An executive summary is a simplified, condensed version of a longer document. This is useful for business plans and financial reports. In a business plan the executive summary contains the purpose and goals of the business.
A business plan should be short and focused. It should evolve with your business and help you identify strengths weaknesses, opportunities and pitfalls. A good business plan will also make it easier for investors to understand your idea.
To write a business plan, start with these five points:
This is your elevator pitch. Describe your company, your product or service, who will buy your product, and your business goals.
Are you selling to consumers or businesses? Include details about your target audience, such as age, gender, social status, location and profession.
Opportunities and scope
How will you grow your business? If you plan to sell over the internet, for instance, plan how you’ll attract visitors to your site. If you plan to have a retail store, think about whether you’ll need to hire staff.
Listing your competition shows you’ve done your homework – investors like this. It also helps you understand what other businesses in your market are offering. Include your:
i. Direct competition: companies offering the same product or service as you
ii. Indirect competition: companies who are in the same market as you
iii. USP: your Unique Selling Proposition – what sets you apart from competitors.
This shows the costs involved in setting up and operating your business, including:
i. cost to make or buy products
ii. labour, material and manufacturing costs
iii. staff costs
iv. distribution and marketing costs
v. overhead costs – like rent and power if you have an office space or a shop.
‘Retention rate’ refers to the percentage of customers you’ve kept over a period of time. This might be a month, a quarter or a year. Retention rate is the opposite of your customer attrition, or churn rate.
There are three things you need to know to work out your retention rate:
How many customers you have at the start of the period you’re measuring.
How many customers you have at the end of that period.
How many new customers you’ve gained during that period.
To calculate your retention rate, use this equation:
((customers at end of the period - new customers) ÷ customers at start of the period) × 100
As an example, let’s say you have:
500 customers at the start of the month
530 customers at the end of the month
75 new customers gained during the month
((530 customers at end of the month - 75 new customers) ÷ 500 customers at the start of the month) × 100
= (455 ÷ 500) × 100
= 0.91 × 100
In this example, 455 of your original 500 customers, or 91% of them, are still using your product or service. Most businesses aim for a retention rate of 90% or higher.
Retention rate is a good way to measure how satisfied your customers are. This is important because loyal customers create more money for your business. Also, getting new customers costs a lot more than keeping existing ones. It pays to keep an eye on your customer retention rate – happy customers means better business.
There are no rules for how to start a business. All you need is an idea, a plan and some money to get it off the ground.
Write a business plan
This will help focus your idea. You need to identify target customers, research competitors, and plan how to grow your business.
Decide how to manage your finances
Keeping track of your money is an important part of running a business. Choosing the right accounting software and working with a bookkeeper or accountant is a great way to track your cash flow. It’s also important to open a separate business bank account to avoid mixing up personal and business finances.
Register your business
Depending on your business structure, you may need to register your business. The HMRC website has more detail for the requirements of each business entity.
Create your brand and logo
This will help make your business stand out. There are plenty of affordable design agencies online that can help you design something professional.
Build a website
This will help you market and possibly sell your product or service. You can make your own website using resources like Squarespace or Wordpress. You could also hire a professional to build a website from scratch.
Launch your business
It’s natural to feel underprepared – starting a business is a big journey. But doing your homework and using the tools that are right for you is a great way to hit the ground running.
Stock management is the process of managing the goods your business plans to sell. This involves acquiring, storing, organising and tracking those goods.
Stock management also involves keeping records of changes in your inventory over time. This helps you keep the right amount of each product or item in stock to keep up with customer demand.
Sales forecasting is another big part of stock management. If your inventory gets too low, you might not be able to keep up with your customers’ demands. But if your inventory is too high it will tie up your money and increase storage costs. You’ll also have to pay higher taxes because of the large value of your inventory.
It’s often useful to have safety stock, also known as buffer stock. This means keeping slightly more goods than you expect you’ll need. This is useful if demand is unusually high or if you need to exchange a faulty or damaged product.