Many entrepreneurs start businesses or at least think about starting a business from an emotional point of view only – they want to do something with themselves and fulfill an old dream of theirs.
The same idea can be very unprofitable and unprofitable, so it would be better for them to think of another business area.
The problem is that entrepreneurs don’t always have the most appropriate tools to perform a feasibility study and to understand numerically in depth what the business they want to establish actually requires.
The ideal situation is to build a business plan for every idea you have and based on the results of the plan to make the decision whether to really establish the business we wanted.
- Is a suitable financial investment required and how much exactly?
- Analysis of operational actions that we need to prepare for in advance?
- What is the percentage of profitability that can be reached?
- Are there any legal challenges we should expect?
- Can such a business grow and develop into other areas?
- Do we understand the market we are entering?
- Are there technological barriers that we need to take into account?
The worst thing that can happen to us is to start a business, invest a lot of effort, a high financial investment, resign from our jobs as employees, and finally find out that the business we started is not at all profitable and efficient and see that in hindsight we could have prevented and prepared accordingly.
Before establishing any venture/business, we will have to write an orderly business plan that will be our forecast before carrying out various business operations. The business plan is an excellent tool to make sure we reach our goals and to examine whether the business we are planning to establish can be profitable? How profitable exactly? And what actions do we need to take in order to make sure that we will indeed reach the goals we have set?
In the past, business plans were business forecasts for 5 years, meaning planning for the next 5 years, but today, the world is changing at a dizzying and dynamic pace that we must build a business plan for the coming year.
The plan is actually a kind of our manager and through it we can make decisions and understand whether the business we are planning will indeed be profitable and profitable for us.
Every business must have a business plan that defines the activity for at least the coming year. This plan is actually the initial feasibility test that we will carry out and in addition an implementation plan can be added – which will include all our activities step by step in all the different departments of the business:
- Sales and Marketing
- Customer Service
- Financial management
- Business development and operations
- Existing market analysis
- Influential trends
Each of these elements is a main and essential component of the business and is directly responsible for its function and profitability. In every important decision, the business consultant functions as part of the business, and actually directly influences its progress and growth, the support is suitable for existing businesses or in the process of establishment.
At every stage, a business needs business support, even when things seem perfect and everything is functioning. In the accompanying process we will locate the future obstacles and find solutions together with the client.
The goal is to stabilize and then launch the business forward in a plan of several months.
Why it is important to create a Business Plan?
The business plan is designed to test the profitability of the business, the amount of money and budgets that we have to take into account, the business is measured mainly by its expenses than only by its income and it is important to check the profitability of our field and business even before we set off.
Prevention of uncertainty
Many businesses operate without any proper plan and rather “flow” with their business. This is the perfect recipe for failure and wasting valuable time and resources. Without a suitable business plan, we cannot really know where we are going – without knowing where we are going we cannot really progress.
We are more likely to meet our goals
The business plan is an assumption of a certain situation and of course we have to build several scenarios. On a personal level, we always advise to build a pessimistic plan that includes many expenses and quite solid scenarios because if we do not reach the goals we have set for ourselves we may lose money and be disappointed with our results. The disappointment of our results will make us doubt our abilities and possibly reach a state of abandoning the business.
Our advice, make several plans and always think about the worst case, at most we will be more successful and be pleasantly surprised, but we will always prepare for the worst case.
Raising funds from investors and partners
In order to convince another party to invest and believe in our business, we must present an economic and operational business plan and forecast so that the same party can see exactly the degree of profitability of the business, all expenses and future income and make a decision whether to invest in you or not.
Without an organized business plan, no serious person will invest most of his money and time in a business that is not managed in an orderly manner, and there is no plan that shows exactly when the business will be profitable and what amounts of profit can be reached.
Business Plan Elements
Vision and goals
In building a business plan, it is very important to start with our vision. Where do we want to go? What is our ultimate goal?
Once we understand exactly where we want to go, it will be easier for us to start thinking about all the ways to reach the same goal.
Our goal is built from smaller and measured goals for a shorter time so that we can build a stable ladder that will show us the way and give us a kind of guideline for our success.
Sometimes when we start a new business, we don’t really know where we want to go. The answers are not always so clear to us and it is perfectly fine not to know exactly what we want and to change our approach on the fly.
Many companies started their journey at one point and ended at a completely different point.
The goal is to identify the existing challenges, open your eyes and ears to what is happening in the market, know how to react and be flexible when necessary so that we can make the business succeed and not fail.
Positions and Key Roles
The business will rise or fall with the help of the people who manage it, therefore it is very important to divide all the people working in the business into those with clear roles and definitions.
What exactly do you do in business? What is your contribution? What is your job description? What area are you responsible for? Focus on what you are best at and what you are less good at – find the most relevant people for the job.
If you think you’re good at everything, at first it might seem nice and you have time, but as the business grows you won’t be able to channel your time into doing much and it could very well be that the business you set up by yourself simply won’t take off – and that’s your fault alone.
Make an orderly list of actions that must happen, divide tasks and clear definitions that can be measured so that you can monitor the work.
Building a winning team is the recipe for success!
In every field and in every position.
Sales and Marketing
An organized marketing plan and a clear sales plan will help you plan your source of income, because they are quite directly responsible for you reaching the financial goals you set for yourself.
The marketing and sales strategy consists of a number of elements that are worth taking very seriously and making decisions about:
About the market in which we operate – which market are we targeting? native? global? What do we have past experience in? Are there competitors in which markets? What do they offer? Can we offer something similar / different? How do we distinguish ourselves and our services?
Our selling point – how do we intend to sell our services? Online on the website / social network / physical point of sale / will there be several points of sale? Distributors who will market and sell for us? Telephone sales center? Field agents who come to the customer’s home?
The point of sale is important to understand because that’s where it all starts. When we market any product or service, the drive to action is the most important when finally the customer buys from us.
Think of the most convenient selling points for both the customer and you.
Choosing the right target audience for us – which target audience are we aiming for? Business (B2B)? Private (B2C)?, ages, geographic location, why did we choose this audience? Do we have an advantage in selling to this audience? Is the target audience necessarily the decision maker for the purchase? Or should we market to an additional target audience so that our target audience will create our products? Do we have products that appeal to different audiences? – We must build for each target audience and each product a different marketing funnel that will increase the possibility that we will sell to a customer.
Marketing funnel – the route the customer goes through until the decision to purchase is made and this route continues for another purchase so that the customer returns to us again.
There are many and varied marketing funnels. There is not just one marketing funnel that works – there are many!
We must try a variety of routes, try and examine what works best for us and then we can maximize the customer’s life cycle up to the various points of sale.
Building a SWOT model – our strengths and weaknesses against external opportunities and threats.
What are you better and worse at – strengths and weaknesses related to you personally that will help you understand what skills you have and perhaps other people who can complete you to achieve maximum success.
External opportunities and threats – what are out there? Strong competitors in the market? A very saturated market? A political/legal barrier that exists and may pose a great threat, or maybe there is a new opportunity following the privatization of a regulation that existed in the past? Perhaps there is an opportunity due to the exit and retirement of one of the competitors?
It is useful to calculate these elements in order to gain an understanding of the field of business you are entering and formulate a general plan for success and identifying better and less avenues.
What are our sources of income? – What sources of income will the customers come from?
word of mouth (WOM)? Sponsored advertising in social networks? Advertising on billboards? Referrals from friends or family? Direct inquiries through the website? As a result of a client who recommended?
Source management will help us manage our marketing strategy so that we can focus on sources that yield us more and less.
As soon as we identify a source of income that manages to bring us many customers – we will increase the advertising budget for it. And vice versa – a source of income that does not generate us at all – we will probably give it up.
Of course we would like to check that the cost for the benefit is high and we cover the cost of the source through which the customers came to us.
Our sales plan – how much should we sell of each product / service we have? The sales plan shows us precisely that we have to manage a sales mix to meet our main revenue goal – what does our monthly income consist of?
– X sales from product 1 whose price Y = total sales from product 1 in the month.
– X sales from product 2 whose price Y = total sales from product 2 in the month.
– X sales from product 3 whose price Y = total sales from product 3 in the month.
And so on for the other products and services we have.
We want to know what the most optimal sales plan is so that we can understand whether the goal we have set is indeed applicable and possible and at what stage we should sell several products in order to grow into additional markets and open additional sales channels.
Building an appropriate business model – building our business model will determine whether our business can be profitable and exist over time.
How do we profit from the business? How much do we earn from the business?
Is the payment model that customers will pay us one-time? – Does that mean our business model works on new customers only?
Or does our business model work on regular customers who pay us every month? (retainer payment). Or do we intend to combine the models and create products based on a one-time payment and in addition additional products based on monthly payments.
There are many entrepreneurs who do not invest much thought time in building the business model, and you can really see that they fail to make the business financially viable.
Yes yes, you will be surprised to hear that many entrepreneurs dream of many businesses in theory, and when they have to build the most profitable model – they get stuck in many problems.
You must first think about the most profitable business model that will make your business continue to exist for a long time.
Financial forecasting and cash flow management
Expenses of the business
When we start a business, we will have to take into account all the expenses we will have so that we can calculate the income we need to cover these expenses.
There are several types of expenses in business:
Establishment expenses – these are all the expenses we have when we establish our business. The establishment expenses are usually one-time and serve as a main entry barrier to the viability of our business.
Suppose we set up a factory, our construction costs are very high because we have to rent a large building, renovate it and adapt it to our needs, buy certain raw materials, purchase operating machines, etc.
In the era of online businesses, the set-up costs are relatively low, so the barrier to entry is very low, and the investment can be recouped in a very short time.
The setup costs can be variable if we have some product that we have a cost for, or we have a service that we provide and the only cost we have is our time. In general in any business, the highest costs are usually marketing costs and employee costs. Today it is possible to use a lot of digital tools for which the payment is a monthly subscription fee, so we will not have to set something up ourselves and pay a lot of money for the set up.
Setup costs can be: setting up a website, content writing services, legal and business consulting, computing, vehicles and other costs that we will need to start the business.
The establishment expenses will define for us whether there is a need for a large financial investment, whether we have the starting money or whether we may have to take a loan for the establishment of the business.
All those expenses, even if we don’t put any money into the business and there are no non-customers, we will still have to pay them. These expenses basically determine how much we have to bring in for us to be profitable.
Fixed expenses can be employee costs, office rent, vehicles, customer management system, insurance we have, bookkeeping, business management systems, etc.
The higher our fixed expenses, the greater the risk of the business, because we are building a business plan and forecast, we also take into account cases where we will not be able to bring money into the business and we would like to see how long the business can exist without much income.
The fixed expenses are one of the reasons why we take a large investment into the business, so that we can predict a case where we were not able to bring in many customers and still maintain the business at a level of profit that would be enough for us to sustain ourselves financially.
All those costs that we have can be canceled quite easily and in cases where we do not have a lot of income we can waive them.
It can be said that the variable expenses are the expenses that help us advance the business to the next level and that is why it is very easy to measure the return on investment for these expenses.
These are mainly marketing and advertising costs, business development, conferences, consulting services – these are one-time increases or for a certain period.
As soon as we see that these expenses pay for themselves, thanks to them we have more customers and our business grows, we would like to continue and only increase the scope of these expenses.
You can look at them as the investment model in the business – once you have found a way to spend money and return it in a safe and efficient way – congratulations! You have an investment channel that will only grow in your business and help you develop, enter more countries, open branches, hire more employees, work with more suppliers, penetrate new markets, create new products.
Focus on the changing expenses and track your expense reimbursement, it can lift your business to new places.
The pricing model is an issue that many entrepreneurs face, with the biggest question – how much money to charge the customer?
The pricing model is actually a formula that contains the cost of the product/service + fixed and variable expenses divided by the number of your customers. This is actually the balance point where you neither profit nor lose for your service/product. As soon as we know what this break-even point is and what the exact number is, we will want to add our profit to the break-even point and only then set the price for the customer.
A lot of entrepreneurs do not deeply consider the break-even point and then a situation arises where the price to the customer does not reflect their real profit and they really see that they are not able to be profitable, and the question is asked – “Where does the money go?” After all, I have many clients, but I can’t make a profit.’
Exactly for this there is an exact formula that determines the price for the customer that takes into account all of our expenses in the business and contains within it the desired profit that we would like to earn.
Think carefully and understand what your break-even point is in the business – the point where you cover all the costs of the business in the price for your customer.
Cash Flow Management
The amount of liquid money we have today that is used by us to increase the company’s activity and daily use for additional operations.
Quite a few entrepreneurs plan to have clients, which is great – the big question here is: “When do we meet the money?”
The biggest problem we see in building business plans is managing the current flow, because “on paper” you sold your services / products but in practice you did not receive the money.
You will receive the money in 30/60/90 days.
Depends on how you receive the money, through bank transfers in advance, credit
That is, you fool yourself that the money is coming in and then you think that you are making a profit, but in reality it may be that you have to take out bridging loans in order to survive and only after a short period will your flow return and you will be able to operate from the business funds.
Without a deep understanding of the issue of cash flow, many businesses fail and find themselves in a situation of bankruptcy simply because they did not foresee the right time when the money would enter their account and be able to deal with it.
This is also one of the reasons we will need investment in our business, because there is a possibility that the money coming in from the customers will appear in our account at a different time than the actual sale time.
The story of the whole business!
The executive summary helps us get a broad picture of our business, it actually summarizes all the elements we need to take into account. A summary containing an overall picture of the business. A sort of zoom out on the most important things we would like to know.
The business insights we will take from the construction of the business plan will help us make crucial decisions in every issue related to the financial, marketing and operational aspect.