“Fail to prepare, prepare to fail” is an important adage to remember in the business world, and often in day-to-day life. Originally attributed to Benjamin Franklin, you may have heard these wise words long ago, but not necessarily recognised how relevant they are when you’re entering the brave new world of starting (and eventually sustaining) a successful business.
The good news is, the failure rate for small businesses isn’t anywhere near as doom and gloom as you may have heard. Governmental research on start-up business failure discovered an annual termination rate of young firms (in their first few years of operations) of 14% cumulatively, with another 8% cumulatively being considered to have “uncertain” status (Australian Small Business Key Statistics and Analysis). On the other hand, the termination rate for nascent firms (i.e. that great idea that you’ve registered a business for, but haven’t got off the ground yet) is higher: according to a study by CAUSEE (Comprehensive Australian Study of Entrepreneurial Emergence), 35% of nascent businesses which they studied terminated after a 3-year period, 34% were still in the process of venture creation, and 31% had reached a point where sales regularly exceeded costs.
In other words, the hardest part is getting your business off the ground, and turning your idea into a reality. And that’s where a business plan comes in.
Planning is an imperfect science, but you’re not aiming for perfect. No one has a crystal ball that can predict the future with absolute accuracy. In fact, virtually every business plan will turn out to be just a little bit wrong, but that doesn’t mean that they’re not extremely important - they’re an indispensable backbone of your business, and can be the difference between success and failure.
You’re aiming for the best-possible map to use to steer your business journey to optimal outcomes. The more you can map out that journey, and discover any potential obstacles that you might encounter along the way, the better. Without planning, you’re simply reacting in an ad-hoc fashion to the unexpected. A business plan lets you handle the bumps in the road in an adaptable, agile fashion while still focused on progressing in right direction.
So, now that you’re sold on the importance of a business plan, how can you create one that will serve you well on your journey, as well as wowing funders and other stakeholders?
We’ve created a business plan template which we believe will be very helpful to guide you along the path. The content is designed to demonstrate your value proposition to potential funders, but is relevant for both internal and external stakeholders.
Funding is a particularly critical component to the recruitment industry, especially for temp/on-hire recruitment companies - you act as a middleman, and have to pay employees their salary (and their superannuation!) on time, before you actually get paid by your clients. This leaves you with considerable costs to cover while you’re waiting for your clients to pay, and being late to pay employees isn’t just bad for them, it’s bad for your reputation, and costly to boot. Unless you happen to have a large stash of cash just sitting around, you’ll need a business plan that demonstrates to funders why your business is different, and why it will go the distance.
In order to help your recruitment business start off on the right foot with a brilliant plan, some important questions to ask yourself are:
What is your “value proposition”?
This term might sound intimidating, but it’s actually very simple. It’s basically an elevator pitch, summarising what value your business proposes to add to its target markets (clients and employees alike). It’s important to keep in mind that the value of a business is in its use – if nobody is using your business, it has no value (and makes no money, but let’s put that part aside for now). What service do you provide, and how do you provide it better than your competitors? What problem do you hope to address? What gap are you filling? Initially, attempting to define your value proposition will lead you to more questions than answers, but these questions are exactly the ones you need to be asking.
The reason you’re starting this business isn’t so that you can retire early and spend your life relaxing on the shores of a secluded tropical island (while that certainly sounds nice, it isn’t what your business is about). The answer to “why?” is an existential question - why do you want to start and sustain this business? What is your mission, and how are you different from everyone else who is already out there in this market? By articulating your mission statement, and your unique selling proposition, you’re taking valuable steps towards defining what your business has to offer.
Who are your customers? What does an average Joe or Joanne customer of your business look like? In the recruitment industry, your primary customers will be the businesses whom you provide staff for, and the staff who you match with them. Each client and employee will have different needs, and different things to offer both your business and each other, but you can create a series of generalist personas.
Let’s imagine Sally, the early-40s CEO of a medium-sized management consultancy firm, who regularly attends corporate networking events and often provides services to the construction industry. Or Alex, who has worked on construction sites for a decade and is looking for a job that still uses his skills but is less physically challenging.
How would you reach Sally to let her know what your organisation offers and how it can help hers to grow? How would you reach Alex and find out what he has to offer, and what he’s looking for? The recruitment industry is primarily about people, about making the right matches. By generalising what some of these matches could look like, you can work out how to let them know what you could offer them. After all, even the best business model isn’t useful if nobody knows about the business.
What does success look like for your business, and how will you know if you’re making progress? What are your goals, and how do you measure their achievement? A tool that is often used in the business world is the SMART criteria; the goals you set should be specific, measurable, agreed upon, realistic and time-based. You won’t always achieve all of your goals, and your goals might change quite a bit as time progresses, but goal-setting is so important to ensuring that you are heading in the right direction, understanding how far you’ve come, and celebrating your successes.
Your business doesn’t exist in a vacuum, and it’s important to understand the ecosystem that you operate in. It’s very valuable to understand who your major competitors are, and how they reach their target markets (after all, you can learn both from their failures and successes), identify their weakest areas that you can do better.
Now that you’ve thought out what you want your business to look like, it’s time to think about the “how”. What is the business’ current financial position, not only in dollar-terms but in assets and liabilities? What will your cashflow look like? What does your organisational structure look like? Once you’ve got the ball rolling, what do you expect your finances and organisational structure to look like in a few months, in a year, in a few years? How can you start and sustain growth?
As we’ve discussed, any potential obstacles you can proactively identify are invaluable to your planning process. Think about some of the problems that you might encounter, and how you might deal with them. Forewarned is forearmed.
What does your team have to offer? Why are they the right people for your business? You want to be working with the right people, who have skills, knowledge and experience to contribute, but it’s also worth considering how important it is from a funding perspective, to be able to prove your team’s value. Of course, you should only hire people who you believe add value to your business, but you should also be able to explain why you believe they add value when you’re writing your business plan.
Funders choose people, not pieces of paper. Your business plan is an essential part of your pitch, but it doesn’t exist in a vacuum: you’re also demonstrating that you and your team are the right people to lead your business idea to success.
Once you’ve brainstormed your answers to these questions, it’s time to transform them into a formal document by writing your business plan. You should have plenty of material now to use in conjunction with our helpful template, to put your thoughts to paper in a way that will provide your business guidance both now and in the future, as well as attracting funding to turn your great ideas into a reality. Of course, it’s always worthwhile to talk to someone who has experience in helping others to get funding, and to make that transition happen, so feel free to get in contact with the Accounting Department for expert advice.
If you would like to receive a complimentary copy of our business plan template, please click here to request a copy.