Entrepreneurship and startups
Why should I be developing a business plan
Entrepreneurs face the task of having to develop a business plan, a document where their thoughts about their project are stored and organized. Over the course of the years the tools and approaches to developing a business plan have evolved, either through academic inputs or through the common practices. There are two things that are commonly heard from entrepreneurs:
- That business plans are useless for that they feel that they have to change their business plan almost every week (if not daily).
- That the real and effective implementation of their project ends up being significantly deviated from their planning (initial or not).
Yet, despite these (accurate) remarks, the alternative is to not develop a business plan, and that will end up in:
- Accumulation and confusion of ideas of what the project should be.
- Inexistence of a structured strategy that the project team should follow.
- Light depthness of thought about the project.
- Poor business modeling.
- Poor marketing and commercial approach.
- Inexistence of a real analysis over competitors.
- Inexistence of a feasibility analysis.
- Difficulty in passing the message to other stakeholder.
- Failure to implement the project.
Hence, the conclusion is that having a business plan is necessarily better than not having one. That is not to say that all Business Plans should follow the same approach and steps or even extent. Depending on the size of your project, you need to adjust the business planning tools that you are going to need.
Nevertheless, some key points must be present on your planning:
- Competition analysis.
- Product or service detailing.
- Business model.
- Needed investment.
- Sales and marketing approach.
- Financial feasibility analysis.
This is where you organize your understanding of your competitors, namely how they are performing, which products are sold, which services are provided, their price positioning and their value positioning. There are several methodological approaches to you can use in order gain and shape your knowledge about your competitors, the important line here is that you should not neglect the relevance that knowing your competitors has to how your will developing your business model.
Product or service detailing
The detailing of all the features of your products or services, including specifying which components and resources are necessary make the product of provide service. Should also include an explanation of how production stages (if applicable).
The business model comprises de definition of how you are going to provide the services or sell the products of your business. You will be detailing the resources and key features that our business will need, how the products will be made or how are the steps to provide services.
Investment in assets
Most business need specific assets in order to be operational. A simple illustration is that of a restaurant: you will be needed cookware, stoves, oven, refrigeration hardware, all sorts of utensils and appliances, tables, chairs and so on. The assets are the long term productive resources that are required for operation. The investment assets do not include the resources that are a component of the end product or service. Different business requires different assets. The investment in asset corresponds to the acquisition of these productive assets that will take place when the business starts or along the life of your business.
Sales and marketing approach
The sales and marketing approach establishes the fundamental aspects of the strategy that your company will follow with regards to price, distribution, promotion and communication. As with the previous points it will determine what resources are needed and how to use them.
Financial feasibility analysis
The financial feasibility analysis can be seen as a quantitative test to the qualitative hypothesis that were stated on the business plan. Through a set of assumptions, you should estimate the revenues, costs, investments and financing that your future company or organization will have. That means that the entrepreneurs will have to be able to foresee the selling prices, quantities, cost of components and others services that may be needed. They will also have to be able to put a value into what needs to be invested and how to fund it.
The financial feasibility analysis may have the following objectives:
- Understand if the project is viable, and under which circumstances.
- Check the adherence of the business model.
- Exploring alternatives to the base plan.
- Understanding the total amount of investment.
- Planning the timing of investments that need to be undertaken.
- Help the entrepreneurs decide which options to fund their project best suit their ideas.
- Address potential investors and other stakeholders.
Again, the analysis should be adequate to the size of the project and to the objectives that you have defined for your feasibility analysis. That means that it can range from a simple estimate of an Income Statement to a more elaborate full financial analysis and planning. Whichever way you are taking, you will have to get some knowledge about key aspects about accounting, financial analysis and business forecasting so that you will be able to understand and use the results of your feasibility analysis. Having that in mind we provide you with a set of handbooks that were developed for those who do not have any knowledge of the fields that are needed to undertake a feasibility analysis of their project, but also aid and clear some doubts on those that have knowledge in the field. The handbook are structure the following way:
- Interpreting the basic accounting and financial aspects of a company.
- A first approach on accounting.
- Understanding the ratios and indicators.
- Forecasting a project.
- Financial analysis of a project or company.
- Using FinUp APP for valuation.
- How to develop a business plan.