Business ideas can be converted into a business plans by dividing the perceived opportunity into parts that can be analysed individually which will make it possible for the aspiring entrepreneur to focus on key aspects of the business idea separately and thus make it easier to communicate his or her start-up vision.
The below article analyze the questions an entrepreneur must ask and answer when he or she write a business plan.
This article was updated on December 1st 2017 when we added paragraphs about Business Plan Executive Summary, Business Plan Elevator Pitch and Business Plan Video Presentation.
Any business has several stakeholders that each needs to see a return on their participation in the business project. Clients will not be clients unless you give them something that make their lives easier, cheaper, more exciting etc, investors will not give you money to create a product or service to make the lives of clients better unless you manage to show them a decent return on the investment, you will not get business partners unless you can convince them it is worth the effort for them to join, employees will not want to work for you if they risk not being paid or given the opportunity to develop as persons and suppliers will never deliver goods and services to you if they suspect you will not be able to pay them.
The entrepreneur is the one who is supposed to bridge these key parts of the business and the diverging interests of the stakeholders into a machine that works, and works so well that all stakeholders become happy and want more at the same time as they are willing to give more. The five essential parts of the business plan addressed below have to be answered in detail or you will not impress any of the stakeholders.
What is the challenge facing the customer? What situations in their lives can be improved? How can their lives become better? How can you help the customer to buy things cheaper? How can you help the customer to increase their status in society? How can you make them happier? How can you deliver items, services and feelings to them faster?
These questions are at the core of a successful business idea and you need to answer them truthfully and in detail in your business plan and not get stuck with any idea that you might have that doesn’t add value when confronted with these questions. Describing the value added is the first thing that should be done in any business plan and it should be done in detail.
Only when you have addressed the customer challenge you can continue by estimating how many customers might be interested in your solution, where they are and how many customers are added to that market per time unit. The challenge, number of customers, their location and growth of their numbers are what any investor will look for first when they review a business plan.
What is your solution to the challenge perceived by the potential customer? Which product or service can you develop and launch on the market to solve the customers’ challenge and make his or her daily life more comfortable, cheaper, and more exciting? This solution needs to be described in detail so that the stakeholders can see a clear and realistic connection between the customer challenge you described and your proposed solution to that challenge.
How much time and money will it cost you to develop your solution to the challenge faced by customers? Do you need investors to shorten the time to develop the solution, to market the solution or to build production capacity? Is your solution possible to scale when put into production or will each product or service unit cost the same to produce? If stakeholders don’t see how your solution can be implemented at a realistic cost and see an advantage with growing your company they will not be impressed as they will suspect that your business will get stuck at an infant level.
Craved by the entrepreneur, demanded by the investor, needed for continued product and service development to retain the customers the return on investment is essential for all stakeholders to believe in and use your product or service. All parties will of course avoid investing, buying, deliver and working if they don’t see more coming out of the deal than they put into it and if they don’t they will pursue other opportunities that has lower risks for them.
The earlier you can prove your concept and deliver a clear proof of good for your stakeholders the greater are your chances to tie the stakeholders to your product or service, which is what is needed to become successful with any business.
The stakeholders invest in you as much as in your business idea. Are you really up for it? Do you have the characteristics of a successful entrepreneur who will be able to connect the dots in the business plan and make them work jointly as a company? Describe why you are the one and what in your experience and knowledge makes you the one – the stakeholders will demand it to do business with you.
There are many reasons why having a business partner is a very good thing but there are also plenty of reasons why a business partner might become a disadvantage.
What is it you lack that you need from a partner? Is it money, enormous work capacity, brains, structure, network, creativity or sales experience? Try to map out what it really is you need to succeed with your startup before you approach potential business partners.
Are you willing to give up control over your business and are you able to deal with somebody else always having opinions about the work you do?
If your potential partner has the same characteristics as you – why would you need him?
Why would you give away a piece of your company if you can get that input free of charge or can afford to hire somebody?
How will your relationship work out when put to the test in though times?
A good piece of advice is, as Rhonda Abrams, president of the small-business-book publisher The Planning said: “Date before you marry.”
There is one group of people out there, a rather large group, who brand themselves as entrepreneurs, always talk about their next start-up, attend every start-up meeting or conference and read every single sentence ever written about entrepreneurship and start-ups. When you meet them and share your ideas or plans in hope of a potential business partnership they are excellent at dissecting it, finding new angles, adding data to your plan or bringing in more people like themselves to the mix.
The problem is that many of these persons are fakepreneurs, they might or might not be aware of it themselves but they will never ever launch or become partners in a start-up. They simply don’t have the guts or lack the capacity to actually get something done other than dreaming, reading and talking about business ideas. If you come across a person like this you might waste a lot of your precious time and be mighty disappointed when the truth dawns on you.
The fakepreneur is hard to spot at first as they come with energy and optimism but if you have a quick look at their background, propose some real world activities you can most often call their bluff and leave them behind you.
Why use the term stakeholders and not focus on investors and customers only? This is because just as there are several aspects of a good business idea and a business plan the stakeholders are also several and their needs will all have to be met for you to succeed. The stakeholders include business partners, customers, employees, investors, suppliers, strategic partners and even your family and they have an impact on the success of your company. Try to imagine who they are when you write your business plan and include their needs and demands in the plan - that will make the business plan stronger and more complete.
Finally it is important to remember that writing a business plan is not what makes a business work but the process of writing the plan is usually the more useful activity for you to develop and structure your ideas and how to implement them. As five star General and U.S. President Eisenhower said: “Plans are worthless, planning is everything”.
The business plan is a sales document more than an internal to-do list. As the executive of the company you will make decisions that change the direction of the company on a daily basis, even if those changes are very small. But when you address the company stakeholders and potential stakeholders you should have a nice document to present, a document nice enough for them to want to invest in, partner with, work for or supply goods and services to your company.
When you introduce your company to outsiders you should not take it for granted that they will read your entire business plan. Maybe they will only look at parts of it to see if you have a serious and thought thru plan. To deal with the short attention span of your stakeholders you need a short and to-the-point executive summary at the very beginning of your business plan or even as a stand-alone document that you can present to the stake holders when you prepare for your meeting with them. The executive summary should clearly and briefly explain your business idea’s potential and why stakeholders should chose to work with you. Create a list of bullets; tables and figures that can be read and understood in a minute and that never exceed one page.
Never forget to include information about yourself in the executive summary. Many investors focus on the entrepreneur above anything else when they invest. Some investors have even said: You are a good entrepreneur, I will finance you so now let’s find you a business idea.
The executive summary will also form the basis for your elevator pitch, your power point presentation and your video presentation.
The expression “elevator pitch” come from the idea that you spot an investor in a lobby when he or she is approaching the elevator, you then rush towards the very same elevator, manage to squeeze yourself in and then have private time with the investor in the elevator until he or she gets off. The time you have the investor by yourself you can use to present your business idea and why he or she should invest. The elevator time is usually short so you need to get to the point fast and know what you are talking about, what you are pitching in the elevator.
The elevator pitch should be based on the most crucial parts of your business plan; the same information you have included in your executive summary. But while the executive summary can include written data and figures the elevator pitch cannot so you have to make sure you know these number at heart and you also need to be able to answer shotgun questions that the investor might ask you.
The very preparation of an elevator pitch is a very useful exercise, as you have to carefully assess what are the unique advantages, challenges and needs to succeed with your business. This very process will develop your skills as a manager and your capability to strategise.
Make your elevator pitch speech in front of the video camera, then edit the video and add the slides from your power point presentation. The video should not exceed one minute.
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