areas (particularly at the start-up stage). However, this incessant focus on day-to-day issues can mean that they spend little time reflecting on the wider picture. The New Year period affords you the perfect opportunity to make some changes to ensure that day-to-day management issues do not distract you from your wider business objectives.

Strategy planners can teach public companies

Many respects, successful private-equity (PE) firms seem to defy economic logic. They acquire most of their businesses through some form of auction, where competitive bidding drives prices above what other potential buyers are willing to pay. Because they manage portfolios of discrete businesses, their acquisitions rarely reap substantial synergies. Their ability to survive, let alone thrive, depends on sustaining returns that attract limited partners to reinvest every few years. And unlike traditionally organized public companies, PE firms can’t underperform for very long, because their track records directly affect their ability to tap into capital markets.

Yet a number of prominent private-equity firms have succeeded for decades, earning healthy returns for investors and founders alike. So it’s not surprising that some public-company managers would look in that direction for new models to address their own myriad challenges—around aspects of governance, operations, and active ownership, among other things.1The way private-equity firms manage strategic planning, for example, offers lessons that might help public companies adapt to an environment marked by heightened shareholder pressure for performance and a fast-paced business cycle.

In our experience, successful private-equity firms excel at some practices that public companies should—but often don’t. These include detaching themselves from the tyranny of quarterly-earnings guidance, deploying highly disciplined business-unit strategies, and developing a competitive advantage in M&A. We believe many public companies would benefit from applying a private equity–like approach more aggressively in these areas, even by going to lengths that might seem unorthodox.

Don’t be tyrannized by the short term

Private equity’s most powerful advantage may simply be that it is private. These firms can restructure and invest for the future while avoiding the glare of quarterly analysts’ calls and the business media. They can also communicate more intimately with a much smaller investment community, so they don’t broadcast their strategies and growth advantages to competitors. Our research shows that public-company managers can also gain shareholder support for long-term programs by communicating convincingly and making the right progress metrics clear to the investment community.

In the first 100 days after an acquisition, some successful PE firms explicitly collaborate with the new portfolio company during an intensive planning process. Over this period, management and the board develop a five- to seven-year plan, agreeing on new markets, channels, or products; assessing the capital needed to execute these initiatives; and developing an explicit set of new metrics and corresponding management incentives. In addition, they identify tactical near-term moves to build positive momentum from the deal’s most readily apparent benefits.

Such efforts require a highly disciplined, rigorous emphasis on metrics that reflect longer-term value, like cash flow, rather than short-term ones, like earnings per share (EPS). Many private-equity firms separate the financing of a business from its operating performance, which they get management teams to focus on by using cash flow–based measures, such as earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow. EPS reflects nonoperating factors (such as interest and tax expenses) that rely on a deal’s structure, but EBITDA depends more on operating performance. Free cash flow also takes into account the capital expenditures and additional working capital required to generate profits; EPS does not.

During the 100-day planning process, private-equity firms are more active than public companies in considering the furthest horizons of strategic planning. Public companies often focus on nearer-term objectives, including existing baseline products and emerging product lines, though longer-term bets can help to create significant longer-term value. Typically, private-equity firms more actively identify and emphasize strategic planning’s third horizon—including new markets and products—and diligently make tactical bets on it. For example, when PE firm Clayton Dubilier & Rice (CD&R) acquired PharMEDium for $900 million, in 2014, it hadn’t previously invested in outpatient care. But managers identified this as a major growth opportunity and made a calculated bet that paid off handsomely. CD&R ultimately sold the business for $2.6 billion.

Public companies could emulate much of this. Quarterly earnings can’t be ignored, but long-term shareholder value depends heavily on the generation of free cash and on the third horizon of future growth trajectories. Public companies should also explore the intensive 100-day planning process PE firms put in place after acquisitions, whether every other year or after the transition to a new leadership team.

Create disciplined business-unit strategies

A multibusiness company is the sum of its parts: if strategies for the underlying units aren’t focused and robust, neither will the overall picture. Success requires picking winners and backing them fully—something that often eludes public companies looking for the next new thing. Indeed, most of them pass only three out of ten tests of business-unit strategy.2Although financial theory suggests that capital should always be available for attractive investments, public companies that are constrained, for example, by their EPS commitments to Wall Street or by planned dividends often face intense competition for internal resources. Too often, they spread those resources thinly across business units. The right strategy means little if it isn’t fully resourced.

Private-equity firms don’t plan strategy around business units, but their investment theses for portfolio companies amount to the same thing. They’re a plan for investing across a portfolio of businesses, basing the allocation of capital on ROIC relative to risk, and explicit plans for creating incremental value in each business. PE firms do focus less than public ones on the strategic fit of companies in their portfolios—a tech company in a portfolio of heavy-industry businesses wouldn’t be a concern because they’re managed separately. But the portfolio-management objectives and disciplines ought to be similar. Both public companies and PE firms should evaluate a similar set of expansion options to assess market context, potential returns, and potential risks.

PE firms develop, monitor, and act upon performance metrics built around an investment thesis. That’s in sharp contrast with the one-size-fits-all metrics public companies often use to evaluate diverse business units—an approach that overlooks differences among them resulting from their position in the investment cycle, their prospective roles in the overall portfolio, and the different market and competitive contexts in which they operate. Although tailoring metrics to reflect these differences is hard work, it gives corporate management a much clearer picture of each unit’s progress.

Public companies could go further. Unlike PE firms, for example, they traditionally manage the balance sheets of a business unit against the needs of the enterprise as a whole. But should they always do so? Instead of divesting a slow-growing but cash-generating legacy business unit, should they have it issue its own nonrecourse debt? This would save the tax and transaction costs of divestiture, and potentially preserve additional upside. Would it make sense to bring outside capital into a high-risk emerging business unit—as Google X (now known as X) did for some of its nascent healthcare ventures? This approach would help investors to see the long-term value of such units, which would be more directly exposed to the discipline of the capital markets.

In addition, public companies could emulate the governance of private-equity firms at the business-unit level, where each portfolio company has its own board of directors. These boards are generally controlled at the firm level, but they are often supplemented by knowledgeable and senior outsiders with a meaningful equity stake. Since board activities focus on only one business unit, they can effectively surface, grasp, and debate the critical strategic, organizational, and operational issues it faces. While creating true governance boards for business units isn’t a realistic option for a public company, nothing prevents it from appointing advisory boards, with incentives based on the creation of value at the specific business units they oversee. In fact, freedom from formal governance responsibilities may make such boards more effective, allowing them to spend significant amounts of time on strategy and on developing management.

Finally, public companies could do more to compensate business-unit managers based on their own results. Compensation for private-equity fund managers typically reflects the results of the fund as a whole, but the pay of management teams at portfolio companies strictly reflects their own company’s value creation. This means that portfolio company executives in a lagging business can’t hope to be carried along by strong results at the fund level. It also means that executives in high-performing portfolio companies won’t be affected by the poor performance of entities over which they have no influence. This is a powerful motivator in both directions.

Big data and analytics

unduhan-23Few dispute that organizations have more data than ever at their disposal. But actually deriving meaningful insights from that data—and converting knowledge into action—is easier said than done. We spoke with six senior leaders from major organizations and asked them about the challenges and opportunities involved in adopting advanced analytics: Murli Buluswar, chief science officer at AIG; Vince Campisi, chief information officer at GE Software; Ash Gupta, chief risk officer at American Express; Zoher Karu, vice president of global customer optimization and data at eBay; Victor Nilson, senior vice president of big data at AT&T; and Ruben Sigala, chief analytics officer at Caesars Entertainment. An edited transcript of their comments follows.

Interview transcript

Challenges organizations face in adopting analytics

Murli Buluswar, chief science officer, AIG: The biggest challenge of making the evolution from a knowing culture to a learning culture—from a culture that largely depends on heuristics in decision making to a culture that is much more objective and data driven and embraces the power of data and technology—is really not the cost. Initially, it largely ends up being imagination and inertia.

What I have learned in my last few years is that the power of fear is quite tremendous in evolving oneself to think and act differently today, and to ask questions today that we weren’t asking about our roles before. And it’s that mind-set change—from an expert-based mind-set to one that is much more dynamic and much more learning oriented, as opposed to a fixed mind-set—that I think is fundamental to the sustainable health of any company, large, small, or medium.

Ruben Sigala, chief analytics officer, Caesars Entertainment: What we found challenging, and what I find in my discussions with a lot of my counterparts that is still a challenge, is finding the set of tools that enable organizations to efficiently generate value through the process. I hear about individual wins in certain applications, but having a more sort of cohesive ecosystem in which this is fully integrated is something that I think we are all struggling with, in part because it’s still very early days. Although we’ve been talking about it seemingly quite a bit over the past few years, the technology is still changing; the sources are still evolving.

Zoher Karu, vice president, global customer optimization and data, eBay: One of the biggest challenges is around data privacy and what is shared versus what is not shared. And my perspective on that is consumers are willing to share if there’s value returned. One-way sharing is not going to fly anymore. So how do we protect and how do we harness that information and become a partner with our consumers rather than kind of just a vendor for them?

Capturing impact from analytics

Ruben Sigala: You have to start with the charter of the organization. You have to be very specific about the aim of the function within the organization and how it’s intended to interact with the broader business. There are some organizations that start with a fairly focused view around support on traditional functions like marketing, pricing, and other specific areas. And then there are other organizations that take a much broader view of the business. I think you have to define that element first.

The investment patterns of cyclical companies

Companies that invest smartly when times are bad typically outperform peers.

When profits are high and funding is readily available, it’s easy for companies to invest in capital projects. But it’s also unwise. Not only do companies that do so reinforce cyclicality in profit growth, they also forgo opportunities to invest at lower prices when profits are down.1

It’s a hard cycle to break. Capital expenditures for the 500 largest US corporations over the past 45 years are highly correlated with prior-year profitability (exhibit). When corporate profits rise, capital expenditures typically go up as well in the following years. This relationship has been remarkably consistent over time—even in the recent years of quantitative easing—with a surprisingly strong correlation of 55 percent since 1972.

The findings correspond with our experience with companies in the energy, mining, transportation, and chemical sectors.2From a long-term perspective, they would be better off smoothing out their capital spending, building financial flexibility in good times so that they can spend more in bad. Companies that can time their capital spending and asset purchases to invest countercyclically typically outperform their peers.