Without a doubt, having a business plan or model is a must for all those entrepreneurs and businessmen and women who seek to do things well and give their enterprise structure and a bright future.
Now, it is important to understand that by having a well-written business plan, you have a great start, but not guaranteed success. Most importantly, you will need to start with a correct business model. No client, homeowner, investor, capital partner or lender is going to help us if we do not have an architecture for our business.
Just as there are many entrepreneurs who consider leadership as the “only” way to achieve business success, there are many entrepreneurs who consider having a good business plan the only way to achieve success.
An integral and well-thought-out business plan is not only essential for the success of entrepreneurs or corporate entrepreneurs, but also for all those who want to start a new business or seek additional capital for existing businesses.
In order for a plan to obtain investment, it must have a series of characteristics and clear and precise definitions. For example it must describe the company, project, and product in a clear, precise, and attractive way. Although the objective can always be variable, the plan must detail the current situation, the needs, and the expected future, it must justify the resource requirements (which can change over time), as well as the talent needs.
The winning business model must clearly establish the following elements:
- The market: These are the customers and users of our services and products.
- The product: What is my product and how am I going to get it?
- The investor: Either financial or other resources.
- Product or service
We find that many business plans are only based on the product, a brilliant idea, something exceptional that no one has, a unique invention, in which creativity is the basis of any business and neglect the elements that give viability to said product, which are: the market and the investor.
As an example, a group of students achieve computer development that for them has a great business opportunity. They work out a business plan with all the possible scenarios, the estimated sales, and the expected benefits, they prepare a careful dossier with all the advantages of the project and this document presents them to investors.
Next, we expose from our point of view those essential elements that a business plan must contain to create sufficient credibility with potential investors.
- The Market
We have to emphasize it the market, for it is the reason for our business plan. All investors look for business plans with a market foundation, rather than the products or technology it offers.
The market potential, sales, profits of products or services are much more attractive than the products themselves. It is important to demonstrate that there is a market for the products or services that your company is proposing.
- Utility for the customer
When marketers reference customers, they are typically talking about the entire consumer experience.
Entrepreneurs design their products with quality standards and production costs in mind. For example, in a round of financing before venture capital companies, a company presents its textile products, exhibiting them as an undoubted quality compared to competitors. The venture capital agent indicated that, although the textile sector was considered a segment of Industry with low profitability would support the project if they demonstrated a clear benefit to the consumer.
In doing so, they have shown the different investors not only the purpose of a product, but also that there is a market and the profits from production are a function of the market. The price is based on the consumer’s experience and not on production costs of the item alone.
- Discover the market
Where and how we can sell our products is the first of the most critical aspects when giving credibility to the plan. If the product is new it requires a strategy, if it is a launch of an existing product it requires another strategy.
For example, for a new technology or service idea, we can create focus groups with potential clients so that they can give their opinion on it and demonstrate the potential market or get ideas that we had not even imagined.
It is very important to have a strategy on how to analyze and discover the market for our products and not only have our imagination and good intentions, we have to document all the actions we take to demonstrate that the market exists and quantify it.
Discovering the potential market for our products is a very complicated and in many cases costly task, it is here that innovators or entrepreneurs should focus on finding strategies that respond to potential clients.
A product that is not known whether or not it has a market is a product that has no value.
- The price of the project
How much is our project worth?
What is the price that a customer can pay for the project?
What is the price that the market can pay for the project?
We usually worry about thinking about the financial feasibility of our project, but we never think about the value of it.
The objective of investors is to maximize the amount they invest in current and future products. As as a business owner, you need to make sure you product is not only fulfilling the need of homeowners and clients, but is a lasting and quality product.
A successful business plan must calculate the value of the project and have negotiation strategies to get the best possible price. Investors are specialists in these aspects and are clearly ahead of us. The question is if we can do the same.
- Clear and realistic financial forecasts
Some entrepreneurs think their financial plan is their business plan. However, this is not the case. Even if all the numbers line up in an excel spreadsheet, a true financial forecast and plan is necessary.
It is important to make clear and realistic financial forecasts, without making the mistake of deceiving ourselves. Forecasts do not have to be exact, let’s not forget that this is only the path that will help us achieve the final goal.
Take these tips into account and you will surely go a long way:
- Do not carry out scenarios that in the end we do not really know what the potential of the business is.
- Create easy-to-understand financial models.
- Incorporate risk analysis into our forecasts.
- Support through studies and documentation the data we offer in the forecasts.
- Don’t make miscalculations.
- The main enemy we have in a new business is the lack of liquidity.
- We must analyze the first years in short periods of time, the ideal is to make a monthly forecast for the first two years.
- Don’t overwhelm the investor with numbers, but present the conclusions clearly and with graphs and tables that support them.
- Clarity when choosing the indicators or ratios that measure our activity, the mistake we usually make is putting any indicator and not having a clear idea of the required indicators.
Now, make it happen!
Now you know how to present a good business model. Take into account that when we present a project to an investor or a bank, we see that there is an order of preference when defining priorities, and many times it is not the money or the project itself that matters most, but you and the people behind it all.
Several bankers and lenders have agreed that the first thing when deciding to release money or not was the person, the second the project and the third the guarantees.
Without leadership, it is very difficult for a project to succeed, and although there is a leader who can achieve objectives if said leader does not have a realistic and convincing plan, it is difficult for him to achieve the objectives he had in mind.
Without leadership – and a great business model – we get nowhere.