Briefing Paper No 6
Start up for Community Enterprise
Why Start a community enterprise?
Whatever your reasons for starting up, be clear about your enterprise
and personal aims and set yourself goals. Thousands of conventional
businesses fold because their owners did not set up, or even identify,
either business or personal aims.
The key aims of an enterprise are known as 'the mission
statement'. You may be surprised at how useful your own mission statement
can be in keeping you pointed in the right direction, because if you
have a firm idea of your aims and where you want to go, you are more
likely to succeed.
Have I the right knowledge?
As an employee you are dependent on your employer, but when you start
an enterprise, you are dependent on your own ability. If you can honestly
agree with each of the 16 characteristics and points below, you have
got what it takes. If not, don't be too worried! At least you know your
strengths and you can work on your weaknesses.
Self-analysis:
I am realistic about my capabilities
I am self-disciplined and I do not let things drift
I have the full support of my family
I am ready to put in 7 days a week, if necessary
I can get on well with people
I can make careful decisions
I can cope under stress
I do not give up when the going gets tough
I can learn from mistakes I can take advice
I am patient, and I expect a long haul
I can motivate people
I am in good health
I am enthusiastic
I know about the risks
I have specific aims
Initial Assessment
Evaluating your basic needs and business numbers is a good starting
place. Start your business plan with a quick assessment. Even for an
ongoing business, take the time to step away from the business and look
at the basics. For a first look, consider your objectives, mission statement,
and keys to success…
Objectives
Have a clear idea where the enterprise is going and what you want to
accomplish. Objectives are business goals. Set your market share objectives,
sales objectives, and profit objectives. Enterprises need to set objectives
and plan to achieve them. Make sure your objectives are concrete and
measurable. Be specific, such as achieving a given level of sales, or
a market share, or number of people helped. Don't use generalities like
being the best or growing rapidly. If less tangible goals are critical
to a plan, find a way to measure them. For example, if image and awareness
are vital, then plan for statistically valid surveys to measure the
improvements in image and awareness. If you want to focus on customer
satisfaction, plan for a survey to quantify satisfaction or specify
numerical objectives regarding returns or complaints.
The Mission Statement
State how you want to operate as an enterprise. Use the mission statement
to define your business concept. A mission statement should define underlying
goals (such as making a profit) and objectives in broad strategic terms,
including what market is served and what benefits are offered.
What Business You Are In?
Ask yourself what business you are in, and don't narrow yourself down.
One of the classic business examples is the railroads, which lost a
chance to expand in the twentieth century because they mis-defined themselves.
They thought they were in the business of running trains on tracks.
They didn't understand they were in the business of transporting goods
and people. When trucks and buses and highways grew, the railroads were
left behind.
Customer Satisfaction
Developing customer care programs depends on spreading the idea and
importance within a enterprise. That should normally start with a statement
included in your mission statement.
Workplace Philosophy
Some mission statements also define internal goals such as maintaining
a creative work environment and building respect for diversity.
Keys to Success
Make a priority list of three or four 'necessary for success' items.
Focusing on what I call keys to success is a good idea for getting a
better view of the priorities in the enterprise. Just about any business
imaginable is going to depend a lot on three or four most important
factors. In a retail business, for example, the classic joke is that
the keys to success are location, location, and location. In truth,
that might be, for example, location, convenient parking, and low prices.
A computer store's keys to success might be knowledgeable salespeople,
major brands, and newspaper advertising.
Break-even Analysis
When does an enterprise begin to make money? The point in the sales
process at which the revenues equal the costs of production is the break
even point. By undertaking a "break-even" analysis you can
calculate figures based on fixed costs, variable costs per unit of sales,
and revenue per unit of sales.
Examples can be found on the internet (such as www.jaxworks.com):
Make the following three simple assumptions:
a) Average per-unit sales price (per-unit revenue): The price that you
charge per unit. Take into account sales discounts and special offers.
For non-unit based businesses, make the per-unit revenue £1 and
enter your costs as a percent of a pound.
b) Average per-unit cost: The incremental cost of each unit of sale.
If you are using a Units-Based Sales Forecast table (for manufacturing
and mixed business types), you can project unit costs from the Sales
Forecast table. If you are using the basic Sales Forecast table for
retail, service and distribution businesses, use a percentage estimate.
For example, a retail store running a 50% margin would have a per-unit
cost of .5, and a per-unit revenue of 1.
c) Monthly fixed costs: Technically, a break-even analysis defines fixed
costs as costs that would continue even if you went broke. Instead,
you may want to use your regular running fixed costs, including payroll
and normal expenses. This will give you a better insight on financial
realities. Try and make a "break-even chart" - as sales increase,
the profit line passes through the zero or break-even line at the break-even
point. A Break-even chart will help to show you how much you need to
make per month to cover costs. You may not want or need to make a profit,
but this will help you consider your bottom-line financial realities.
Can you earn enough to meet your break-even volume?
Market Analysis
Determine if there is a sufficient market to support your enterprise.
You may want, and even need to do more detailed research later on, but
for now make a good educated guess about how many potential customers
you might have. What you want at this point is a reality check. You've
already developed a quick break-even analysis that ties your initial
business numbers to your required sales. So now you're going to look
at how many customers you need to attract to make the sales to make
break- even...
Develop a basic Market Analysis table.
This table gives you a simple list of market segments. Each segment
is a group of customers. Define the groups according to what community
needs you could meet, demographic characteristics, buying habits, preferences,
or whatever other classification system works for your plan. Fill in
the total potential customers estimated and the annual growth rate expected
for each segment.
A Few Starting Thoughts
A business plan is not the most important single requirement for starting
a business. Many other things are much more important. For example:
customers. The first thing you really need to start a business, maybe
even the only thing you really need, is customers. It all starts with
at least one customer. Customer needs: Your enterprise will fulfil some
type of community/social/environmental need. Sometimes customer needs
can be intangible, like security or prestige. Make sure there is a market
for your service or product. The enterprise will fail if it doesn't
address either the community need and/or personal needs
What's a Start-up Plan?
A very simple start-up plan is a bare-bones plan that includes a
summary, mission statement, keys to success, market analysis, and break-even
analysis. This kind of plan is good for deciding whether or not to proceed
with a plan, to tell if there is an enterprise worth pursuing. Once
you have decided your plan does look promising, you can move on to more
detailed work of how you will actually run it (see other briefing papers
for more information).
Websites
Business Link www.businesslink.org
Federation of Small Businesses: www.fsb.org.uk
Free Sample Business Plans: www.bplans.com
Manchester Progressive Enterprise Network (MPEN): www.mpen.org.uk
New Economics Foundation: www.neweconomics.org
The Prince's Trust: www.princes-trust.org.uk
The Scarman Trust: www.thescarmantrust.org School for Social Entrepreneurs:
www.sse.org.uk Small
Business Service: www.sbs.gov.uk
Further Reading
Definitions of Community Enterprise
A Community Enterprise Company
The Voluntary Sector Legal Handbook - Directory of Social Change
Voluntary but not Amateur - London Voluntary Service Council
A Practical Guide to Company Law - Directory of Social Change
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