Kick start document - Introduction

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					Campus Enterprise Opportunities
    Kick-start programme




           Campus Enterprise
              Opportunities
            T: 0116 2078914
           E: ceo@dmu.ac.uk
           W: dmu.ac.uk/ceo
       Campus Enterprise Opportunities
             T: 0116 2078914
            E: ceo@dmu.ac.uk
            W: dmu.ac.uk/ceo
Introduction

This document will, by the end of the process, enable you to describe your
business, its objectives, its strategies and the market that it is in.

The real value of going through this lies in the discipline of thinking about your
business in a systematic way. The act of planning will help you think things
through in detail, study and research when you are not sure of the facts, and
look at your ideas critically.

This document will help you spot potential pitfalls with your business idea
before they happen, focus your development efforts and allow you to measure
your success when you finally launch your idea.




                         Campus Enterprise Opportunities
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Executive summary

A one-pager on what your idea is all about. This is the bit they will definitely
read so grab your opportunity and get them excited.

Think of it as an „Elevator Pitch‟, because if you can't explain your idea to
someone in one minute climbing from the ground to fifth floor your target will
be out of the doors and gone.

One of the most important things to consider here is if it's money you‟re after,
tell them how much you need, what you need it for and what's in it for them.

Two other important aspects for the executive summary are:

A Sales Summary – a clear description of what the business will offer your
clients/customers, focusing on your core products/services and their benefits

A credible description of what your product/service is, how your idea works
and what it will do for your clients/customers that will make it worth paying for.
Keep this short and to the point. Investors want to know that your business is
possible, deliverable, offers saleable benefits with profits, but without an
unreasonable risk.




                         Campus Enterprise Opportunities
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Market research

Your business venture should start with careful, systematic research. It is very
dangerous to simply assume that you already know about your intended
market.

There are two kinds of research that you should carry out.
1. Primary: Gathering your own data, ie focus group interviews,
   questionnaires
2. Secondary: Using previously published information, ie public libraries,
   chambers of commerce, government agencies (such as HMSO, Customs
   and Excise, National Statistics office)

The market opportunity

The purpose of this section is to explain what the market is, for your business,
how large it is and what the future holds.
 Points to consider are:
   1. The size of the market within your industry, UK and/or overseas
   2. Competition within the industry (who are the main movers – nationally
      and regionally)
   3. Future prospects for the industry
   4. Is the total market growing or shrinking?
   5. Is the market prone to seasonality?
   6. Is the technology on which the market is based under threat?

Information for this can be sourced from on-line databases, such as Mintel
and Keynote, both available in the De Montfort University library.

If you are looking for statistical information about consumer habits the Office
of National Statistics (ONS) may be a useful resource. It provides information
about the UK‟s population in terms of demographic data and spending
patterns www.statistics.gov.uk




                        Campus Enterprise Opportunities
                              T: 0116 2078914
                             E: ceo@dmu.ac.uk
                             W: dmu.ac.uk/ceo
The business

In this part you should set out, in detail, your vision for your new business.

You should think about and include the following:
   1. When you started / intend to start
   2. Type of business
   3. Company goals and objectives
   4. Your personal background, skills and experiences

You should also describe in depth your product, service, or product plus
service. This must include any factors that you feel will give you an added
advantage or a disadvantage relative to your competitors

It is here that you should detail your Unique Selling Proposition (USP) – the
areas of your product/service that make you unique, or preferred, to your
customers/competition.

A point worth noting is that you should avoid having a USP based on lower
costs/prices, unless your advantage here is very major and likely to be
durable.

NB – Please remember that the person reading this document may not understand your
business so it’s important to avoid jargon and to explain any technical/specific terms.




                          Campus Enterprise Opportunities
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Business strategy

A SWOT analysis is a method for describing your business (or your business
proposition) in terms of those factors that have the most impact.

Essentially you nominate the Strengths and Weaknesses of the business (its
internal resources and capabilities), then you identify the Opportunities and
Threats it faces (factors external to the organisation). The Strengths and
Weaknesses should come from section 2 as they are specific to you and your
business idea and the Opportunities and Threats should originate from
section 1 as they are external to you and your business.

Strengths – List all the strengths of your company. Why should you succeed?
What do you do well? Why do customers say they enjoy doing business with
you? What distinct advantages does your company offer?

Weaknesses – A weakness is something that seriously impedes a firm‟s
effective performance, a limitation or deficiency in resource, skills, or
capabilities. What could be improved about the business – markets, staffing,
management, control? What stumbling blocks do you continue to encounter?
What does your company do that can be improved? What should be avoided?
What do your competitors do better than you? Don‟t try to disguise
weaknesses, and don‟t merely list errors, omissions and mistakes.

Opportunities – Where are the openings for your business? What customer
needs are not being met by your competitors?

Threats – Threats are key impediments to the firm‟s current or desired
position. What are the more obvious obstacles in your way, both actual and
potential?

The aim of a SWOT analysis is to identify the critical issues in any situation
and to organise them in a way that enables you to come up with a sound
strategic approach. This should enable you to:
 Build on strengths
 Minimise weaknesses
 Seize opportunities
 Counter threats.

   Indeed, you might see things in terms of answers to these four questions:
    How can strengths be used to take advantage of opportunities?
   How can strengths be used to avoid or defuse threats?
   How can weaknesses be overcome to take advantage of opportunities?
   How can weaknesses be overcome to counteract or minimise threats?




                        Campus Enterprise Opportunities
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Marketing and sales

Within this section you should describe the specific activities you intend to use
to promote, sell and distribute your products/services. It is often the weakest
section of anyone‟s business idea. A strong marketing and sales section
means that you have a clear idea of how you will get your products/services to
market.

It is important to remember that the focus of marketing is people. The term
‟target market‟ is used because that market is the „Bull‟s eye‟ at which you aim
your marketing efforts.

1. People

Your primary and secondary target markets need to be identified here. To
segment the market use the following three areas:
 Psychographics – your potential customers‟ lifestyle preferences
 Geographics – where your customers are, ie locally, regionally, nationally
   or internationally
 Demographics – measurable statistics about your potential customers, ie
   age, gender, income level, occupation, education.

NB – try not to alienate any elements of the market that do not lie within your target markets.

2. Price

It is important to note that for many small businesses, having the lowest price
is not always the best policy. Cheap goods or services can be looked on as
inferior, it also robs you of important profit margin, customers may not care as
much about price as you think and competitors can just undercut you anyway.
You should be able to identify the correct pricing, service and quality areas
from your competitive analysis.

Examples of two pricing strategies are:

    Price Skimming – The practice of „price skimming‟ involves charging a
    relatively high price for a short time where a new, innovative, or much-
    improved product is launched onto a market

    Penetration pricing – Involves the setting of lower, rather than higher
    prices in order to achieve a large, if not dominant market share. This
    strategy is most often used by businesses wishing to enter a new market
    or build on a relatively small market share.




                             Campus Enterprise Opportunities
                                   T: 0116 2078914
                                  E: ceo@dmu.ac.uk
                                  W: dmu.ac.uk/ceo
3. Promotion

In this section of marketing you should identify and consider how you are
going to get your message across to your potential customers.

There are five steps to this:

   1. Determine the objectives
                   - what do you want to achieve
                   - Make objectives SMARRTT
   2. Identify the target audience (this can be taken from the people section
      above)
   3. Select the media
                     - eg Flyers, posters, TV, Radio, Internet
   4. Design the message
                   - Make any text benefit-orientated
                   - Make sure that the text and language you use is
                       appropriate for the target audience
   5. Feedback
                   - To monitor the success of your promotion it is vital to
                       obtain feedback from your customers.

Think again about seasonal trends and any other key promotional periods.

If you are considering word of mouth then how will you generate this?

You also need to identify the cost of this promotional work and where this
money will come from.

It is also worth considering any possible methods of networking as you will
find that networking is one of the best ways of creating word of mouth for your
business.




                         Campus Enterprise Opportunities
                               T: 0116 2078914
                              E: ceo@dmu.ac.uk
                              W: dmu.ac.uk/ceo
Sales

Now that you have laid down all of the details of your business – its
customers, its market, its pricing – its now time to make some predictions.

The sales forecast should be based upon any historical sales, your marketing
strategy and your primary and secondary market research.

With your sales forecast you may wish to form upper and lower estimates,
then use the average.

Questions to ask yourself:
 How many potential clients/customers do you really have?
 How much of your product/service are they likely to buy?
  Be realistic
 How does this breakdown on a month-by-month basis?

Below is an example of a sales forecast table. You should fill in your predicted
sales on a month-by-month basis allowing for any predicted seasonal trends
and possible business growth.

Month      Sales a   Sales     Sales      Total                 Month          Cumulative
                                                                                monthly
                       b         c        month

   1
   2
   3
   4
   5
   6
   7
   8
   9
  10
  11
  12
 YEAR




                        Campus Enterprise Opportunities
                              T: 0116 2078914
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                             W: dmu.ac.uk/ceo
Operational plan

Production

How and where will your products/services be produced?

If you are planning to use a specific location:
 How much space will you need
 Type of building
 Power and utilities
 Access
 Occupation Expenses – rent, insurance.


Explain your methods of:
 Production techniques and costs
 Quality control
 Customer Service.

Location

How and where will you sell your products and services?

If you are planning to use a specific location:
 How much space will you need
 Type of building
 Power and utilities
 Access
 Occupation Expenses – rent, insurance




                         Campus Enterprise Opportunities
                               T: 0116 2078914
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   The Financial Plan

   Start up costs

   You will have many expenses before you even begin operating your business.
   It is important to estimate these expenses accurately and then plan where you
   will get sufficient capital. This is a research project and the more thorough
   your research efforts, the less chance you will leave out important expenses
   or underestimate them.

   Even with the best research, opening a new business usually costs more than
   you anticipate. There are two ways to make allowances for surprise
   expenses. The first is to add a little “padding” to each item in the budget. The
   problem with that approach, however, is that it destroys the accuracy of your
   plan. The second approach is to add a separate line item, which is called
   Contingencies and add this as a different percentage, to each separate item
   of cost.

   Explain your research and how you arrived at your forecasts of expenses.
   Give sources, amounts, and terms of proposed loans.


Start-up costs

Business rent
Business rates
Water rates
Light/heat/power
New equipment
Business insurance
Travel and vehicle costs
Telephone and postage
Printing and stationery
Advertising and promotions
Accountancy and professional fees
Development and training
Bank charges




                              Campus Enterprise Opportunities
                                    T: 0116 2078914
                                   E: ceo@dmu.ac.uk
                                   W: dmu.ac.uk/ceo
12 Month profit and loss projection

Many business owners think of this as the centrepiece of their plan. This is
where you put it all together in numbers and get an idea of what it will take to
make a profit and be successful.

Sales may be great, but do your statistics show you are making a profit? Just
because your trendy T-shirts are selling faster than you can churn them out
doesn‟t mean that you‟re going to make any money at the end. Your reader
will go over your profit and loss forecast with a fine toothcomb. So be realistic
with your number crunching, and if you make any assumptions, make sure
your reader knows it.

Your sales projections will come from a 12 month sales forecast in which you
forecast sales, cost of goods sold, expenses, and profit month-by-month for
one year.

Profit projections should be accompanied by a narrative explaining the major
assumptions used to estimate company income and expenses. Keep careful
notes on your research and assumptions, so you can explain them later if
necessary, and also so that you can go back to your sources when it is time to
revise your plan.

Sales

Insert your sales figures on a month-by-month basis, using the accounting
period you expect to send out your invoices. Remember these figures should
reflect when you think you will actually do the business. If you‟re selling
designer Xmas hats you would expect more sales in December than August.

Direct sales

Don‟t leave out any costs you have. Remember, you‟re estimating the cost of
everything you need to sell your product/service. If you‟re a 3D multimedia
designer you should include any essential software, hardware, printing, etc
you need to buy in to create your fabulous commissioned designs. If in doubt,
do not leave it out.

Expenses/overheads

Make sure you cover any fixed and variable expenses you have over the
accounting year. These might include:
Rents and rates. Show how much you‟ll be paying each month. If you pay
your rent/rates annually, you‟ll need to divide it up evenly across each month

Utilities. How much are you likely to pay for water, heating, lighting, gas, etc
each month?


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Insurance. Chances are you‟ll need a few of these depending on what your
idea is, like fire or liability insurance, life insurance, employee insurance. How
much will these be?

Drawings. How much are you going to pay yourself each month? You will
need something to live on, but don‟t get carried away.

Wages and salaries. How much will you pay your staff? You‟ll need to include
National Insurance and any other staff costs.

Interest. If you‟re borrowing cash to make your idea work, what are your
interest payments each month?

That covers the basics of a profit and loss forecast. Other things you should
account for include your advertising spend, logo design, etc. Remember,
developing a profit and loss forecast is a crucial part of your plan. It shows
that your idea works where it really counts – profit making – and isn‟t just
another black hole to pour money in to.

To work out your gross profit, take away your cost of sales from your sales.

To work out your net profit, after covering your overheads, take away your
total expenses from your gross profit above.




                         Campus Enterprise Opportunities
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SALES INCOME                           ANNUAL

Sales a.                                                    Exclude any VAT from sales
Sales b.
Sales c.

TOTAL SALES INCOME        (A)

DIRECT COSTS
Cost of materials sold/used                                 Adjust for stock and unfinished work
Direct wages and National Insurance
Subcontract charges
Packing Materials and carriage
charges

TOTAL DIRECT COSTS        (B)                               Exclude VAT if business is VAT
                                                            registered.
GROSS PROFIT ( A-B = C )                                    % G. P. Margin = GROSS
                                                            PROFIT x 100
                                                            SALES



OVERHEADS

Staff salaries/wages and National                           Ltd Cos – include Directors’ salaries
Insurance
Business rent
Uniform business rates
Water rates
Light/heat/power
Repairs and renewals
Business insurance
Travel and vehicle costs                                    Include motor insurance.
Telephone and postage
Printing and stationery
Advertising and promotions
Accountancy and professional fees
Development and training
Bank charges
Interest charges – Bank/Finance                             Do not include any CAPITAL
                                                            repaid.
General expenditure
Depreciation charge

TOTAL OVERHEAD (D)                                          Exclude VAT if business is VAT
                                                            registered

NET PROFIT/(LOSS)     ( C-D )

DRAWINGS (Sole Trader/Partners)                             Drawings will be subject to tax at a
                                                            later date. Allow for Class 2 N.I.




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Projected cash flow
If the profit projection is the heart of your business plan, then cash flow is the
blood. Businesses fail because at some point they cannot pay their bills.
Every part of your business plan is important, but none of it means a thing if
you run out of cash.

The point of this worksheet is to plan how much you need before startup, for
preliminary expenses, operating expenses, and reserves. It will enable you to
foresee shortages in time to do something about them.

For each item, determine when you realistically expect to receive cash (for
sales) or when you will actually have to make a payment (for expense items)

Your cash flow will show you whether your working capital is adequate.
Clearly, if your projected cash balance ever goes negative, you will need more
startup capital. This plan will also predict just when and how much you will
need to borrow. Allow a percentage contingency in your borrowing to cover
any unforeseen costs.

Besides whether or not your idea will turn a good profit, they want to know
when cash will come in and when it will go out (known as your Cash Flow
Forecast). Just because you invoiced a business in April, doesn‟t mean you‟ll
be paid in April. Chances are you won‟t get paid until May, or June… if not
later! So you need to show how much you need to keep afloat until the
cheques start rolling in and that you‟ve got the cash to cover your costs.

Sales and Income

Sales/Income. When will you be paid for your time or product/service – not
when you sent out your invoice – these can be quite far apart. Include all cash
that comes in from all sources.

Equipment and Capital. Chances are you‟ll have to buy some equipment for
your idea, like a new computer. Whether you borrow the cash or use your own
include the money as a receipt.

Expenses

   Record when you expect to pay someone for any work they do for you.
    Remember, credit terms are typically 30 days

For each month, you can work out how good or bad your cash flow is. By
taking what you have at the beginning of the month – your opening balance –
add all the cash you have coming in for that month. Then take away all your
expenses for the same month – you now have your closing balance. Do this
for every month of the year and then you‟ll have what‟s known as your year
end closing balance. Now you‟ll know whether or not you are bringing in more


                         Campus Enterprise Opportunities
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money than you are shelling out and you‟ll be able to work out exactly what
cash you need to make your idea work.

Explain your major assumptions; especially, those which make the cash flow
differ from the Profit and Loss Projection. For example: If you make a sale in
month one, when do you actually collect the cash?




                        Campus Enterprise Opportunities
                              T: 0116 2078914
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        RECEIPTS             MONTH   MONTH     MONTH    MONTH    MONT   MONTH   TOTAL
                                                                 H
                               1        2        3         4       5      6
Sales a.
Sales b
Sales c.

Capital
Other Business Income
VAT Output

        TOTAL RECEIPTS

        PAYMENTS
Materials
Subcontract charges
Packing and carriage chgs.
Wages (employees)
PAYE and NI
Personal drawings
Business rent
UB rates and water rates
Light/Heat/Power
Repairs and renewals
Business insurance
Travel and vehicle costs
Telephone and postage
Printing and stationery
Advertising/Promotions
Accountancy/Prof. fees
Development and training
Bank charges O/draft
Bank repayment inc.capital
Finance     “           “
General expenditure
Fixed Assets purchased

VAT Input
VAT Balance(Output-input)

       TOTAL PAYMENTS



MONTHLY NET INFLOW/
(OUTFLOW )

CUMULATIVE MONTHLY
INFLOW/(OUTFLOW)




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Management Team

Within this section you should identify the staffing structure of your business
and any key personnel. You should include for each key individual the
following information:
     Name
     Age
     Role
     Experience
     Qualifications
     Key Skills
     Training Requirements

You should also consider who will be your
         a. Business Adviser
         b. Accountant
         c. Bank Manager
         d. Solicitor
         e. Auditor




                        Campus Enterprise Opportunities
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                             E: ceo@dmu.ac.uk
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Final Tips

You‟ve really worked hard on it, but is it any good?

Have you worked out where things could go pear shaped and told readers
how you will deal with them?

Have you covered the „What if‟s‟?

Have you been realistic or really pushed the boat out?

Find out before you approach a potential investor, so that you don‟t fall at the
1st hurdle. Show your friends, parents and relatives to get honest opinions.




                         Campus Enterprise Opportunities
                               T: 0116 2078914
                              E: ceo@dmu.ac.uk
                              W: dmu.ac.uk/ceo

				
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