If you are about to start your first business the prospect of writing an accurate business plan can feel downright scary but a well considered plan lets you spend money on paper rather than from your wallet and that is more than worth the effort. A business plan will also show you whether the model you have chosen will reap adequate rewards to keep you in the style to which you have become accustomed or whether you should maybe consider staying in your day job until you have got your venture off the ground.
If you plan to raise investment for your business your bank or potential investor will want to see a business plan that is ambitious but consistent and that shows sensible amounts of money being spent on items and services that will help your business to grow. Being frugal and asking for small amounts that might just get you by might feel honourable but it is not what an investor wants to see.
If this business will be your total means of support the place to start writing your plan is at the end. Make a list of all your financial commitments so that you know how much you personally need to earn in your first year to make the new enterprise viable for you. Translated backwards, this figure will demonstrate how much product you need to make and to sell, how many doors you need to open in order to sell that volume. With a better idea of the quantity of product you will need to make, you can estimate how much space you need in your workshop both for manufacture and for storage. This back to front approach prevents the commonly experienced scenario of working your socks off for a year only to find at the end of it that you haven’t made enough money to cover the mortgage.
If you are a solopreneur who is planning on doing everything yourself (something I vehemently advise against) then when thinking around production assume that your production activities will take place just one or maximum two days a week. Remember, it takes virtually the same time to make and pour one kilo of soap as it does to make fifty kilos….and there is less washing up.
To grow your business you will need the rest of the time for selling, marketing, record keeping and building your brand. This approach will also give you a better idea of your required batch sizes and the equipment you will need to make them.
Filling in a sales forecast with no past history to go on is also a pretty daunting prospect but will become reality if you get real about this. If you were planning to sell to say, ‘gift stores’ don’t be tempted to make a broad sweep by jotting down a figure you think this sector will spend with you. Make a list of exactly which stores you plan to approach and map them on to a projected cashflow forecast. This will not only help you determine how much you will have coming in and when but it will also set you clear targets to focus on. A cashflow forecast can be a moveable feast but it’s a great starting point.
It goes without saying that your plan needs to show accurate costings for your products. To come up with a ballpark selling price take the cost of your ingredients and production labour (cost in your own time at the rate you would expect to pay someone else for the same job) and add 70%. This will give you your wholesale price. Your retail price, if you are planning to sell both to shops and from a website) should be at least double that figure plus VAT. Your overheads, marketing and administrative costs will need to come out of that 70% but these will reduce proportionally as you start to sell in larger volumes.
Finally, bear in mind that good business is a place where everybody makes money and by everyone I mean you, your retailers and your investors so if you are going to take a leap and do this your best chance of success is to think big rather than small. The key is to think through the detail, know where you are going, thoroughly research your market and to have a clear view around how you are going to make your sales.