As you can imagine, I see a lot of business plans and so does any Investor. While many are good, most are very poor indeed.

Here’s my top ten of most common mistakes:

1. Typos and spellings – it sounds small, but it is a killer. Now days there is just no excuse. My own spelling is atrocious, but I use a spell checker all the time. Use a spell checker, proof-read your work, or get a friend to proof-read it. Sloppiness in producing the plan will indicate sloppiness in your business.
2. Poor structure – again no excuse. There are templates and examples around, we ourselves run business plan workshops and there’s software that will structure it for you.
3. Executive Summary – people get confused as to what that is. It’s simply a short, punchy, straight-to-the-point summary of all else in the plan. About 2 pages, that is interesting enough and factual enough to almost stand-alone. After reading it, you should want to reach for the phone to contact the author, or at least feel you want to read more in the main plan. Although at the front, it’s the last section to be done.
4. No contact details on the cover page. Someone reading the plan shouldn’t have to hunt through it for contact details – put them clearly on the cover.
5. Over hyped – expressions such as “fantastic”, “unique”, “incredible” are meaningless and overhyping your product or service shows naivety. This is closely coupled to the next point…
6. Lack of evidence – if you state a market figure, or statistic, try and show where it came from. It gains credibility. Do real market research; don’t just ask friends and family (they don’t count).
7. No effort made to sell the product/service – the proof of the concept comes when you get sales. There are many, many, good ideas around, but not all of them are commercial. Will customers actually give you their cash for your product? Get out there and make some sales, show it will be bought.
8. Not using Appendix’s – cluttering up the plan with pages of market statistics is not conducive to having it read. No one will struggle through a badly organised plan, just mention the facts and refer to the full information in the relevant appendix.
9. No detail to the sales and marketing plan – it’s as though you think that the product/service will sell itself – it won’t. This is often the worse part of the plans we see.
10. Unbelievable and incomplete financials – We’ve all seen the “hockey-stick” projections, where in the first year the revenues are minimal, but then by golly they shoot up at an incredible rate. Having unrealistic numbers, or incomplete numbers, or contradicting numbers are all plan killers.

You will spend a lot of time writing a plan, whether it is an operational plan to grow your business, or perhaps to get funding, you may as well produce a good professional plan.

There is software that will help with this – see our review of business plan help, or come to our business plan workshop (my bit of marketing!) But why reinvent the wheel, if your business is important spend the few pounds and save time by doing it right first time.

So it is coming to pass. As I speculated back in March, the new government is to close Business Link.

Mark Prisk, the business and enterprise minister, has now said: “The regional Business Links have spent too much time signposting and not enough time actually advising,”

“We’re going to wind down the Regional Development Agencies, and as part of those, we’ll be winding down the regional Business Link contracts.”

The minister’s plan is to replace Business Link with a better state-funded on-line service, backed up with a call centre and more use of existing private business consultancies.

There was no time-table announced however and I wonder how they can do this in the short-term. For instance outsourcing giant Serco have only just taken over the running of the service in the south east in a three-year deal worth £80m and there will be contracts to supply the Business Link service through-out the country.

Whatever is implemented I hope it is done in a speedy fashion rather than dragged out. We will get to a position where Business Link services have to continue because the contracts are still in place, but no adviser wants to join them and the existing staff are demoralised because of the axe hanging overhead.

The planned on-line service replacement must be well thought out and effective. There is so much information on the web now days that just creating a government site that repeats this information will not do the job. It needs to be able to cover a vast range of issues in an accessible manner, catering from the inexperienced start-up, to established businesses looking for solvency advice.

Or should we be limiting the focus of such government advice centres. The original Business Link was set up to encourage new and very small businesses, but lately had targets set upon them that pushed their focus towards SMEs that had 5 – 250 employees.

There is an argument that an established business could better afford to engage consultancy advice from the private sector and that the free support (presumably on-line) should concentrate on start-ups and businesses with less than 5 employees.

I wait with baited breath to see the next set of announcements on timetable and focus areas for the new service. I just hope that like almost all government IT projects, the implementation of the on-line service doesn’t over cost and under deliver.

Business Angels are often thought to be tough and worldly-wise and it’s true that they are people who have made a success of their business life, but even a Business Angel needs to remember to use their head rather than just their heart when making investment choices.

There are a number of new business angel investors entering the market, because of falling interest rates and limited opportunities for investing elsewhere, so it’s worth repeating a few essential guidelines for sound business investment:

1. Invest in areas that you understand and have experience of, your knowledge & contacts will be worth more to the business and you will understand the risks better
2. Be interested in the business area, get enjoyment from the activity, you’ll then be happy to put the time and effort into the business
3. Do due-diligence
   - check that the people you are talking to are who they say they are
   - credit checks are easy now days to obtain
   - check thoroughly yourself the financials of the business, or use an accountant
   - examine all claims (market size, patents, etc) to ensure they are correct
4. Choose entrepreneurs who are realistic, know their market/business well and with who you feel you can have an open working relationship
5. Do your own investigation of the market potential, look at competitors
6. Weigh up how much time you will have to spend in the business – does it fit your time available?
7. It can take longer for a business to be a success (average 6 years) than to fail (less than 3 years), so plan accordingly
8. Make sure that your overall aims for the business and use of the investment are in sync with the entrepreneur
9. Agree the respective roles and responsibilities of yourself and the entrepreneur (would you be a working Director, or non-Exec) – agree who would do what.

 

Clearly there are many more issues that a Business Angel would want to cover before making the investment, including negotiating around equity/debt, agreed exit strategy and sorting out partnership / legal documentation, but by doing the basics right you’ll be in a better position to judge a sound and workable investment.

 

Yesterday’s budget reminded me that there are still considerable tax benefits to owning your own business, beyond the normal personal tax choices of taking salary, or dividends.

The Chancellor has for a start not only continued with the Entrepreneur Relief Rate of 10% but expanded it up to a value of £5M. Now many entrepreneurs busy beavering away on growing their business, may not even know about this advantage. But if your hard work and persistence results in a successful business, you may want to sell it, or even just retire from it at some point.

When you do sell it, instead of paying the current Capital Gains Tax rate, you can just pay 10%. That’s a fantastic benefit and most people are not aware of it. There are of course certain requirements you must meet, such as at least owning 5% of voting shares in the company for longer than a year, so check with your accountant.

Interestingly it also includes selling just a share of the business, business property (not letting properties though) and your own property that may have been used for a business, so lots for an accountant to have fun with.

There’s more… how about not paying any Inheritance Tax (IHT) on a major asset left to your children, partner or beneficiary of your will? That is exactly the case with a business. If you leave your business to someone when you die (sorry to be morbid, but it’s important), the beneficiaries pay no tax on it.

Given you’ve worked hard to build the business up, it’s comforting to know that if the worst happens, your family or dependants could inherit that business without giving the taxman part of it. Not the case with most other assets.

There’s just a couple more reasons for being an entrepreneur and for a change hard work does get it’s rewards.

During the latest recession as skilled or senior professional people suffered redundancy, many decided to start their own businesses. Some escapees from the crash of the City actually became Investors into young businesses.

With the huge cuts to public spending now being implemented there will undoubtedly not only be direct job losses, but with contracts being cancelled and bought-in consultancy slashed, there will be massive collateral damage to the private sector as well.

This could be an opportunity to help some of the affected become self-sufficient and start their own businesses. Where else will they find a new job with the mayhem that is about to hit the jobs market?

There will be a wonderful pool of talented yet frustrated ex-employees that will be keen to make a new life of self-employment rather than face the despair of applying fruitlessly for a dwindling supply of suitable jobs. Surely now is the perfect time to help them achieve this.

However, the announced cuts already talk about reducing the regional development funds and I can’t see any attention being given to helping start-ups or growing businesses.

I think the new government is missing a huge trick here. This is the perfect opportunity to provide a focus on young businesses. Producing a programme that encourages entrepreneurs to grow their own companies and in turn delivering growth to the UK.

Well let’s first look at the terminology “hung parliament”. It is a term that is designed to send shivers down your spine. Hung, drawn and quartered, a hung jury, hung from the highest tree.

It provokes the public into a sense of unease, if not outright terror. The danger is that this sense of doom can translate into a self fulfilled prophecy with less consumer spending as the public starts to gird their loins against the terrifying consequences of politicians having to put aside party self-interest in order to work together for the good of the Nation.

Yet need it really be like that? Apparently we are paying a good level of salary and additional benefits in order to attract the brightest of people to be MPs. People who say they put the interest of the Nation before all else. Yet we are fully expecting them to act like unruly gangs in a school yard, destroying the play equipment and breaking the school windows.

Shouldn’t we instead insist that they act like the intelligent public servants that they claim to be and put away the sling-shots and stones in order to work together to run the country.

While it was necessary to scaremonger about “hung parliaments” during the election campaign to stop the public from voting for that nice Mr. Clegg, it can stop now.

Germany’s three main parties work together as a coalition government, Greece has a single party. Which has the stronger economy?

With all that has happened recently to destroy the public trust in members of parliament, now would be a good time to show that they can after all behave responsibly and help to grow the economy, rather than see it wither for their own political self interest.

The EIS (Enterprise Investment Scheme) was set up to encourage Investors, by giving them various tax breaks if they help to fund growing businesses.

The business must be set up as a limited company and the shares not listed on the stock market, which means a lot of small companies could use this to attract Investors, but I wonder how many are?

If your eyes glaze over at the mention of CGT Deferral Relief… and calling this a “scheme” doesn’t help, visions of unfathomable, complicated rules pop to mind… you may think that it is like most government business support, just too much trouble to be bothered with.

I recently went through the process of looking at EIS for Company Partners (a couple of potential Investors were keen to use it) and actually it’s not that hard.

You have to firstly make sure that your type of company qualifies, it must be small (<50 employees and <£7M turnover) and not controlled by another company. Then it must not be working in certain excluded markets, this is a longer list than I might have thought. It includes finance, property development, leasing, accountancy, hotels and a bit more. Most wholesale and retail activities are fine.

The company has to have been in existence for at least 4 months, but the business doesn’t need to be trading, since the investment could be used for example to start the company up (must start within 2 years).

Each Investor under this scheme can only have up to 30% of the company and the shares that are sold must be ordinary shares (no special rights). The investment goes to the company (by raising some new shares), rather than for instance to the business owner, by him selling his shares.

In return for investing into the company, apart from of course getting a part of the business, the Investor will get 20% of the investment back as tax relief and if the shares increase in value, there is no Capital Gains Tax.

Not bad eh? But there’s more… If the opportunity doesn’t work out, the Investor can claim any amount that they lose on the shares against their own tax.

It is all run by the SCEC (Small Companies Enterprise Centre) on behalf of the Inland Revenue and there is a nice service that they provide, where you can fill in Form EIS(AA) to get them to look at your company and the shares you would issue to say whether you qualify. It’s called the advance assurance scheme. This assurance from the SCEC is useful for companies to show to potential investors.

If you want to do this, you should probably have your accountant delve into it for you, since there are always going to be some complications, but find out all you can yourself first.
Here are some links to find out more:
Company Partners (EIS)
Inland Revenue (EIS)

It seems a useful tool to encourage Investors towards your business, so I wonder why more companies don’t do so?

Oh yes, how did we get on? Well it took about 5 weeks for the SCEC to come back after we filled in our form and we did qualify.

I originally put a similar article to this in our resources section, but we continue to get questions about what to do if you have invented a new product, so I’ve also put these 7 tips here in the blog to reach a wider audience.

1. Work out whether it is an “invention” or a more of a “good idea”.

The difference is that with a new invention, you can patent it (legally own it and no one else can make it). Whereas a good idea for a product or service may not be patentable, but you believe that you can be first into a market and so don’t want others to latch on to that idea.

The Patent Office does a patent search service that will help you decide if you have a case for raising a paten, they do charge for this however. Company Partners has fact sheets on patents, trademarks and copyright in the Company Partners resources pages, have a look down the resource list to find them.

2. Be careful when you tell anyone about it.

Often inventors are concerned that people may steal their idea. However if it is an invention that may be patentable, if you tell people about it first, not only may they steal the idea, but more importantly from a legal stand point…. you no longer own the idea! This is because it is now in the “public domain”. It can no longer be patented.

What can you do? Before you tell anyone, have them sign a NDA (Non Disclosure Agreement). This is a simple agreement that protects your idea or invention. Here is an example agreement. If it is likely to be a novel and patentable invention don’t tell anyone at all without an NDA. If it is more of a good idea but not patentable, you will have to decide if you want a NDA signed in every case. Some people will happily sign, others won’t.

3. Companies that help you put your idea or invention into production.

If you type “invention” into Google you will get several pages of companies all offering you help. Why? What do they get out of it? Well mostly they will want to sell you their services. It may not be obvious from reading their literature at first, but it starts with you submitting your idea.  Then they will suggest that they can give you an assessment of that idea/invention – for a price. Normally a few hundred pounds. This is their bread & butter money.

They may then commit to do more (like find a buyer to license the invention from you) in exchange for a share of the royalties, but with an expenses fee attached. Or they may say that after their evaluation there are things that you can do to improve the chances of it being marketable, or of finding an investor to provide funds. This second stage normally costs a few thousand pounds.

So you can see that you have to be careful who you go with and indeed if you should go with such a company. There is a lot you can do for yourself without paying thousands of pounds. Many Mentors and Investors in Company Partners will contribute their expertise and knowledge in exchange for equity without you paying anything at all. Also try the British Library’s IP & Business Centre, they provide a wealth of information and help, almost all is free.

4. You have a great idea now you want someone to fund it.

Okay you have a great idea. Do you believe that it’s so good that you’ll remortgage your house and spend all your savings (which is what James Dyson did)? Or maybe you need some additional funds beyond that which you have access to?

This is where Angel Investors can help. These are private individuals that are looking for interesting opportunities to invest into. However Business Angels and private investors have seen it all before, most of them will expect you to also contribute some of the finances and put yourself on the line for it to succeed, or they also will not invest.

5. Implementation is king (ideas are 10 a penny).

Well some ideas are better than others of course. But everyone has some good idea for a new product or service inside them. It’s those people that get out there and make it happen that are different. 99% of great ideas never get further than a chat down the pub, or wishful thinking.

Then when you do start to make it happen, how well you implement the idea makes the difference to success or failure – not just the idea itself. If you are not best at marketing, sales or even detail planning, look for a business partner.

6. Be realistic.

It may be a great idea, but will people part with their hard earned cash and buy it? Sometimes they are great ideas, but ones that no one would actually pay money for. Be especially wary of “gadget” type inventions. Check that people really would buy them. These sound great, but often too few would be sold to make your fortune.

Do some market research; check whether other similar products or services are selling well. Put together a questionnaire, or a prototype and ask members of the public if they would spend money to buy it (friends and family don’t count). What is the addressable market for this? If it is sold, will it be at a profit (add up all expenditure and costs, including salaries and selling/distribution costs)?

7. Persevere and put in the energy.

If you’ve been realistic and after considering everything, you still want to get this invention or good idea into the market, you have to be persistent. We’ve all heard of the great businesses that were originally turned down by funders.

I listened to Tim Waterstone once describe how he was turned down for a loan to start the book chain by various banks. He persevered, mortgaged himself to the hilt and found an investor. When he was successful and eventually sold for millions to HMV, he sent the banks that turned him down a newspaper cutting of the sale.

He was however a driven and energetic man who didn’t believe in just dreaming. Not all of us are the same, but you do need determination and it helps to have a business partner or mentor. They can give you motivation and together you can bounce ideas around.

Think in business terms and understand that no one is going to give away their time or money unless you can prove the concept is a winner. That will require upfront effort and investment from yourself. But you can’t just dream – you have to make it happen.

Britain used to be, shall we say, not great at customer service. But then everyone started to catch on that keeping a customer was less expensive (5 – 7 times) than finding a new customer. Good service also of course benefits reputation and public image.

So why would any company build into its systems anti-customer procedures? Or arrange for any customer contact to be one that turns the customer against the company?

Yet that’s what happened twice to me recently when contacting organisations. Admittedly the first one is a well known example of how to get it wrong, but even then the way in which their procedures and systems promoted a poor customer experience amazed me.

Who was it? BT I’m afraid and before you cry out “well what did you expect”, let me say that I have mostly enjoyed being a BT customer, but maybe that’s because I had little reason to contact them before.

Without boring you with details, it took numerous frustrating calls and 5 weeks to simply have our 2nd line moved to a new house. The issue was that BT’s systems didn’t allow the department that I had to contact, to pick up a phone and talk to the people that had to book and carry out the work. All they could do was send an email. No one knew if the email was read or being actioned. There’s also no way to give feedback, so they will never know how to improve their systems.

In the other case, I contacted Which? to change my address, however after going through several layers of automated call handling and being kept waiting 10 minutes on the one selected, with no end in sight, I decided I didn’t actually need their magazine that much and instead just cancelled the subscription.

Interestingly, the people I talked to in BT and Which? were polite and tried to be helpful, but their systems let them down.

It’s also strange that one can struggle to get through to a customer service department, to be thwarted in every way and yet you can get quickly through to the sales department.

As though existing customers are less important than potential new ones. Have we forgotten already the relative costs of acquisition versus retaining?

Generally in the UK we have now gotten pretty good at training staff to give the right service messages, but systems are often put in by people who are measured on cost savings rather than customer satisfaction.

If you are in the position of running a business never underestimate the importance of keeping customers happy, even after they have bought your products or service.

The Tories have vowed to get rid of Business Link, the government-funded business advice service in England, but what if anything will replace it?

Business Link has had over the years a mixed reputation. Your view of the whole organisation usually depended on which adviser you were allocated.

I certainly remember my original encounter with them. I was starting my first business, an IT consultancy and was looking for any advice and help I could get. Having made sure that I was at my free one hour consultation 10 minutes early, I sat kicking my heels until the adviser finally turned up 40 minutes late.

“I’ve been having trouble with the #%*! central heating, mate” was his reason; ironic really since his background and expertise turned out to be as a plumber. I then was entertained for 19 minutes by tales of his plumbing business, before being told the best thing I could do was to go on a business planning course. Since I’d just finished my MBA and had sat through more lectures on business planning than I cared to remember, I wasn’t feeling greatly helped.

I grabbed the last minute to try and describe what I wanted to do as a business, but he was only interested in getting me to sign his time-sheet to say I had received my advice.

However I have heard very encouraging stories from some of our members and so I try and remain positive, but I shall probably not shed too many tears if they do go. The question is what should replace them and what will happen to the £190m currently being spent on Business Link.

The view of the Conservatives, should they come to power, is that they will instead boost the role of the local enterprise agencies. These have services that overlap those of Business Link, but I have found these organisations to be quite confusing to young businesses.

Many are run by private companies and it can be difficult to tell which are commercial organisations looking for customers and which are non-profit. They also suffer from the old criticism of Business Link, before they started to get their act together, that there is no uniformity, each presents itself in a completely different way.

Now if we accept that we are not trying to put in place one uniform monolithic organisation, but to have individual local organisations that may be privately run, but meet certain standards and deliver a locally needed service that’s fine. However the public understanding of what a local enterprise agency is and does needs to be made clear.

Doug Richard, of Dragon’s Den fame, has the view that: “We must sweep clean the entire government funded industry of business support and leave behind solely an institution whose remit is to expedite and simplify the effort of small business to manage the burden that government places upon it.”

This implies that there are no government funded enterprise services, but that instead the government just concentrates on its own processes, making them easier for small businesses to deal with.

That is a reasonable argument, that entrepreneurs don’t any longer need all the information and services that ‘business support’ groups give out; after all we now have Google and the Internet. Just stand back and let us get on with it. Maybe using the funds instead to give tax advantages to start-ups.

I like to think that after the next election, whoever is in government would work on creating a ‘culture of enterprise’. This spans the entire spectrum of changing the perception and attitude of financial institutions to entrepreneurs, incentives to people starting a business and yes also reducing the red-tape.