We believe that design studios don’t go broke because they are bad designers, it’s because they are bad business managers
Preparing your business plan is the first part of planning to stay in business.
Our business plan contains four major components:
The SWOT analysis is covered in this article.
The Marketing strategy is covered in this article.
In a future article we will look at Writing your business plan which covers the Operations strategy.
The financial strategy
This is a plan that will ensure we always have enough reserves and cash flow. I start with the long term. In my SWOT analysis I have identified that insufficient capital or cash flow are a threat to my future. This means that I have to look at the capital (long term) issues and then look at the cash flow (short term) issues.
The amount of capital needed will depend on the size of your business. Do you have to pay rent, car lease, phone, computer and hardware leases? Or do you have enough capital to purchase these things at the start up stage? What salary do you want to draw and how long do you think it will take until you have enough income to cover all of these expenses?
The answer to these questions will tell you how much capital you need to start up.
I do this by looking at a budget for the coming year. Download the budget sheet that shows the items we include.
The expenses section will show how much we can expect to spend each month. If you are a start-up the items will be less that we have shown. However you will need to work out your expenses and then allow for at least 3 months of expenses before you start to see some income. For a start-up I think it would be fair to say that you should allow 6 months of expenses before you break even.
The Income section is where we set our projected sales for each quarter of the year. This will then allow us to work out how many hours we will need to bill in each quarter. This needs to be worked back into our Marketing plan to ensure that we are pitching on enough work to get the required number of billable hours.