Your business
step 5
In this step:
1 We look at the simplest of business plans.
2 We check your figures are realistic.
The only business plan you’ll ever need
Youve got a team of experts, entrepreneurs and support-
ers to help you, now it’s time to plan. I’m not a great fan of
business plans. There are hundreds of books, websites and soft-
ware packages you can buy on the subject. Later on, you might
(and I stress might) need a funding plan to present to the bank.
That’s a different matter.
The most important person you need
this plan for is yourself and it needn’t
be a complex document. This is why
successful entrepreneurs talk about
‘back of an envelope’ plans.
But you do need to think through your financial projections
before you leap.
think through your
financial projections
before you leap
64 brilliant start-up
Be pessimistic about your projected figures
While you want to be optimistic about most things in your busi-
ness, when it comes to your figures, put on your miserable hat.
There are two areas that entrepreneurs tend to miss out on
when doing their costings.
Factor in all your indirect costs
Say you are making pottery mugs. There are the obvious costs
of the clay and paint. But there are also hidden costs such as
the gas to fire them or electricity to run the machines. You
might think they are too small to factor in, but as you grow,
they can take a big chunk out of your profits.
Cost your own time
One of the biggest oversights people make in start-ups is failing
to cost their own time properly. I include myself in this camp.
It’s easy to do. You are eager and keen, and you don’t cost’
anything. However, this is a real problem when you grow.
brilliant example
I interviewed a massively successful oil entrepreneur on his approach to risk.
His theory is: ‘We work out our odds of success in a particular exploration.
Then we halve our assumptions of reward, and double our costs. If it still
adds up, we go ahead.’
You could do worse than follow his formula.
Getting trapped
It takes you an hour to make each mug. It takes another hour to
pack, deliver, and process payment for each one. You don’t care
because you are having fun, and you can keep your price down.
Your business plan 65
You need to factor in:
How much time realistically goes into each item. Include
time to purchase your supplies, set-up time, packing and
delivery time, and how long it takes to get paid.
Put in an honest rate for how much you would have to pay
someone else to do your job. If yours is a specialist skill, don’t
assume you can get someone for £6 an hour to replace you.
If you charge by the hour, factor in your ‘down time’
A mistake service businesses make is to overestimate the
number of hours they can work. Say yours is a consultancy
business, you might think £20 an hour will give you a good
standard of living. Working all day, all week that’s almost
£40,000 a year. But you must build in your non-chargeable
time. You need to include travel time between jobs, holidays,
missed appointments and time off for admin and book-keeping.
A more realistic capacity is probably around 65 per cent.
Mojo meter: avoid paralysis by analysis
It’s very easy to get bogged down in your figures. You want to
keep this step short and sweet. And there is a real risk of dis-
appearing up your own fundament in a misguided attempt to
‘plan’ out any risk in your business. When you find yourself
worrying about the supply source of teaspoons in your café, or
you are colour coding the headlines in your plan you’ve over-
done it.
Orders flood in. You are suddenly working 60 hours a week. You
could employ someone else to do the work, but their hourly rate will
be at least £6. Suddenly you are making a loss on each mug. You
are trapped.

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