Business Plans

Business plans - what are they and do we need 'em??

A business plan is a document that sets out exactly how an entrepreneur proposes to start a new business venture.

The plan allows us to:

• set clearly defined objectives
• identify steps we have to take to start trading...

Example time...

http://www.buzzfeed.com/mariasherm/music-festival-hacks-that-will-make-your-experience-way-more#yvopde

When it comes to the joys of you attending festivals, you want to make sure you are fully prepared otherwise you end up like this crazy bunch who didn't even bring a coat!!! 

Without creating a list of the necessities - we wouldn't know where to begin. By clearly identifying what actions need to be undertaken, we relieve some of the stress.

• The plan also helps give our business direction. We can very easily get caught up in the excitement of our new business, but sometimes we need to remind ourselves of our final aim.
• And of course, our plans should support us when trying to raise finance.

Several people are going to be interested in your business plan. The main ones are your banks and potential investors. Our suppliers however may also want to know more about our business to see if they support your idea and want to be involved. The plan may also help you gain trade credit (take the products today but pay later).

Ultimately - YOU should be regularly looking at your plan. You need to know where you're going and how you are getting there.

Benefits of a business plan

• Encourages a logical and detailed breakdown of the business
• Forces an entrepreneur to stop and think
• May identify a weakness or gap in the entrepreneur’s knowledge
• Helps secure funding
• Provides a framework
• Progress can be reviewed against plans

Limitations of a business plan

• Can be difficult to make accurate forecasts
• Difficult to turn paper plans into reality
• Opportunity cost of time spent planning - causes a delay to trading
• Can cost money if help is needed
• Can restrict creativity

Sources of information

As a new start-up, we may be a little unsure of certain areas of our business plan, but where on earth can we go for help? Below is just a few suggestions as to where we can gather the necessary info...

• Small business advisor
• Bank managers / Accountants
• Government agencies
• Library (they have books and stuff here!!!!)
• Internet
• Other businesses

Franchises

Okay so we are at a point now where we understand and know we have what it takes to be an entrepreneur, but one of the first questions we must consider is:

"Do we set up on our own or do we operate as a franchise?"

So what exactly is a franchise?

Without saying the word 'like'...

A franchise is when an established business, know as the franchisor, sells to another business or individual, known as the franchisee, the right to use their products, service, logo, branding etc. This is in exchange for a lump sum and royalties.

The franchisor provides:

• training
• equipment
• promotion and marketing tools

but most importantly...

• a well established brand name with tried and tested products

The amount a franchise will cost will vary depending on the business itself. Every organisation will have different administration costs. This will be calculated depending on the likely turnover of the business and the profit margin.

Do you know any franchises?

Generating and Protecting Ideas

We can put the maths to one side for now and focus on actually building a business. Where on earth do we get ideas from???

Personal experience and expertise --> 

• Jamie Oliver turned his education into his Business
• Simon Cowell may have little fashion sense but he certainly knows the music business - One Direction exist because of him

Brainstorming -->

• When your legal guardian decides you deserve a treat and spoils you with some Shloer, it would seem that we can come up with the most genius of inventions... this is how some businesses are born
• Suggest anything and everything until something is mentioned that has potential

The post-it was born because one 3M worker needed to mark a book without damaging it. 

Another had designed an adhesive that formed a sphere rather than a film.

BOOM!!! Post-it!

Stealing ideas from other countries --> USA adopted the coffee bar culture by introducing Starbucks

Inventing new original ideas --> Dyson did not invent the vacuum cleaner but they made it what it is today

Spotting trends --> Friendship bracelets became loom bands

We all know how this feels!!!

Market niche --> Finding the gap in the market that is yet to be exploited. Can you think of any market niches?

~~x~~

So we've come up with our incredible suggestions... now to stop the competition stealing our ideas!

There are three forms of intellectual property protection:

Trademark --> protects a business's distinguishing feature such as a logo or slogan

Copyright --> protects creative and artistic works such as literature or music

Patent --> legal protection that protects a new invention. A patent lasts 20 years and has to be renewed every 5th year.

We need to protect our business ideas so that we have a unique selling point. A USP makes us different from our competitors. If we have a USP it means we can charge more for our product and thus make more profit.

However, by protecting our idea, we are stopping others using the invention to further advancements in society. We may not be where we are today if people like Nikola Tesla had patented his work.

Calculating costs, revenues and profits

Now we like to mix things up in the Business department and your first taster of this was looking at the 'mathsey' side of the topic quite early on. We realised that one of the fundamental issues when looking at businesses is ensuring we cover our costs and aim to make a profit (whether this goes towards our new boat or a social good is another matter!)

So whatever our purpose or legal status, our main objective is to make a profit. Profit is the surplus of money left once all costs have been covered.

We can calculate profit in the following ways:

Profit = revenue - total costs

OR

Profit = revenue - (fixed + variable) costs

We've mentioned this idea of revenue but what exactly is revenue?

Revenue is the money made from sales (from our customers). There are other ways for a business to receive money but revenue just focuses on the money from sales. You may have heard it being called something else?

Income

Earnings

Takings?

Then we need to consider our costs. Costs have to be paid in order for the business to exist. If we aren't paying for raw materials then we don't have the ability to actually make a product!!!

There are two types of costs:

FIXED => these DO NOT change in relation to the level of production; e.g. rent, salaries

VARIABLE => these DO changes in relation to the level of production; e.g. wages, raw materials

We need to be aware of our finances in order to keep the business functioning. If we aren't making any money, we need to know why and how to resolve the issue. Being on top of our finances can also help us apply for further sources of finance, such as a loan.

Consider this...

What could a business do if it was making a loss?

Enterprise and Entrepreneurs

So at this point we have all started some actual Business work. Our focus for the AS is to look at entrepreneurs and start-up businesses, and this week we learnt exactly what an entrepreneur is.

An entrepreneur is someone who is willing to take a risk to start a new project or business venture. As an entrepreneur we have to understand the difference between calculated risks and stupid risks. Entrepreneurs have to know which risks are worth taking in order to build their businesses.

We then moved on to the idea of opportunity cost. Opportunity cost is the benefit that could have been gained from the next best alternative foregone. An entrepreneur has to make decisions and it is usually the case that money can only be spent once. The opportunity cost is what we are missing out on if we had taken the other option.

For you guys, your opportunity cost of coming to college is missing out on full-time work, or starting an apprenticeship.

So why would anyone want to become an entrepreneur? So far it just seems stressful and full of pressure! Watch the video by Maya Penn and see why she wanted to become an entrepreneur.

Then look at the infographic below and see what type of entrepreneur you would consider yourself to be.

Welcome!

Firstly, a huge welcome to all the new students embarking on the AS Business Course. You have made the first step to shaping your career and designing a future that suits you.

We are a dedicated team that are here to coach you through your AS experience.

This blog is a new idea that aims to recap the topics that you will cover in class, as well as any additional links or materials that we think may be useful for you.

Our aim is to update the blog at least once a week - we're staying optimistic that this will happen!!!!

For now... peace out... good luck... be inspirational!