In my line of work, clients, business partners and prospects often ask me what a good business plan looks like. I don’t have a straight answer to that because each business, each category and each industry has its own idiosyncrasies and it’s hard for me to generalize. I’m sure that I could offer a standardized answer if I put my mind to it, but I like to feel my way into engagements rather than check off items on an objective list of things-to-be-done.
My work is a delightful mix of business development, strategy consulting, category creation, market expansion, brand management, forging partnerships, financial analysis, and portfolio management. All of it becomes even more exciting given that I am not constrained by any sectors. Hence, my belief in co-creating businesses by fusing my lateral experiences with the vision & mission of the entrepreneur.
Very often the most basic issue with business plans is that owners fall in love with their product and/or ideas so much that they fail to justify the existence of the business from the prism of an investor. And that’s very crucial. There’s nothing wrong in really believing in your business, but one should always strive to answer a few critical questions:
What unmet needs are being addressed? Why now? And, what is really different?
There are many I’ve met who believe that their product/service is the best or first of its kind or not replicable. But what is the main customer pain point that you are addressing and is the time ripe for it? Many businesses die an early death simply because they are ahead of their times, or because an ecosystem to support the business or expand the market has not matured adequately. For instance, online grocery shopping may not have worked in India five years ago, but today with technology, logistics, payment mechanisms in place it seems to be a viable method.
However, the toughest part, and the one that requires maximum attention, is to identify the one or two strongest customer propositions. This is what defines your business in the market place; this is what your entire business strategy will be based on; this is what each and every employee in the organization will align towards.
Do you understand the chosen industry and competitors well?
Are you trying to be an entrepreneur because it’s sexy to be one, or are you entering this having done the necessary research? Passion is important, but that alone doesn’t pay the bills. It goes without saying that unless you do understand the forces at play, the outcome will at best be mediocre. Will you be able to both open up a new market/category and sustain market share? Or will you be the guy who opens the market, educates the audience, only to see others with deep pockets rush in and edge you out?
What are the key factors that will keep the business in business?
You obviously know where the revenues will come from and may have even formed very scientific assumptions to predict future revenues & costs, but you might have to consider every tangible and intangible aspect that will keep you going. You need to be adaptable to evolving needs; in fact you should be able to proactively cause people to change their needs & habits. That’s a very important skill. For example, if you are a healthcare company, are you going to choose only the unwell as your target client, or do you want to inculcate a habit of regular check-ups among the larger population and thereby create a much larger catchment area for yourself. Similarly, you should be aware of how government policies can affect you, what wind is blowing politically and how that could shape the policy environment. Is your universe of target audience expanding or shrinking; and what adjacencies to explore?
Do you understand your potential investor?
The potential investor is probably reviewing several plans simultaneously. She/he may not have the time to do detailed research on the businesses at this early a stage. So try to present her/him with as many relevant information nuggets as possible, with due reference. If you are presenting a certain market size & dynamics and you got the numbers from Report XYZ; please do mention – after all you don’t want anyone to think that those numbers were pulled out of thin air. Tell the investor why you are the right person to back, who are the others that take decisions in your company and what are their backgrounds. Support your financial projections with rational assumptions and go into as much detail as possible.
And don’t forget the most important aspect that any potential investor looks at – a successful exit. Every investor will want to engage with a player who has a definite plan to provide an exit – whether through buybacks, IPO, trade sale. So it comes to 3 things: Ability to Scale, Ability to Execute and Ability to Exit.
The list can go on, but the fact is that a well-researched business plan, that showcases the entrepreneur’s passion and gumption, always wins. The trick is to tell a compelling story, grounded in rationality, which excites everyone!