Business model & Business plan preparation


Starting a business starts with idea generation. The next step in his journey in entrepreneurship is finalizing business model. How best the idea can be commercialized to make it successful. The best cook in house may not be a successful hotel owner.  A successful engineer in charge of operations may not be a successful factory owner.  Business needs different entrepreneurial skills beyond knowledge of process or technology.  One of such skills is systematic planning and it starts in preparing commercial model of his idea. 

A business model preparation involves looking at different parameters of a business which are classified in nine blocks as given below:

  1. Customer segments: Every business targets a customer and the customers are found in different segments.  The targeted customer in our model and the segment in which he is in are tobe identified and fixed.
  2. Value Propositions: The products or services offered are to carry a value for the customers. Values normally offers solutions to problems or pains faced by the customer in his job.  We should offer a pain relief to address the problems of customers. Proposals of value addition of our product or service are to be determined.
  3. Channels: The product or service are to reach the customer and the methodology of delivery channels are to be worked out and finalized.
  4. Revenue Streams: Revenue generating ways whether,pricing, subscriptions, fee/commission, copyright, brokerage etc are to be devised and collection logistics are to be planned.
  5. Customer Relationships: Strategies to bring in customers and to retain the customers visited us to ensure repeated customer visits are to be planned. A suitable customer relationship policy to be adopted towards this end.
  6. Key Resources: The value proposition, channels and revenue streams require certain resources. The key resources which deliver this-Physical, Intellectual, Human, Financial-are to be identified and planned.
  7. Key Activities: All the above are to be planned and executed and the requirement of activities involved in such planning and execution –Production, Problem solving, Platform, Networking-are to be put in place.

Key Partners: A business is not a single man show. Competitors exist.  Whether we can face the competitor or take him also alongwith us by sharing business, identify partners who will associate with us and out source the business etc are to be determined.

  1. Cost Structure: Finally what are the costs involved in the operation of this business model and how it could be mobilized and what we could earn out of it is the Business Planning which need to be done.

These nine steps if meticulously followed and planned a Business Model is ready and an Entrepreneur confidently proceed with his idea.

BUSINESS PLAN 

An Entrepreneur ready with an idea has to answer three basic questions.  Whether I can make the product I propose?  Whether I can sell the product?  And Whether I can earn from it?  Possession of Skills or acquiring skill through training gives you the confidence to make it.  Planning a Business Model prepares your marketing strategy.  A Business Plan is the tool that enables you to find out how much you require to execute your model and if so done whether you can earn anything out of it?   Therefore, an essential task before a systematic business planner is Preparation of a Business Plan.

Secondly, an entrepreneur looking for loan assistance from banks/financial institutions needs to answer three fundamental questions as follows:

  1. Who am I ? What I propose to do ?  3. What do I need and how I am going give back what I received ?

A  business plan is prepared to address these issues to be placed before a financier which would enable him to assess the viability of our proposal/project.

Therefore  a Business Plan is primarily for an Entrepreneur and secondarily a document for raising resources.  This obviously makes it clear that the Entrepreneur has to prepare this document himself and if need be vetting assistance can be drawn from an Auditor.  Because, preparation of Business Plan enables to anticipate  problems, issues and planning to resolve these problems  in advance.  Mere gate crashing will result in opening the shop and waiting for business and preparation of business plan does vice versa.

In simple terms a Business Plan can be explained as a document which enables you to determine how much cost is involved in the project and what are the sources for funding it.  Howmuch one can do and what will be revenue generation.  Revenue generated minus the production cost incurred will provide your gross income.  The amount you can set apart for loan repayment from the gross income can be arrived and balance will be surplus retained by you.

A business plan comprises of the following sections:

The first section will explain the promoters background and the proposal in his hand and his plans to excute the same.  A brief report providing information pointedly and precisely with necessary inputs will highlight the promoters ability to  carryout the project.  Making it lengthy and voluminous may make the reader boredom and tired of going through the entire document.

A market survey necessarily has to precede preparation of a Business Plan Preparation.  A survey targeting to find out the gap between demand and supply for the product is essential.  What is existing market for the product and what are advantages and disadvantages of the available products are to be studied.  The supplier/manufacturer, end user/ultimate consumer, and intermediaries such as stockiest/dealers/retailers are to be covered in the survey.  A sizeable coverage of samples sectorwise will enable you to evolve your marketing strategy based on the analysis of survey.  This may provide info on probable customers for your product and how much business you can anticipate.  The  assumption of anticipated business is the basic data on which a business plan has to be built up.  This data if not hundered percent accurate should match reality.   Based on these data a pricing policy can also be adopted.

Finally, the last section tells you how much you can earn out of your project and if the investment is worth of it.  This has to be studied by preparing reports of  Balance Sheet, Profit and Loss statement, Cash Flow Analysis and Breakeven Analysis.  Viability of the project report has to worked out based on the following ratio analysis.