Module 1: Business Plans

Business Ideas

Business plans outline the ideas for the business in the future. You will often hear about the need to create a business plan when creating a new venture but business plans are important throughout the life of the business. Business ideas can happen at any time but often in response to external stimuli.

New Businesses

Ideas for start-ups will come from many directions:

Gap in the Market

A gap in the market is demand for a product or service that is not currently being met. Noticing a gap in the market can lead to successful business ideas as there will be no direct competitors in the short term.

Competitors

Business ideas can also come from competitors. There is nothing wrong with setting up a business that resembles a competitor (indeed, most businesses are based on existing ideas) but it is necessary to ensure that the business has something distinctive to offer that makes it different, e.g. a different location, a different product or a unique selling point (USP).

Current trends

The behaviour of society is responsible for current trends. For example, in the UK, there has been a recent decline in the number of people choosing to buy 'fast fashion'.

Likely demand

Likely demand is similar to current trends – noticing demand for products can lead to decision making. For example, changes in legislation could increase demand for goods or services. Sometimes events drive demand for goods, e.g. in one study, 80% of people said they were concerned about the environmental impact of the products they buy. This increases the demand for environmentally friendly products which creates opportunities for start-ups.

Established/Developing Businesses

Similar changes can encourage an established business to make decisions about how to adapt.

Changes in the economic climate

Economies go through different stages in a cyclical pattern. Economic peaks are followed by less prosperous times, or troughs, and so on. A business will need to decide how it is going to respond to economic changes.

This video gives more information about the economic cycle:

Changes in the economic climate create opportunities for different types of businesses. When the economy is going well, people tend to spend more on luxury products and services, e.g. holidays abroad, going out to eat and goods like televisions, cars and so on. When the economy isn't doing so well, people tend to save their money, spend more on ready meals to have at home, go on ‘staycations’ and buy films to watch at home. They keep cars and other goods for longer and repair or buy second-hand rather than buying new.

Pause for thought

From the above information, think about what kinds of businesses benefit in an economic boom and what types of businesses benefit when the economy isn’t performing so well.

Trends

Established businesses are also affected by consumer trends and will keep an eye on customer behaviour to ensure they are responding to those trends. For example, a number of businesses have responded to the recent growth in the number of people choosing to go vegan and offer vegan options as part of their product range, for example:

Fabulous Welsh cakes

Competition

If a business has taken advantage of a gap in the market or new technology, it may enjoy minimal competition for a period of time. But in the long term, other businesses will enter the market. Also, if patents expire, other companies will be able to copy the new technology or create their own products. As competitors reach the market, a business may have to adapt to the new competitive environment.

This could involve the use of the Ansoff Matrix in order to analyse the competitive environment.

Using the Ansoff Matrix