How To Analyze A Business Idea And Write A Business Plan
Business ideas can be structured into a business plan by dividing the opportunity into parts that can be analyzed individually and make it possible to focus on key aspects of the business idea.
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.
The entrepreneur is the one who is supposed to bridge these key parts of the business and its various 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.
What is the challenge facing the customer? What issue in their lives can be solved? How can their lives become better?
Your Solution To The Customer’s Challenge
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?
What Will The Solution Cost?
How much time and money will it cost you to develop your solution to that challenge faced by customers? Do you need investors to shorten the time to provide the solution?
Return On The Investment - Profit
Craved by the entrepreneur, demanded by the investor, needed for continued product and service development to retain the customers. All parties will of course avoid investing, buying, and working if they don’t see more coming out of the deal than they put into it. If they don’t they will move towards other opportunities with lower risks.
Disrupting an existing market has so far proven to be one of the best paths to success and fortune. By changing the value proposition for an entire market the opportunity to amass a great fortune is enormous.
By disrupting a market your business should provide solutions that are groundbreaking and address the challenges faced by customers in a totally new way, a way that will disrupt the ways of the market and have a major impact on the current actors on that market.
Global Scope – Market Size
The size of the market you address is something investors will pay a lot of attention to. The potential market size is what determines the potential of your business idea and the potential number of customers. Needless to say is that the more customers you can reach the better it is.
Further, it is not easy to build processes and organizations that have a capacity to be truly global which increase the potential of your business – if you manage to overcome the many hurdles that stand in the way for a truly global organization. Different countries have different regulations, cultural and wealth differences and you must adapt to these differences to be successful.
Production Of Scale
Scaling a business basically means that the more units you produce the cheaper the production of the last unit produced will be. This means that business that produce many units at an ever lower marginal cost has a much greater chance of building value in the business, for its customers – by being able to lower the sales price – and for its investors by providing a larger and larger profit for each unit produced.
Scale economics is a chief challenge to businesses in the service industry. Surely they can create support systems, knowledge databases and centers of excellence to lower the production cost but it only goes so far. Factories can build larger and larger production lines and increase their purchasing power to reach large scaling capacity but they also face fixed costs that are hard to scale; research and development being one, capital cost another.
The current leaders in production of scale are the Internet based companies. Adding one more user presents an extremely low cost – the server capacity – which mean that Internet based companies can expand fast without suffering from the investment needs in production, which historically has challenged businesses. Add to that the opportunity to go global without hampering regulations - but for government censorship in a few authoritarian countries - and you have a near perfect economy of scale. These factors put together are the reasons so many of the richest persons today own Internet based companies.
Examples Of Fortunes Created Through Market Disruption And Scalability
Uber – Pushing market prices and lower distribution costs on a static market.
Facebook – Increasing the social reach for people
Standard Oil – Lowering production cost of distilled oil products and distribution through efficient operations and cross-state borders effectively challenging the legal structure of a large country.
Ford Motor – The well known moving assembly line and control of the supply chain
IKEA – Eliminating the assembly cost by pushing it to the customers and thus creating an enormous price advantage
Dell Computers – Production on demand
Spotify – Streaming of music instead of large file downloads and CDs.
AirBNB – Increasing supply by making private renting of privately held accommodation easier accessible.
The list could be expanded by many more examples. One thing they have in common is that they changed the logistics of a market, a product or a service while at the same time taking advantage of economics of scale.
Business Opportunities That Can Make You Superrich!
Below follows a few ideas of potentially successful business ideas that could create market disruption and use scaling opportunities on some seemingly static markets. Some of the ideas are not novelties but the author of this article considers them not yet well implemented.
Lack of efficient delivery of goods to households is an obstacle to trade and commerce. Today small deliveries can be made through the mailbox but any larger packages or goods that need refrigeration usually have to be coordinated with the household to make sure somebody is at home to sign-off on the delivery or at least make sure it is safely brought into the house. This situation creates hassle and limit the interest of households to buy online.
A solution for safe deliveries without the need for household participation could create an enormous boost to both household’s and producer’s economies. This delivery system must be safe - have codes or keys to access the delivered goods - and have technology for package identification and delivery verification as well as provide refrigeration of the goods. The market actors must also agree on set standards for the various logistical chains, nodes and endpoints.
The costs foremost relates to establishing an accepted standard that will be used by all producers, retailers and delivery companies while being cheap enough for households to install it. For apartment buildings this equipment might have to be installed outside but near the property. The equipment needed is probably already available on the market in other uses like safety boxes at train stations, banks, hotels, warehouses, in large scale international transportation – the container system being an excellent example - and the refrigerator technique is tested but access to the power grid wherever the delivery point is set up will have to be provided. With an accepted standard and production of scale the implementation could be made possible at a cost accepted throughout the supply chain though.
Being the person or company establishing the standard for deliveries while also providing the equipment needed would create enormous riches for that person or company as the new process of deliveries would give all parties an enormous opportunity to consume and transport goods at a much lower cost.
The new delivery system would disrupt the current logistical chain and be enormously attractive to online retailers, wholesalers, delivery and logistical companies as well as households. All these savings could potentially equal profits through the entire chain of transportation and consumption.
Most education today is still conducted using very old methods, a teacher is giving a lecture, the students reading books, working on assignments – individually or in groups – using computers and the Internet to find information as well as process and communicate their results.
While the old and static methods are still ever-present many children and adults alike are consumed by computer games. Successful computer games are addictive and require a lot of learning for the player to achieve success. One example is the Grand Theft Auto series of games that require the player to learn a vast amount of geography to be able to successfully complete the missions. Other games are strategic in nature and require the player to apply strategic thinking, choice of method, spending of resources, selection of weaponry and much more.
The opportunity is to apply the addictiveness of computer games to the teaching of school curriculums. There must be many ways in which a computer game can be adapted to include learning opportunities relevant for the real world. Anything from solving math problems to advance to a new level, learning geography to find the shortest route in a competition to learning language for foreign missions. Adding instant rewards to the learning-game will push it closer to the addictiveness and thus make it possible for the student to focus for longer stretches of time. In a virtual reality learning-game it will also be possible to include physical training by virtual reality to the modules. This increased efficiency of learning would be a total win for all parties with stakes in education, and that include almost every person and organization.
The costs include development of the learning-games, finding the addictive spots, building the virtual reality consoles and, not the least, solving the ethical aspects that might prohibit any violence and other moments that schools will find unethical and morally deplorable.
Successfully executed this business idea has a global market for rather expensive equipment in fields that consumers and schooling institutions spend an enormous amount of money on and spend it over the entire lifecycle of persons. The savings from increased efficiency of teaching are enormous.
The disruption effect of this concept is potentially massive, it could totally change the ways schools and universities are functioning today and if the expected results are achieved the computer game virtual reality approach to learning will be at the center of all educational institutions moving forward in time. It would lower costs and strike at the personnel costs while at the same time make it possible for pupils and students to enter the labor market in a shorter time span or make it possible for them to acquire more knowledge and skills without extending the time they are enrolled in schools and universities.
Tailor Made Goods
Many people dream of having tailor made goods. Goods that have been produced to match the customers exact needs. Throughout history custom made goods was the norm and only with the industrial revolution did the mass fabricated products become the norm. Now, thanks to computer technology and robotics, the idea of custom made goods is surfacing again as the production of custom made goods at affordable prices is within reach.
To solve the challenge software where the client can easily design the goods he or she wants, chose material and build robots and establish processes for production of the tailor made goods have to be developed. The input material should preferably be drawn from an automatic warehouse and put together by machines reading from the code that the client's design has been translated into.
The software to design the custom made goods is probably not very costly or hard to produce. Building the automatic warehouse and, especially, the production belt including the robots is probably the most expensive and hard part but if cars and cell phones can be produced automatically tailor made goods production should not be an impossible challenge. One of the major issues to solve is the setting costs, the cost of changing the machine set up and programming to make it possible to switch to different types of production and supply the various materials needed for that unique order.
Considering the potential market – global – the scaling opportunities and the low marginal cost per unit at high production levels the profits are enormous.
The potential disruption of implementing automatic production of tailor made consumer goods is enormous. Most currently established production and logistical processes for production are at stake which means that the value of all those companies can potentially be transferred to you.
Households spend a lot of time on tidying and maintaining their houses. This maintenance cost time that could be put to better use and it also leads to a lot of frustration from the feeling of always being behind with chores. Robotics could potentially free household members from chores at home and could improve the maintenance and tidiness of their house. This should not be confused with recreational gardening etc, which of course will be an option also in the future, but at the household members conditions.
The solution is robotics. Robots are becoming more and more sophisticated and are for example already used in hospitals to resupply stocks of supplies needed for patient care. These robots are specially programmed for their route and tasks, and can perform these tasks day and night at a very low cost. The only significant costs are the development of the robot, the purchase of the robot and the programming of the robot. These costs are significant though, but hardly comparable with the training and salary costs of having a human performing the tasks.
The costs includes guidance equipment needed, installation procedure, recharging and resupplying the robot, equipment changes, noise, and time schedule for working not to disturb the household members.
The robot will initially come at a high price which will limit the market size but on the other hand provide an opportunity for very high profit margins.
Think about all the equipment to manage homes that are used today, almost all of them are made to be operated by a human. These machines and tools are sometimes inexpensive but many times significant capital is tied up in the machine stock in a single household. Introducing robots, while also capital binding, is offset by time and effort reduced for household members and will have the potential to replace most, if not all, of the current machines and tools used in a household and thus disrupt an existing market, a market with companies valued at hundreds of billions of dollars.
Media Connecting Analysis With Citizen Journalists
Today’s news media are trying to cover the world using the same methods they always used and are relying on outdated business models to sell their advertisement, which make it hard for them to provide quality reporting and analysis at a profit. Today’s media are basing their operations around the journalists that try to cover huge geographical areas and many topics at the same time as the news consumer has a record number of, alas low quality, alternative sources available at no cost.
Present quality news from all over the world and from all fields at a comparatively very low cost and sell subscriptions to consumers who want to have access to this news. The cost advantage can be achieved by creating a totally virtual organization. Technicians manage the central news hub and editors who coordinate the broadcasting, which is made over the Internet in text, photos and video – live or not live. Expert analysts, discussion moderators, news presenters, on the scene reporters and photo teams are all freelances called upon on demand. Bringing all these parties together for the broadcasts is made strictly online to limit travel and studio costs which are instead created virtually. Translators are called upon when needed and work in all areas that are covered to make the news available globally thus creating the first truly global news source – one which is able to cover local news in depth in a way not achieved by the current world wide news organizations.
Citizen journalists are one of the central parts of this potential venture. Citizens journalists are vetted and ranked based on performance and accuracy and perform the very important task of being available, collect material and report from anywhere in the world. This method is what makes it possible to cover the world at a low cost and in a very timely fashion. Investigative journalism is outsourced to private investigators, accountants, whistle blowers and others. The accuracy checks of these reports can be outsourced to yet another external party.
How is this different from social media like Twitter, Facebook, Instagram and other social media? Social media is not fact checked and is flooded with fake news and hate speech. Social media can however be used for leads on what to cover by the citizen journalists, analysts and special investigators.
Building the technical system to manage the processing and distribution of the news presents a major initial cost together with marketing and creation of the network of citizen journalists, analysts and other human resources needed to operate the company. Maintaining these functions will also carry a cost, not remotely as high though. The ongoing effort to sell the service and expand its market share will also be a part of the running operation and vital to maintain the brand, the value of the company and, of course, the profit demanded by the owners and needed for value increasing investments.
By being able to supply superior quality at a much lower cost than the competitors the virtual media venture is set for higher than average profits in the industry and will thus be able to invest more, grow faster and pose a major challenge to current industry actors. The potential value generation is therefore very significant. Also by leaving the advertisement business model behind the venture will add an extra value to consumers who pay for the news though subscription plans.
This venture could be the thing that takes down traditional media once and for all. This new idea would have enormous cost and quality advantages, and would be able to provide superior news in both quality and range. The disruption is potentially very high and equally very likely.
Today single-family houses are still to a large extent built by on the site carpenters and other craftsmen. Surely the house production has gotten more streamlined over the years and specialized companies provide plans for everything and even pre-made modules that are put together on site.
However, this is not a moving belt production of something that can be used immediately when coming of the belt. The pain of time insecurity, organization of multiple worker teams, unforeseen delays and special on-site changes remains for the soon to be house owner.
These circumstances drives cost and time to completion and makes it harder for anybody to decide when to build a family home and how much this home will cost.
Another hassle is that once the house is constructed it is very expensive and complicated to make adjustments to the original plan, to expand the house or to maintain many parts of the integral house construction.
The solution is to manufacture the house parts on a moving belt using assembly robots and just-in-time delivery of the material needed for production.
The house parts needs to be standardized enough to easily be possible to attach to each other with a Lego style ‘click’. This level of integration – including wiring, plumbing, the concrete base, sewer etc – have to be complete to totally cut the cost of on-the-site per-hour expensive and time consuming work.
Some example features of the ready-made units are that they have to bee able to include attached WC units, kitchen cupboards and municipality sewer, water, electricity grids etc.
The housing units must also be prepared for adjustments and extensions. Opening up walls, adding extensions, changing the interior layout and functions must all be possible with ease and planned for already at the stage of unit production.
Establishing the production line will be the large cost but sourcing the material will be cheaper than today as purchases of scale increase.
Cutting cost of production and material while at the same shortening the time to completion would provide a massive competitive advantage and make it possible to cut consumer prices and make a very good profit at the same time.
Moving belt and just in time production of houses on scale would disrupt the market on a grand scale and create enormous gains in efficiency. Being able to predict future adjustments and extensions would further this disruption. The opportunity for wealth creation through disruption is thus enormous.
Theft of goods is a major cost to society, companies and citizens. It is not only the replacement cost of the goods but also the very unnerving feeling of an intrusion into ones private life caused by the theft. Producers, wholesalers, retailers and customers will therefore probably like to have their goods protected and they will save massive amounts in insurance, security and replacement cost by protecting their goods – besides from the invasion of privacy it means to get items stolen.
The solution to the challenged faced by goods owners is a burglar alarms with a tracking devicen that can be integrated in all things small and big, including money. The tracker must be built into the product in a way that the tracker cannot be removed without destroying the value of the product. Ownership of products should be registered in a database similar to a car register. The solution face one major challenge and that is to make the cost so small that it will not have a great impact on the sales price.
Developing and producing the security devices small enough to be possible to place in all kinds of items without being able to removed and doing this at a cost with only a minor impact on the price of the goods is the core challenge to overcome to make the product a success but considering the market potential it could very well be worth the challenge.
To make this venture profitable the customers needs to be convinced that it works and will have the intended premptive effect of protecting them and their possessions from theft, or at least make them believe their possessions can easily be recovered if stolen despite the traceable alarm. If the customers are indeed convinced you can solve this potential problem for them and do it at a cost they are willing to carry with regards to the perceived good you will be able to reach a world market and make enormous profits.
The disruptive effect connected to the product-integrated-burglar-alarm is foremost directed against the criminals for whom it will become much harder to steal goods and place it on the secondary market. The profits criminals make on theft can be transferred to your venture and your customers, which is a very significant wealth transaction.
Wrapping It Up
Solving any of these challenges is a major undertaking that would require huge investments of time and money as well as a real dose of luck. If you succeed however, you would become one of the richest persons in the world.
The entrepreneur needs to make thousands of small and big decisions along the way to reach success and the risks confronted by making the wrong decisions and perceiving the wrong paths can lead to failure.
The entrepreneur most likely also have to accept that the path to success require an effort and focus that will have a profound impact on their life. Working enormous hours, living with pressure from investors, customers and – foremost – the family can consume energy to an extent that drains energy and motivation. But despite these challenges the entrepreneur must charge ahead, work with repetitive tasks, communicate the same message over and over again and wrestle with all the people who fail to understand the ingenuity of their business idea.
The fruits of success associated with entrepreneurship include wealth and the intellectual as well as physical freedom but most often they cannot be enjoyed until after a long time. The well-known success stories involving young people becoming billionaires almost over night are based on cases so rare that the probability of high return from investing in a lottery ticket is higher.
Finally, becoming an entrepreneur is one of the very few professional fields available today that offers an out-of-the-ordinary life with freedoms, influence and riches. Don’t hesitate to throw yourself at it! Failure is just a lesson you took to better prepare yourself for the next adventure.
Please don’t hesitate to contact me with comments, questions and suggestions for improvement of this article at: firstname.lastname@example.org
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