The single biggest hurdle that entrepreneurs confront when they consider launching a new business is not knowing if their business idea is truly a good idea. Can they support themselves and their family? What are the chances of success – or failure ? Most people are not accountants, and struggle with understanding the principles behind financial forecasting. In such situations, the major mistake to be avoided is to assume that you will be successful and will somehow get through ! A sound business plan is one of the keys to success.
A sound Business Plan is always useful for self evaluation of your business. It may give you a yes / no signal, before you actually plunge in. It would highlight the pros and cons of your business and help you keep a watch on your weaknesses. Besides, if you are looking for a partner or a financier, it is a good document to keep handy at all times.
One must keep in mind the following components of a good business plan :
- Executive summary : This would be a quick summary of what you intend to do and how. What is your main business mission and what needs does it set out to fulfil ? It should give the reader a quick overview of your business model, the key financials, the marketing strategies, technology required, if applicable, etc. Ideally it should never exceed 2-3 pages. It should be lucidly written and should excite the reader and lead him on to read the full plan.
- Business description : This section of your business plan should describe in detail, all aspects of your business model. What are the revenue generators, the operations, the costs, the technology, the infrastructure, finance and admin requirements. This is the core component of your Business Plan.
- Market Analysis : Use this section to dissect the market and analyse it in depth. Know your industry’s average financial performance statistics. Make your market forecasts plausible and relevant to the current situation. A detailed review of the competition, what they are upto and how they are pricing similar products would help tremendously. Touch upon your USP (Unique Selling Proposition) and product differentiation so that you stand out from the crowd, and use this to generate better prices for your product or service.
- Financial Projections : Identify the selling price of your product / service in the market, know your costs, find out exactly how much you will pay to source or manufacture your product. Also, there would be several fixed costs which you will have to incur to run your business. List out such costs and how you intend to track and control them – this might be the key to your success in some cases. Your financial projections should also include your initial investments in fixed assets and infrastructure and how you would most likely finance the same. Whether you would take loans or take equity from a financial partner, if you would take loans, whether they would be secure or unsecure, at what cost would the loans be available, etc.
- Human Resources : What kind of people would you require to succeed ? Would you need partners ? Senior Executives ? Mentors ? WorkersHow many and when ? How much would they cost ?
- Scalability : What if you succeed and reach your peak as projected in the first 3 years ? Is your plan scalable ? What would it take to move up the ladder ? Additional resources ? Space ? People ?
- Plan B: What if your main plan fails – would there be a fall back ? Would you continue to operate at a reduced level ? Would you outsource before you consider manufacturing again ? What are the costs of aborting the venture? Think about all this and document it in your business plan.
Remember, a business plan is not cast in stone. You should review it annually and change it according to the realities you face, to make it more effective and relevant. Also, it should be relatively confidential – it should not be available to all and sundry.
There are books and websites galore on the subject and you will have to wade your way through, to get the right one. You may look up http://wzcc.net/bpc09_resources.asp or www.enterprisers.in for a variety of resources to make business plans, to start with.
So before you take the plunge, be sure to make a sound business plan. Remember – not planning to succeed is a sure plan for failure !
E-Series – Yazdi Tantra