THE BUSINESS BACKGROUND

THE BUSINESS BACKGROUND

Nobody backs a business they don’t understand. You have said something about the company in the summary, but you have not gone into any detail. Then your reader comes to this section, which outlines what your business is about and how you got here. Your audience may know nothing about your business and industry; worse, they may think they do and be utterly mistaken. You must either educate readers very quickly or put them right. The purpose of this section is to get the essential facts over rapidly and to paint a broad picture so that readers will then be able to understand and assimilate the detail that is in the body of the Business plan.

THE BUSINESS

“I keep six honest serving-men

(They taught me all I knew);

Their names are What and Why and When

And How and Where and Who”.

-Rudyard Kipling

THE BUSINESS BACKGROUND

Outline what this business is all about:

1. What is it, what does it do?

2. Where does it do it?

3. How was it established, and when?

4. By whom?

5. Why?

6. Has it been successful, and if not, why not?

WHAT IS THE PRODUCT OR SERVICE.

All businesses sell something, and the reader may not understand the special issues that affect your products. You must explain the key issues briefly and clearly:

Don’t explain the technicalities here, but broadly how it does what it does.

Where does it do it?

Is there anything unique about it, and have you a patent or other protection on it?

How is it supplied or distributed?

THE MARKETS

Most readers will imagine they know something about all markets. You must therefore choose the important points and get them across in a punchy way. Correct the reader’s misconceptions quickly and firmly. Remember that this is a platform for saying what you intend to do and why, so focus on things that support your case:

What is the structure of the market?

• Whom do you sell to?

• Why do they buy?

• Why do they buy from you?

• How do you distribute your product or service?

• Very broadly, who are the competitors? 0 How do they compete?

What do we mean by ‘structure’ of the market? Well, is it a monopoly, with one dominant supplier, or are there lots of suppliers? Is there a dominant group of suppliers? Similarly, are there one or many customers, one or many suppliers like you in the market? Are there segments in the market with a recognizable top quality at one end and cheap and cheerful at the other? Is there effective branding, with one or more players in the market selling an image and the benefits of the product or service?

This, together with the other issues on the list, is discussed in greater detail in the next chapter.

Many, if not most, businesses have important supply issues. For example, if you are a motor car distributor then clearly your plan must talk about where you buy your cars from and what influences the prices at which you buy and sell as well as the security of your supply. What are your main contract terms? If your primary supplier is losing market share, then you will need to reassure your reader as to why that does not affect the viability of your proposal. If yours is a computer software business then you may still be influenced by supply constraints, in this case perhaps the supply of skilled programmers or systems analysts.

You need to answer the following questions:

What are your main inputs? Are there a limited number of suppliers?

Are there any constraints on your ability to get supplies when you want, at the price you want?

Are credit terms an issue? What is your credit limit, and how many days of credit do you get?

Answer the key questions about potential suppliers that may occur but don’t go into great detail at this stage, for example:

Does it have key customers or suppliers?

How many outlets or factories does it have? e How big is it? (Turnover? Profits? Staff?)

Example

Qualco is a family-owned and operated laundry and dry cleaning business. It has four shops located in the suburbs of London at Shepherd’s Bush, Hammersmith, Holland Park, and Putney. The shops each have a ZZZ dry cleaning machine, but all laundry is sent to a central facility at Shepherd’s Bush. The company’s drivers have a daily round to each of the shops and deliver and pick up from customers.

Approximately 50 percent of the business’s 750,000 turnovers is laundry and 80 percent of that is contract work for some 70 hotels and restaurants in the West London area.

THE BUSINESS BACKGROUND

HOW DID YOU GET HERE

Explain how the business got to where it is. Clearly, this does not apply to a start-up proposal but would need to be replaced by more about the market and how you got involved. If the business has problems, explain how they arose, what has been learned, and how they will be resolved. To understand a business and to believe forecasts, it is important to see how the enterprise developed. For example:

Example

Sunblast was a loss-making business acquired by John Smith in 2000 for 100,000. He cut overheads, stopped dealing in low-volume products, and brought it back to small profits before recruiting new management and becoming non-executive chairman. His new MD, Charles Jones, was an accountant, a former partner with Strutt & Grovel. Profits grew to 50,000 by 2003. In 2003, Jones persuaded Smith and the rest of the Board to acquire Black Hole Ltd, which was a complementary business. Unfortunately, it suffered a dramatic downturn in orders owing to the insolvency of two major customers,

Jones did not report this to the Board for three months and sought to gain new customers rather than cutting overheads. Losses were 200,000 in 2004. The bank appointed a receiver and called on cross-guarantees which put Sunblast into receivership, although it was still trading profitably.

In this example, a proposal from a management buy-in team for funding to buy a company from a receiver, more explanation would be needed. A financier would need to be persuaded that the part of the business being bought was viable and that the problems that brought the Group down really did not affect it.

For some businesses, their regulation is a key aspect of the story. Regulations may not be at the kernel of operating a shop, but for casinos, amusement machine hire, nursing homes, food distribution, road haulage, etc they are.

Dispel concerns. Your reader does not want to back a business that can be shut down at the whim of a far-off authority or as a result of a minor error. Explain clearly how it all works and how your internal control ensures you do not fall foul of the authorities.

Remain focussed and understand what will work with each type of customer. Contact HyperEffects to chart out a tailor-made business marketing strategy for your company and see your business show up on television ads, press releases, and major channel partners. A poorly designed website can repulse people from your business and can cause you to lose customers before you even have them. We also work on creating, enhancing, and making the website of your company more user-friendly. For many target customers, social media is becoming an ever more popular focus for advertising campaigns as it can be a very inexpensive way to reach many different users. Use social media to get more sales for your business.

 

 

 

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