Article / Guide

Starting a new business is tough, but by planning effectively and making good decisions it has the potential be less stressful.

Having been through the process ourselves, and experienced many of the same problems that any new start-up is likely to face, we've written this article to hopefully give some useful advice and share our experiences.

Photo by Mike Kononov

16/Apr/20

How did we get here?

Some might say starting a new design consultancy during a global pandemic is a bad idea.

Something I've learned over my relatively short lifetime is that it can often be tough trying to do the things we’ve set out and planned for. Be it starting university at the start of a recession, or getting turned away from jobs and funding, barriers to progression come in many forms. Take the current scenario for example, at the time of writing the world is currently in the formative stages of what could be said is the biggest global crisis since 1939. The potential impacts will likely be far reaching; encompassing everything from the collapse of economies, to the death of myself, close friends, family members, and unknown numbers of people around the world. The range of possible outcomes are truly mind-boggling; and if anything, there must also be some small hope that things may change for the better once it’s all through. An uncertain time to start a new business for sure.

What this drives home to me is something that I think is important to understand; the future is always uncertain, and the decisions we make in life are bound by the unpredictable nature of the world we live in. It doesn't matter how well we make a plan, numerous ways of making our goals harder will always go unseen. This does not mean we should give up however, and in my opinion its quite the opposite. It’s only by facing these adversities armed with our plans that we ever get anywhere. We’re by no means the first to face unfavourable odds, and we’ll be by no means the last.

So, with the light-hearted preamble out of the way, we can finally get on to the subject of the article. On the themes of planning - and more specifically ‘our journey’, told through my own experiences of planning for, and implementing our business plan. Hopefully this formula will work, as from knowing myself, we’re not always that engaged in each other’s ‘journeys’, and the over-abundance of depersonalised SEO based business articles rightly promotes a TLDR response.

Writing a Business Plan

Writing a good business plan is hard, it takes a lot of work, and will likely be the source of much frustration. It is however absolutely essential if you want to show that you are serious about setting up a new company and have considered how it will work. This may sounds like it doesn’t need to be said, but you’d be amazed how many clients I’ve worked with that are prepared to spend thousands on an idea that; a) hasn’t been near a potential customer, and b) has no financial plan to show how a profit can be made.

I don’t subscribe to the idea of the ‘One-Page Business Plan’ (as is sometimes suggested, and may well be useful in some instances), and at minimum should be done using a decent online template. There are many guides out there which describe the structure of a good business plan and what you should explore in each. A fine example that I found helpful was by Andrea Wahbe at Intuit Inc. Alternatively, if you’ve read this far and would like some information about what worked for our plan, please feel free to get in touch.

Inherently these documents can get quite unwieldy, and getting things in the correct order at the start definitely helps keep things move more smoothly when working through. From my own experience, quite a long time was spent (wasted) arranged and re-arranging the structure. This was most likely due to a mild form of OCD, but also having everything in the correct order helped make later sections appear more logical, with key decisions informed.

Often, it can feel like there is either something missing or could be covered in greater detail. My advice would be that if you find yourself in this situation you are probably pretty close to being ready to start putting the plan into action. Something that’s easily forgettable at this stage is that the plan should not be considered a ’dead document’. What I mean by this is that it should always evolving, mainly because; a) a lot of the content is likely wrong and will need to be updated once you gain experience, and b) you will want to update the plan once you start to grow and develop new strategies to do so.

So, what should the business plan ultimately explain? To answer this, I’ve stolen (re-purposed) a description I recently read: ‘A business plan defines the organisation’s market and customers; its products and services; its activities processes and infrastructure; the value it creates and its financial viability. Ultimately the main aim of any business plan is to flush out the detail of how the company will work, and also give you (and investors) confidence it can make money. As there are literally countless online guides describing what to write in a plan, I’ve written more about some of the main questions you’ll be trying to answer.

How will the business organisation work?

Quite simply what the legal structure of your business will be (limited company, non-profit, co-operative, etc.), the roles of the people involved, and how they will work together. Depending on where you look, this may be described as operations or management or some combination of these. For our product design consultancy, we explained in detail;

•  The co-operative nature of the business, how new employees become members, and the roles and responsibilities of members within the business.

•  The different development teams across product design, mechanical engineering, graphic design/UI, and market research. Specifically, key responsibilities and the ways in which each specialisation supports new product development projects.

•  The external supply-chain we use to support design projects, for us this was around IP management, electronic development, prototyping and contract manufacturing, amongst others.

Of course, the information you present will be highly specific to your product or service. In our example we combined several of the sections typically suggested as this felt more efficient, but see what works.

What is my product or service and why do people need it?

Answering this allows you to question the unique features of your product/service and develop them to align with the customer needs established in your market research. Essentially, this means you need to know; a) who your customers are, and b) the problems/needs that could be addressed better.

The first point can typically be established by finding some market specific demographic data. A Google trawl looking at your sector of interest will often reveal free reports compiled by competitors or industry experts to justify the profiles you create. If the demographic is UK specific, the ONS can also be a useful place to look for more general population data.

Understanding customer needs is more difficult, and in some cases can require large amounts of resources to find the people you need to speak to. If you don’t have access to this however, there are several other options to look at:

Create a strategy and go and speak to the customers you’ve identified. Plan who you want to talk to, what you want to ask them, and what you want to try and find out. When doing these activities, it’s important to try and speak to a wide variety of different people to get a broad range of views - from men to women, experts and laymen, you will build a much better picture of the people involved if you get everyone’s perspectives.

Depending on your area of interest there are sometimes relevant market research articles freely available from Deloitte, IDEO, McKinsey & Company and Nesta. These are some of really great market research companies, so any glean-able information can often give some market insight, or at least direct further research.

By following these approaches, you will hopefully start to see some common themes form around the information you’ve gathered. These might be things such as ‘size’, ‘safety’ or ‘impairment’, and will be grouped around what’s being said in the responses received. Typically, the explanation of your themes will highlight the main customer needs that your product should be meeting.

If your product or service has yet to be defined, you can leverage these themes to generate insights in the form of statements that describe why they’re important to the customer. Taking impairment as an example, a statement might be made such as; ‘A large proportion of users suffer from physical and visual impairments which makes product X difficult to use.’ This process should be done many times for each theme, with the most relevant statements aligned to your business goals used to ask questions around how you could solve that particular challenge. For example, using the insight statement above we could ask; ‘How might we make product X suitable for users with impairments?’. The answers to this question are what would yield the products and features that we then develop and test with our customers.

Following our design process, these activities are a matter of course before touching pen to paper. Whilst the level of insight you can gain will always change (depending on budgets/industries), being able to put yourself in the mindset of the people who will be using your products is invaluable.

Who are my competitors and how can I do better?

It’s obviously key to find out who’s already out there and what they are offering, hopefully so you can steal some of their market share. This is also a great time to reflect on what you’ve found out in your market research, to see if the needs of your customers are currently being met and how effectively.

The challenge here is where to limit the scope and quantity of competitors to research. For any new business, there will likely be hundreds of people operating in the same area, each offering various products/services, and all at different levels. Start by making a listing out the top twenty or so on Google and look for ways of categorising them by level/ability/themes and also location. Next, you’ll need to start capturing any relevant market information in order to gauge how successful they are; this could be in the form of business assets, number of employees, and anything else that may be relevant to your industry (see Company Check  for company house data).

Next get onto their website, check how well the information is presented, what their marketing messages are, and what products/services they offer that are similar or different to yours. Use this opportunity to get a good idea as to how you may want to present yourself using what you think works and doesn’t work well. A good way of doing this initially is to set-up a spreadsheet and start pasting key information before formalising into your plan, this saved us quite a bit of time by getting everything in one place and was a worthwhile step.

Once you’ve gathered as much information as you think is necessary to form a decent picture of each competitor, something needs to be written about them in the plan. What worked for us was to write a short review detailing several different aspects:

What you think is works and doesn’t work about the products/services they offer – specifically aligned with what you’ve identified as the needs of your customers.

How they market their services and the size of their online presence.

Their level of presentation and the quality of the products/services they offer.

Capturing these key points will hopefully give you a decent picture of who is doing what, how successfully, and where you could try to position yourself when competing against them. To finish things off write a summary of all your findings and consolidate your objectives for the new business. A general SWOT analysis is a good tool for this, and will help you flush out any service gaps you may find.

For example, when looking into the product design consultancy space we found there was a clear split between two types of consultancy:

•  The ‘doing’ agency; A consultancy that focuses on the services they provide and not any specific value propositions.

•  The ‘stand-out’ agency; A consultancy that promotes a broader industry perspective and a more insight driven process.

When looking at the doing category more closely, we found that the most successful companies tended to specialise in specific areas, such as medical design or other industries. This didn’t always translate into an effective presentation of work or services however, with many projects lacking any description of the commercial/user benefits of products developed (a key established customer need).

Stand-out agencies performed much better in this regard, and were overall more profitable (from current assets). The clients they worked with tended to be larger and the projects more challenging and diverse.

A general summary of some of the insights we discovered in our research, and hopefully they highlight the value of doing these kinds of activities somewhat. The key point to take away from our experience is, it is only by looking into these areas in detail that we were able to define both our current position and the strategies for where we want to go in the future.

How will the business make money?

I’m won't go into the detail of how to calculate the costs to deliver individual products and services, as there are already many guides out there for that cover this. What I will say is that, unless you have already tested your business model, this is probably one of the most difficult questions to answer accurately. For example, figuring out the costs to deliver your product or service can be quite straightforward, but how then to define your revenue? For a service company, a calculation can be made based on your available hours multiplied by hourly rate (with some reasonable assumptions for flexibility). When considering the sale of a new product, these are normally based on an estimated ramping up of quantity sold during the formative years of operation, and could likely be derived from a percentage steal of market share.

What should be apparent is the fact that assumptions and estimates are used and rarely accurate, especially so when extrapolated years into the future. Take the weather predictions as an example, we can predict this with 50% accuracy ten days from today, and here we know all the variables to plug into the supercomputers. Little hope then of us predicting our sales forecasts in year 3 with an untested product or service. What this should serve to highlight is that an awareness of risk is important, and suitable fall-back strategies and financial buffers need be considered should sales not meet expectations.

The key point here is to be realistic; it will naturally take time for any new business to start selling their products and services irrespective of how well they market or position themselves. I’ve seen many plans that overestimate sales during the formative years, predicting vast amounts of profit with little account for how the revenue will be created. This massively reduces the credibility of a plan and should always be avoided.

The Executive Summary

It’s unlikely that even the most invested individual will completely read a 20,000 word, 80-page business plan they didn’t write, this is understandable. To this end, a good executive summary is worth the time, and should direct readers from the key headline information to the sections where more detail is available.

 

Putting it into Action

There’s an absolute mountain of things to do when setting up a business, and with that in mind a good old-fashioned list is definitely your friend. I’ve listed out some of the key steps below with some stories of my own experiences.

Setting up a Ltd company

If you Google this term you will likely find many companies offering to do this on your behalf for a fee. My advice would be to spend the £15 on something nicer and simply log onto the Government Gateway and do it yourself. The process is extremely simple and everything is quite clearly explained online. Something to bear in mind is that you will have to select a name that has not already been taken, there is however a very simple search service available when filling in the paperwork.

Another aspect to this process is that of the registered business address. There are several options available here, and you can simply use your home address temporarily if you don’t mind the occasional sales letter. Alternatively, if you have yet to find an office you can effectively rent one through a variety of different providers where they will forward your mail from Companies House.

Opening a Business Account

You’ll certainly want to separate your business dealings with your personal finances, so have a look around for a decent business bank account. Most will offer no fees for the first year or so of operation and may also throw in some other useful freebies. The process isn’t instant however, and the application process may take a week or more.

Getting Finance

This is probably one of the most challenging and talked about parts of starting a new company. Whilst there are several options available, each will depend on meeting certain criteria to obtain funds.

The Government

The UK government operates the Startup loans scheme which will match you to a provider for loans of up to £25,000. There is a lengthy process involved and you will be required to provide a business plan that may go through further development before the loan is secured.

Naturally as this is a government backed scheme it is highly bureaucratic and you may fall foul of the acceptance criteria, so read the small print.

The Bank

As a start-up, the bank will not offer you money unless you are generating proven revenue. This is at least from my experience.

Crowdfunding

There are many forms of crowdfunding options available, and each will be more suitable depending upon your circumstances. If you’re a new start-up with a solid business plan, you may be placed to access equity crowdfunding from platforms such as the Angel Investment Network or Crowdcube.

If you plan to develop a prototype and campaign using your own savings, firstly please get in touch! Then platforms such as Kickstarter and Indiegogo become good options.

As an alternative to bank loans, finance can be obtained through P2P platforms such as Funding Circle. It’s worth noting however that this option is only for established businesses with revenue.

Personal Loans

Whilst you won’t find a personal loan designed for starting a new business, if you’ve got a good credit history you’d be surprised what a home improvement loan could be used for.

Getting an accountant

A necessary step that takes much of the seasonal financial complexity out of your hands. Have a look around for someone local and go in for a meeting armed with your business plan. For day to day accounting I’d use something like Xero, it links directly to your business account and makes bookkeeping very straightforward.

Setting up a Website and SEO

If you can do it yourself do it, you’ll save a lot of money. We used a program called Adobe Muse (now obsolete) but there are countless online providers for this service available. Be forewarned though, once you start searching for anything to do with websites, you’ll be bombarded with Wix adverts on YouTube, thank the internet for Adblocker.

Whilst setting up the website may be somewhat straightforward, getting your webpage to sit near the top of Google is another story. External providers such as Wix offer services to help with this, but if you’re hosting your own site there’s quite a bit more involved! Essentially you need to make sure the text on your site is well written and uses the language (keywords) you want to be found through the search engine. Other points to make are that the company also needs to have links in and out to other sites such as LinkedIn, Facebook and Yell to name but a few. Finally, you’ll need a Google My Business page so that people can find you locally for your services.

I’m by no means an expert in this area and there really is no substitute for external help in these areas. There are also countless guides and videos on this subject online as well, so the best advice I could give is to get stuck into some additional learning!

 

 

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