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Guide to Starting a Business

unduhan-38Starting a new business is a very exciting time – however, it is also very challenging. Luckily there is plenty of help at hand for those who are clever enough to look for it. Did I say clever? Yes, I did, because many entrepreneurs charge headlong into their pet projects without giving due consideration to the resources available to them. While the energy levels for all entrepreneurs tend to be very high, it is important to step back, when appropriate, to ensure that the proper advice is being obtained. For many people, a new business is like a boat sailing in uncharted territory. One can reduce the inherent uncertainty and risk with good advice, appropriate planning and a dollop of experience. The following article contains some advice and recommendations for those starting up in the UK. While not a ‘bootstrappers’ guide per se, the assumed audience are UK-based entrepreneurs looking to set up with fewer than five employees and limited funding at their disposal.

Where to Start?

Given that one area of particular interest for us is business planning, it seems like a very good place to start. You must resist all temptation to skip writing a business plan. Preparing a business plan is a vital first step on the journey of all entrepreneurs. Sure, it may seem like a difficult proposition, especially if it’s the first time you have to write a business plan. However, the business planning process will really help you get a feel for the various elements that will determine your success, from cash flow, to sales forecasting to your personnel structure. You skip this critical process at your own peril.

Naturally, we recommend Business Plan Pro (RRP £79.99) as the best means available to write business plans. Business Plan Pro helps you to structure your business plan, is exhaustive (meaning you cover everything) and offers help at every step. Alternative methods include writing the plan yourself, using products such as Microsoft Word and Excel, or paying someone to write it for you. Unfortunately, these other methods either leave you staring at a blank screen, or simply help you avoid thinking through the conceptual and financial issues critical to your business. Whatever method you choose, you will find more information on writing a business plan at our business plan site.

If the industry is relatively new to you, I’d recommend you purchase a Business Information Factsheet or Business Opportunity Profile from Cobweb. These fact sheets will help you understand some of the live issues within your sector. These profiles include options such as ‘How to Start a Coffee Shop’ to ‘How to Start a Restaurant’ and cost about £5.

I cannot stress enough at this point the importance of getting advice. The great thing about starting a business is that there are lots of experts who may be blogging about their experiences or have written about the issues they faced and some of the hurdles they have overcome. Here are some of my personal tips for some key areas in getting started:

Accountant

Speak to an accountant early on in the process. They can help you decide the best legal structure for your business, explain VAT and also advise you on other financial obligations. Aims Accountants are a group of accountants that are scattered around the UK and are ideal for start-ups.

How To Success on Business Planning

images-41In the past few weeks we have witnessed a period of unprecedented economic turbulence and instability. Of course this uncertainty is not just affecting us here in the U.K., but in a globalised economy it is affecting people right across the world. Years of consistent economic growth have given way to rising unemployment, increased costs, reduced disposable income and a greater number of risks. In this short article, I will describe some courses of action that may help to reduce the sense of helplessness businesses are currently experiencing.

1. Stay abreast of economic indicators

The global credit crunch and the increased uncertainty affect almost everyone. Very few UK businesses are immune to the effects of reduced credit, devaluing housing stock and the greater perceived risk we all feel. These are clearly very difficult times and potential solutions are occupying the minds of economists, bankers and ministers alike. Hence it is important to stay abreast of developments to ensure that management decisions are made in the context of the most up-to-date economic indicators and forecasts.

2. Revisit your business plan

It is perfectly acceptable to revise your business plan more frequently than once a year. If you have not done so for some time, it is worth revisiting it now. Business plans are written with certain assumptions built-in and these assumptions are context sensitive. If your business plan is over 6 months old, then it is likely that you will need to revise revenue figures downwards and costs upwards.  Do this as soon as you can, and revisit key indicators such as current cash burn rates, debtor days etc.  An up-to-date business plan can help ensure everyone is aligned towards the strategic goal of the company; ensure the cash flow is monitored and that the impact of changing assumptions is reflected in the numbers.

3. Review current projects and plans

Most businesses have a number of projects and initiatives on the go at any one time. These projects will consume resources over a number of months and years, and will typically involvement investment of time, people and money. The end goal of the completed project will often be designed to help your company generate additional revenue streams or to protect current streams. Again projects that have been planned over 6 months ago, and that take a number of months to complete should be reappraised. It may be more appropriate to defer projects or put them on hold until the economic conditions are more favourable or until the level of perceived risk and uncertainty declines. Any new contracts with third parties need to have additional safe guards built-in. For example, if exchange rates move outside certain agreed bands, it would trigger a renegotiation of the terms or an option to break the agreement etc

4. Communicate Effectively

It is not just management that feel the pinch when economic conditions deteriorate. It is likely some employees may be saddled with credit card debt, or may be sitting on properties with negative equity and may be worried about their futures. Management need to ensure their employees are aware of issues with implications for them. It is also important that employees are fully aware of the wider context so that any legitimate change initiatives designed to reduce costs are accepted rather than resisted.

5. Consider outsourcing some activities

In most industries it is possible to outsource non-core activities. There are many pro’s and con’s for outsourcing, however, if cash flows are under pressure, the inherent flexibility of outsourcing may be more appropriate until economic conditions improve.

6. Assess exposure to known risks and dependencies

In times of uncertainty it is important to step back and identify risks and to appraise key relationships. Is the company over-reliant on one particular company or industry? While this reliance may have been fine in periods of economic growth, it is important to recognise that a dependency on one supplier or customer dramatically increases the risk. Any vulnerability in one particular industry sector can lead to knock-on effects in the most unexpected of places (as well as in the more obvious areas). A diversification strategy can help to mitigate against an over-reliance on one supplier or customer.

7. Consider Scenarios

The importance of scenario planning grows when uncertainty increases. Scenario planningconsists of management considering a range of plausible future outcomes ranging from a ‘small stretch of the imagination’ to the ‘outlandish’. The aim is to think through the implications for the company if certain scenarios came into effect. So for example what would happen if sales decline by 20% or if oil doubled in price in 2009? By thinking through a number of plausible scenarios, and designing strategies to deal with such eventualities, companies will be better prepared if indeed one of the scenarios does in fact occur.

Plan is a living document

images-42As you review implementation results with the people responsible, you will often find the need to set new goals and make course corrections. Keep track of the original business plan and manage changes carefully. Although changes should be made only with good reason, don’t be afraid to update your plan and keep it alive. Business Plan Pro Premier has Planned, Actual and Variance tables, complete with linked formulas, to facilitate active cash flow analysis.

Prescription for live planning

After your plan starts, save a copy of your plan in Business Plan Pro and then type actual results into the sales forecast, profit and loss, and milestones Actual tables. Then watch what the variance views tell you.

Note when actual results indicate you need to make changes.

Stay in the Business Plan Pro Actual mode and make adjustments to future months of your Actual cash plan. After all, it is already more accurate than the original plan, because it has actual results for the months already completed.

As each month closes, type actual results over your revised plan numbers into the Actual area.

The starting sales plan
The example begins in this first illustration with the sales forecast imported from a finished business plan, developed in Business Plan Pro.

As you look at the variance for the sales forecast for the first three months, you should see several important trends:

Unit sales of systems are disappointing, well below expectations.

The average revenue for systems sales is also disappointing.

Unit sales for service are disappointing, but dollar sales are way up.

Sales are well above expectations for software and training.

Adjusting the sales plan
One of the main advantages of creating a plan on a computer is how easily you can change it. Month by month, as you record your actual results, you can make changes to your plan in the future months of the actual tables, preserve the plan tables, and be able to see the plan vs. actual variance.

In this example, if the company knows by March that sales will be different than planned in April, they should estimate the revised forecast, as a correction to future results. When the actual results are available, they can then replace the revised plan numbers with actual results. The actual results area can then become a plan area for course corrections.

Compare the difference in the February and March columns in Illustration 1: Beginning Sales Plan (the original plan) above, and Illustration 4: Adjusted Sales Plan in Actual Table, (the actual results area).

Business Plan That You Need To Know

A business plan is essentially a more detailed version of your business model. A business plan has been traditionally understood as a physical document, although increasingly this view has changed as business plans have migrated online. The business plan format very much depends on the context and business plans are often verbalised via presentations where a presenter pitches their business plan to an audience. Business models are more likely to take the form of either simple verbal descriptions or one page visual representations which can either be produced before a business plan or as part of the same planning process.

Alexander Osterwalder, co-author of Business Model Generation, agrees with the link, arguing that:

‘..when you have designed and thought through your business model you have the perfect basis for writing a good business plan.’ 

It is also worth noting that there are increasing numbers of business plan critics who argue that their composition is too time consuming and that people need ‘to get building’. Some of this criticism has come from software developers (many of whom are proponents of the Lean Start-up Methodology).  I personally feel their arguments are a little simplistic and that entrepreneurs need to map out a viable business model and a business plan in tandem. I also think that the arguments are more valid in an Internet business context, where it is relatively easy to bootstrapa low-cost website which can be used for feedback and constant iterative development.

If you are looking to build a new business and are about to draft a business plan, you should also spend time working out your optimum business model as well as drafting a visual representation of it.  You can use the following framework to map same. In recent years there has been significant innovation in the range of business models, and some of them may be of relevance to your offering. Finally, it is also worth noting that some business models such as the Internet bubble model have largely had their day. Very few investors will invest in businesses these days that have advertising at the heart of their business model.

Things coming to an end

The launch of the Zilok website in the U.K. (May 2008) reaffirmed to me that the way we have been consuming for many years in Western Society is changing. The raison d’être for Zilok goes something like this:

“Why own a ladder or a drill when you only need to use it once a year and you can rent one from a neighbour for a very low cost?”

I think of my parents’ generation, and a combination of increased disposable income (relative to their parents), significant marketing and the growth of retail parks meant that most of their generation have garages full of items that rarely see the light of day. However, our world is changing. In recent years there has also been an increase in single-person households, as well as a growth in apartments and flats with less square footage for storage than the houses of our parents. It’s not simply a case of why buy a ladder to use once a year but also a case of if I buy it, where do I store it?

The notion of community has also changed and urban dwellers are more likely to access an online community than knock next door to borrow something.

The Internet has also served to reduce transaction costs across the board. It is now easier to search for a wide range of (long tail and /or obscure) products and services from a PC. The days of driving around calling into different stores are well gone. On the supplier side it has removed the need for providers to have a physical presence in the various markets that they serve, or to carry a lot of stock in these stores.

Finally there is a greater environmental awareness amongst consumers and an increasing amount of purchase decisions now include a weighting for the environmental impact of their purchases. Websites such as The Story of Stuff with Annie Leonard seek to promote sustainable production and indeed consumption –again seeking to promote shared ownership, product reuse and seeking to educate people about the impacts of their purchase decisions.

As a result of these changes, there is a raft of emerging offerings that blur the lines between products and services as we have traditionally known them. The message for entrepreneurs is that environmental changes and changes in consumer behaviour create business opportunities. The next ‘big idea’ is more likely to be a simple tweak to an existing product or service rather than an idea concocted in a garden shed!

Zilok

Zilok takes advantage of a number of relatively recent developments, not least the Internet (and in particular Google Maps), to enable you to search for things and then to rent them from a neighbour. They claim that the average drill is used for just 12 minutes of its lifetime, and hence, rather than owning a drill for example, users should consider renting one.  This all makes sense of course.  When I was younger, product ownership was pretty much ‘for life’ or until the ‘thing broke’. Most of you will be familiar with the notion of an attic overflowing with Christmas decorations and a shed packed full of ladders, tools and the like.  Nowadays, services like Zilokand Hirethings raise serious questions about both the need to always buy products and the need to hold on to them for life if we do buy them. Of course plant and tool hire is not something new; however, while the outcomes are the same, the processes used to achieve the outcomes are very different, as are the value propositions.

In short, paying a neighbour $10/ a day for a drill rental which is arranged over the Web is pretty compelling for some people.

When you Arrive Late to the Party

Relying on academic management literature for guidance can be a fickle business. For example, while “first-mover advantage” was once lauded as the optimum strategy for market entry, it was shortly displaced by its close cousin “second-mover advantage”. The thought went that the “second mover” could learn from the mistakes of the pioneering entrant who was likely to run out of money while trying to educate the market. Of course, some of these initial pioneering entrants did not run out of money and ended up dominating their space, thus striking a blow for advocates of being a “second mover”.

For “first movers” there are a number of poster boys, like Twitter, the micro-blogging platform, which has become so dominant that successful market entry by a direct competitor would be difficult to comprehend. The launch of the iPad created the tablet market, which did not exist prior to its launch but has since been flooded with entrants. For some cash-rich entrepreneurs, with the pockets, vision and patience of someone like Steve Jobs, the lack of a market is an opportunity rather than a problem. However, in the majority of cases, there may be no competition because there are structural reasons why a market does not exist (such as a lack of demand or a market size that is currently too small to serve profitably). In other words, the entrepreneur may simply have misread the opportunity!

For “second movers,” you can generally enter the market without the cost of the first mover. A subsequent entrant can study the incumbent when deciding how to design and position their offering. After all, imitation is the sincerest form of flattery. Competition also helps from a marketing perspective – trying to educate and attract a market on your own is a very costly exercise. However, in some cases the first mover is so dominant, subsequent entry would not be advised.

In other instances market entry is not always so easily defined. A recent example from the U.S. is the almost simultaneous market entry of Gowalla and FourSquare, both location-based social networking sites. These were soon followed by Rummble, and a host of others.

For entrepreneurs the lessons are clear – there are different things to be aware of when you start your business, in terms of market entry. If the market does not yet exist you need to ensure you have deep pockets as marketing is likely to be extremely costly. You also need to be confident that you are not ‘misreading the opportunity’.

Steps to recession proof your business

There is a lot of uncertainty at the moment (May 6, 2008) with much talk in the media of an ‘impending economic downturn’. While the phrase ‘recession’ seems to be close to many people’s lips, it is being muttered in hushed tones rather than being shouted from the rafters. In the U.S. they are ‘not in a recession’ according to the U.S. Commerce Department[1] (April 30th), in an ‘awfully pale recession’ according to Alan Greenspan[2] (May 5th) and in a ‘recession’ as Warren Buffett[3] defines it (May 5th). For now, in the U.K., at the very least, we are experiencing a downturn/slowdown/worsening of economic conditions. (You can take your pick as to which euphemism is most applicable.) Regardless of the word play, one thing is clear; many economic indicators are predicting flat or negative growth for the next year.

The Context

What is clear in the U.K. is that there have been significant increases in recent months in the costs of staple foods, oil, oil derivative products, and those services heavily reliant on oil, such as transport and heating. All of this change has resulted in higher business costs, a greater cost burden on the average consumer and reduced disposable income. Add the ‘credit crunch’ to the mix and it is clear that the economic conditions are going to be a lot tougher in the months to come.

So what does all of this mean? The bottom line is it will mean less money in people’s pockets and less access to credit as banks tighten their belts. Given the above, it seems prudent to consider some actions that will help ensure that your business is able to adapt quickly to less favourable economic conditions if and when they ever do arrive!

How vulnerable is your business?

The first thing to consider is how ‘recession-proof’ your business is.

Is your product generally considered a ‘necessity’ or a ‘luxury’? Is your product a ‘staple good’? In pure economic terms, ‘staple goods’ tend to be those where demand stays relatively constant even as price increases; for example, cereal-based products such as bread, available year-round, are staples. Understanding the nature of your product and who consumes it will give you a better feel for the likely future demand for it.

If your company is business-to-business (B2B), you need to consider how the wider economic changes are likely to impact the demand for your products or services. It is also worth analysing your current customer base. Are you over-reliant on a small number of customers? If yes, consider how best to diversify your customer base. If your product portfolio is too narrow, seek ways to increase internal innovation so you can diversify your income streams in the short term.

All of this analysis will allow you to better understand your particular vulnerabilities and help you to craft strategies to reduce the impact if a full-blown recession kicks in.

Revisit your sales forecast

As you’ll gather from the above, it is necessary to revisit your business plan (in particular the sales forecast) to reappraise the core fundamentals. When people draw up a sales forecast, they are typically basing their figures on the economic conditions of the time. As these conditions change, the assumptions on which the sales forecast was based will have changed. Hence, assuming your business plan was written six months or a year ago, it is necessary to revisit the sales forecast and to reassess the figures, probably downgrading sales predictions in the light of the changing circumstances. You will need to analyse your projected sales and assess the likely affect a recession would have on them. Perhaps you draw up a number of scenarios. Once you have done so you will have a better feel for plausible outcomes in the year ahead. The revised business plan will also help you identify some other areas in need of immediate focus: cost base, proposed marketing spend, resource deployment, etc.

Credit control

Alongside the risk of reduced sales numbers, credit management tends to be the next biggest issue during recessions: debtors take longer to pay, or worse, some debtors go out of business. Hence it is prudent to reassess your cash position. If you have a high percentage of sales on credit you will need to reconsider the payment terms, ensure you invoice immediately and maintain contact with those who owe you a lot of money. There is no need to panic; it is simply opportune to revisit all elements of your credit control system from invoicing, to bank overdraft facilities, to the debt collection process you have in place, to make sure that you are on top of your cash flow.

Run down stock

As you redo your business plan, take time to review your stock position. You may want to ‘restructure’ your balance sheet, to reduce assets consisting of stock and debtors (accounts receivable) and increase cash/bank reserves.

Every cloud has a silver lining

It is also worth remembering that every cloud has a silver lining, and that how you behave will significantly impact your chances of riding out the recession. For example, you may pick up better advertising rates as other businesses slash advertising budgets. For instance, Michael O’Leary of Ryanair claimed he “would welcome an economic slowdown across the continent that would make consumers more cost conscious and therefore choose Ryanair.“[4] The bottom line here is to remember that a recession does not need to be all doom and gloom and that careful planningcan help you mitigate against some of the key issues that can impact your business.

How to Write a Business Plan

So, you have decided to start up a new business. You begin to do some research and find that almost everything you read recommends that you produce a business plan. Why is this so? Because the benefits of compiling a business plan are numerous – not least, the fact that committing your thoughts to paper dramatically improves your prospect of getting started in the first place. A business plan also helps you gain a holistic view of the business and helps you to devise a strategy to ensure a successful launch for your idea.

Having decided to produce a business plan, there are three main ways to write one:

1. Pay someone to write it.

2. Write it yourself using Microsoft® Word and Excel.

3. Write it using a task-specific software product such as Business Plan Pro UK Edition.

If you, like many entrepreneurs, are time rich and cash poor, option 1 quickly removes itself from the equation, given the cost of having someone write a plan for you.

You are then faced with the choice between using Business Plan Pro or building everything yourself, from scratch, in Microsoft Word and Excel. Why are we not recommending other business plan software options? Because Business Plan Pro is the best business planning software available – without exception. Palo Alto Software (the maker of Business Plan Pro) has a proud history, has had category leadership for years and has extensive lists of testimonials and independent reviews on the website, all corroborating this view. By all means, consider other software options; however, we are confident that your own analysis will reveal that Business Plan Pro stands head and shoulders above the alternatives.

When it comes to using Word and Excel there are undoubted benefits – not least the fact that they are ‘free’ in the sense that they are bundled on most PCs. The interface is also familiar, given the popularity of their use. However, while these tools are excellent when you know exactly what you need to produce, they offer negligible assistance when it comes to producing specific content, such as that required for a business plan. If the purpose of the business plan were simply to jot down a few notes to keep you on track, they would suffice. However, if you intend to circulate the plan to peers, colleagues or prospective investors, you will need to produce a plan worthy of your name. After all, you are the author!

Here are the reasons why we believe that using Business Plan Pro is the easiest way to write a business plan:

1. Offers significant time saving

Business Plan Pro was designed to help you write a plan as efficiently as possible. It comes with extensive help, lots of examples and expert advice.

2. Provides the structure

Business Plan Pro walks you through a list of specific tasks, step by step, in stark contrast to the blank screen and flashing cursor you face when you create a new document in Microsoft Word.

3. Includes hundreds of examples

Business Plan Pro includes over 500 sample plans so you can browse plenty of examples to help give you ideas.

4. Ensures you do not leave out any sections

Over ten years of history means that we know what sections to include, where they should appear in the document and what you need to put in them.

5. Makes the numbers part easy

We recognise that while compiling the financials is an essential part of any plan, it is a very challenging area. We have simplified this process with the inclusion of easy-to-use financial wizards and automatic calculations, linking together all the financials from Start-up costs to Sales Forecast to Personnel Expenses to Cash Flow to Profit and Loss.

Success without external funding

Economic downturns tend to be self fulfilling. We all help to drive market conditions, so if we all decide to ‘batten down the hatches’, and become more risk averse we all contribute to prolonging a downturn. However though it may sound counterintuitive, an economic downturn is as good a time as any to start a new business.  This short article discusses how entrepreneurs can bootstrap their way to success, by describing what it means in practise and suggesting some benefits to bootstrapping.

While certain businesses will struggle to get off the ground in a recession (in particular ones that require significant investment), for others, the time is as good as any to take the plunge. For a start, there tends to be a wider pool of qualified candidates available to work as unemployment rates increase. Similarly some companies may reign in marketing spend so there is a greater opportunity to market at more competitive rates. Finally, there are also stronger disciplining forces at play when conditions are tougher as people keep a much closer eye on outgoings. In short, it is a perfect time to bootstrap a start-up.

What is bootstrapping?

The phenomenon of bootstrapping is simply starting a business without external funding such as venture capital (VC) funding. The aim is to maintain a strict discipline on cash flow by managing costs very closely and trying to get the company up and running as cheaply as possible. By ensuring as low a cash burn rate (rate at which a company uses up cash) as is feasible, you increase the chances of your business succeeding. Similarly, without any debt repayments or obligations to shareholders you can afford to be more flexible with your idea. Other commentators, such as Seth Godin, believe bootstrapping is as much a state of mind (1) as anything.

Of course, bootstrapping is not possible for all start-ups as it will depend on a number of factors ranging from the nature of the product or service, whether the business is capital intensive or not, and whether low-cost guerrilla-marketing techniques are suitable in the industry context, etc.

What does it mean in practise?

For me, bootstrapping means behaving very smartly at every cost point, given there is no external investment in the business.  It means entrepreneurs consume business essentials only and are constantly looking for innovative means to substitute costs out of operations.  It means resourcefulness, and plays to the fact that larger companies are less nimble than start-ups.

The phenomenon of bootstrapping can be viewed in stark contrast to the excesses of the ‘Dot-com’ boom.  During this period, companies secured significant funds from financiers and some of these investments were squandered or invested in non-revenue-generating assets such as perks. This profligacy typified a classic case of the ‘Principal Agent problem’ (2), which occurs when the incentives of management and investors are not aligned and management (agents) spends money on items (perks) which are not aligned to generating a return for investors. These included water features in receptions, chill-out rooms replete with table football, offices in prime locations and generous expense accounts. With bootstrapping there is no scope for excess. The sole focus is getting the company running without incurring any non-essential costs.

What are the benefits of bootstrapping?

One immediate benefit of bootstrapping is that you are not reliant on outsiders for funding. As a result there is greater flexibility afforded you, the entrepreneur, as you put your ideas into practise.

Similarly, if the business fails to take off it is less painful to exit as the cash burn rate will have been low, so there are no significant losers. However, if the business takes off the rewards are not dispersed to third parties.  Once there is proof of concept and evidence of demand, it is a lot easier to secure financing at more favourable rates.

Finally, with bootstrapping, incentives tend to be aligned so those that invest their time are rewarded accordingly, which typically leads to greater focus and reduced agency costs (see Principal Agent problem above).

Bootstrapping ideas

Bootstrapping includes outsourcing certain activities, so you pay on a usage basis rather than bearing the full cost. It also means negotiating hard with every supplier you deal with and eschewing capital expenditure in favour of renting or leasing. The following represents a list of some typical bootstrapping behaviour:

* Purchasing office equipment on eBay
* Using a virtual office assistant system rather than a full-time secretary
* Choosing efax solutions rather than buying a physical fax machine
* Using Open Office or Google Docs for word processing instead of Microsoft Office
* Promoting your offering through blogs, commenting on blogs and other relevant forums
* Hiring staff that are generalists and are happy undertaking a range of varied tasks
* Remunerating staff with stock options rather than high salaries

Additional examples can be found in Jason Calacanis’ excellent article called ‘How to Save Money running a Start-up’ and the article by Guy Kawasaki entitled ‘The Art of Bootstrapping’.

The Starbucks office

A major cost for any new business is rent. However, increasingly it is becoming more popular for people to start from their home or a small, flexible rental arrangement.  As a result of these trends and the increased ubiquity of wireless, more and more companies are bootstrapping by using Starbucks as their meeting rooms.

Dangers of bootstrapping

While certain aspects of bootstrapping are clearly useful, it is important not to overstep the line. There needs to be some reasonable amount of cash available. Excessive thrift can be counterproductive and can send out the wrong signals to staff, customers and prospects alike. The objective is not to become compulsive in managing the costs or to expect a company to successfully develop on nothing. As always it is a question of balance. You do not want to lose credibility by being noticeably focused on bootstrapping, but you do want to manage your cash position to move the company forward.

Summary

Bootstrapping is an increasingly popular way to start a business, regardless of the economic conditions. Naturally it is more conducive to certain businesses, such as Internet based businesses, where initial costs can be managed until there is clear evidence of demand. Once the idea you are bootstrapping gains traction and revenue begins to increase, you may then need to switch out of bootstrapping mode. At this point it may be appropriate to seek external funding from the likes of VCs. However once you have proven the concept, the risk for investors reduces a little and hence you should capture more of the upside as you need to give away less equity. In short, the aim of bootstrapping is to keep a low cost base to ensure you can gain a foothold in some market and to generate a sufficient return so you can then assess how best to proceed.

Getting the basics right

The growth in the use of the Internet in recent years has led to a huge shift in marketing activities to the online space. This article explains some of the key things for you to focus on to help you market effectively online. Secure that domain name early. The natural starting point is the creation of a website. Once you start your business it is important to secure the domain name in the markets you intend to compete in. We at Palo Alto Software, Inc and Palo Alto Software Ltd have lots of domain names ranging from PaloAlto.com (global), PaloAlto.co.uk (U.K.), and PaloAlto.ie (Ireland). These help ensure that prospective customers can find us easily by typing our name directly into a Web browser.

There are numerous ways you can build a website, from doing it yourself using available software tools, to hiring website specialists. Regardless of the method chosen you need to be completely clear on the main purpose of the website. Is it to sell products or to generate leads? Once the primary purpose is clear, you can then decide on the layout, alongside the look and feel.

Ensure your website is optimised

Given the hundreds of thousands of websites out there, it is worth reviewing a number to get a feel for the type of design and user interface you would like. Finally, when it comes to a website it needs to be ‘search-engine friendly’. This means that searches initiated from the likes of Google (using repetitive software, called ‘bots’) can find your site, scan it and identify the keywords associated with the website. Many firms offer Search Engine Optimisation (SEO) services which are designed to help you achieve high rankings on the search engines, such as Yahoo! and Google. Most of the techniques they employ are widely known so you could choose to do it yourself. However, be aware: anyone promising top place listings on Google should be treated with caution. There are techniques (so-called black hat techniques) which can be used to game the system – however, Google has been known to punish sites known to be using such techniques, as BMW® found, to its cost, when Google delisted them in 2006.

As it takes time for a new website to get indexed by the search engines, it is likely that traffic will be low at the start. New sites tend not to feature in organic search returns for some time, but there are ways to drive traffic to your site using some of the methods described below.

Use Web analytics to improve your site

Once you have set up the domain name and site, you will want to understand how many users you are attracting, where they are coming from and how they are behaving on your site. Google Analytics is the most popular tool to manage this. It is available free from Google, easy to implement and even easier to use. If you want to see where people are going on your site, tools such as Crazy Egg® will help you improve the design of your site by showing you where people are clicking and where they are not.

Once the basics are in place it is now a case of creating awareness of the existence of your site and generating traffic to the site.

Get traffic to your site on day one

The quickest way to get traffic to a website is signing up for Google AdWords’ Pay-per-click (PPC) service. In the U.K. the vast majority of Web searches are via Google so this is the best one to focus on. This service lets you create adverts that appear when people search for certain keywords. You then pay according to each click you receive (hence the name ‘Pay-per click’). The main attraction with this option is that it is a highly targeted form of advertising, and you only pay when the prospect clicks on your advert and lands on your website.

Create unique landing pages

You need to decide where you want to bring the prospect when they click. Dropping users onto a homepage can be confusing, so you need to create a number of landing pages that are highly relevant to both the search term and the AdWord copy. For example, if a user searches for marketing plan and the advertising copy is for Marketing Plan Pro ® then the landing page needs to feature Marketing Plan Pro prominently. The beauty of running Analytics in the background is that you can measure conversions so you can identify which combinations of advert copy and landing pages are the most successful. After that it’s a case of testing, testing and more testing. A/B testing is a popular method where 50% of the audience is randomly assigned to see page A, and 50% to see page B. Whichever page results in the most conversions ‘wins’ and that then becomes the new default page.

Business Plan Template

Looking to write a business plan?  Considering using a business plan template?  Think again!  Here at Palo Alto Software we make Business Plan Pro- the fastest and easiest way to write a business plan. There are a number of reasons why we believe Business Plan Pro is the best option for writing a business plan as this article illustrates- The Easiest Way to Write a Business Plan.

Business plan templates are increasingly common, but they are often very basic, consisting of just a few headings and a spreadsheet. These business plan templates are typically Word Documents and do not offer any assistance with the business plan content. The result is often a poorly crafted business plan.

Here at Bplans our site contains a selection of free sample business plans as well as sample business plan outlines. One of the difficulties of relying too heavily on free sample business plans is that the quality of the business plan may be suspect. Our sample business plans on the other hand are designed to give you, the reader, the opportunity to read a sample plan so you can get a feel for the structure, the content etc as well as gaining an understanding of important concepts such as sales forecasting, executive summaries and cashflow.

In short, free business plan templates are no substitute for the real thing. A business plan is for your business idea, not some one else’s.

If you want to get a sense of what a business plan for your industry might look like:

1. Click the link below to access the free sample business plans
2. Browse through the sample plan categories, or enter your business type in the keyword field