Don’t be hasty! The Business Plan is the first thing you should prepare before you start with your business
First of all, let me tell you what a Business plan is (just a few words). A Business plan is a document that describes all the key points explaining how your business or company will achieve success. The introduction is a fundamental aspect of the Business Plan. It should be clear and straightforward, as its main goal is to show the business sustainability. Business Plans are normally used by SMEs or startups, as they are a tool when searching for funding.
A Business Plan should not be boring. You should try and make it as “light” as possible. Nevertheless, it should be extremely precise, because you are trying to define and describe the main ideas that define your business and that will make it sustainable for your investors. You want to convey your ideas as well as possible. I will break down the several parts of the Business Plan into items, in order to graphically show what I mean:
• The executive summary: This is the section of the Business Plan that includes the following: business sustainability, criteria used in business evaluation, business evaluation and funding needs, return on investment, expansion plans, features of the market shares, the business concept, the proposal for value the business includes, factors that make the business stand out…
• Description of the situation: description of the professional team, description of the technical team, content subject, design and functionality of the website, SWOT, RMG matrix…
• Definition of the marketing policy: criteria for establishing prices, definition and in-depth description of the product, logistics distribution, definition of commercialization systems, description of the communication plan, etc.
Always keep in mind that you should introduce your Business Plan from a marketing point of view. After all, you are trying to position your product in the market in the best possible way.
Business Plan: The Canvas model
The fundamentals for what you should include in a Business Plan were described above. Nevertheless, several models are available to design a Business Plan for your startup. Most probably, one of the most prominent ones is the Canvas model. This was created by Alexander Osterwalder and focuses on the most relevant aspects of the Business Plan: describing the business idea in the most graphic, plainest way as possible.
Using this Business Plan model, Osterwalder managed to outline nine basic modules through which the reliability and sustainability of your business idea should be determined. The nine modules focus on four main subjects: clients, offer, infrastructure and economic sustainability.
This is the path you should follow: taking your proposal for value to your customers using your resources. In order to obtain your partners’ cooperation, you should show them that this path may be followed successfully.
In Spain, particularly in the situation we have been going through in the last few years, entrepreneurs need to make the most of their resources in order to establish agreements with third parties, given that public funds are only available for very few people. In order to reach such agreements, you may choose cooperating with other business owners or else turning to funding options with external partners. Whatever you do, your main goal is to obtain resources that enable you to take your business idea further.
The Canvas model of a Business Plan will position your proposal for value right at the center of the outline. The clients you need to get your proposal for value through are located at the right of it. In order to be able to successfully complete the process, you will need to create the proper links to your clients.
Establishing relations with your prospective clients is not always easy, but several channels are available:
• Online: E-mailing, SMS, social networks, etc…
• Offline: Flyers, shops, phone calls, salespeople, etc…
On the right sight of your Canvas model you will find the internal resources your company may use. Besides, at this stage you will also need to define key relationships that you need to establish in order to be successful. Finally, you will also need to estimate costs and the cash flow your business will rely on.
Key relationships in your Business Plan
When the times comes for you to establish relations with third parties, several options will be available: strategic partners, industrial partners, investors… You will also be able to make the most of economies of scale, but this should only be undertaken in the long term.
There’s a word you should always keep in mind as an entrepreneur: Innovation. Have you ever heard of “Open innovation”? It involves the people or organizations you will work with when you take your first steps with your company. It has been shown that an entrepreneur will most likely be successful if he/she works in an entrepreneurial environment as well. Good examples of open innovation are crowdsourcing and joint creation.
The cost structure in your Business Plan
One of the most important aspects to be taken into acount when creating a company is when revenue will start flowing in. However, not everyone keeps that in mind from the very beginning.
You should ask yourself several questions in order to finally decide the model you will follow. Questions should include the following: Will you pay for supplies in advance? Or else, will you invoice your clients before you pay for your supplies? The latter is usually called “Mercadona Model”, as the well-known supermarket chain pays for supplies 90 days later, which makes room enough for them to sell the groceries before they need to pay for what they bought. If you choose this model, you should focus on selling as much as possible during the 90 days so that you may grow as a company. Besides, you will also need to make the most of your assets before you pay for supplies. How can you do that? By short-term investing, or else long-term investing with the surpluss money. By doing so, you will obtain extra interest for your liquid assets.
You may also choose the Consulting Model, in which money is invested before obtaining any profits. In this model, you should make sure of the sustainability of your business; otherwise, you may lose money. This is why funding sources may play a pivotal role if you choose this model, as if your business takes too long to generate income, cash problems in your company may keep growing. In order to avoid that, you will need funding sources available that help you keep afloat if necessary. Once you get your revenue, you will be able to give the money back in the installments you previously agreed upon.
In order to avoid falling in a downward spiral that is always detrimental to your business cash flow, make sure you know well your business revenue in your Business Plan, and work out the investments you will need at first to make up for losses. Once you reach the impasse in your business, you may reconsider your funding needs.
As always, I encourage you to leave your comments and join the discussion if there’s anything you would like to tell us, or if you just feeling like commenting on the article.
• Expr.: Electronic certificate
• Expr.: Obligation
• Expr.: Company