How to create an effective Business Plan?

03 May 2015, Posted by Shyam Sekar S

In many of my conferences, when I ask the audience as to how many prepare business plan for their company, or even how many do set business goals, I do see only a few hands going up. I don’t even need my second hand to count them. Well, you are not new to this; but then let’s understand as to why this does not happen.

First it’s the uncertainty about their business outcome, market dynamics, that clouds their mind; and more often it might look scarier to prepare one.

Second, most may not know exactly how this has to be done.

Let me give some quick pointers as to how anyone of you can create an effective business plan.

  • Start with your company’s introduction
  • Problem definition
    • Highlight the challenges, shortcomings, problems that you wish to address. This could explain the reason for your entity’s existence.
  • Your solution
    • What are the solutions, services you plan to offer/have been offering
    • Products/solutions that will help solve these issues/challenges
    • How will your solution make life easier/better for your customers
  • Who will be your target customersSegment them by
    • region/geography
    • demographics
    • age groups
    • others
  • About your competition
    • Who are your competitors?
    • What are their offerings?
    • What’s their positioning?
    • SWOT analysis of your competitors

This is not a one-time activity; rather your list will keep getting modified as your business grows/progresses.

  • Revenue model
    Most often revenue model seems to draw a blank; like with many online players hinging their revenue models only on advertisements which are a risky proposition.

    • State how you wish to generate revenues?
    • What is the timeframe to achieve those numbers, and from which segment(s)?
      Your revenue forecast is a critical element in your business plan, because your cash flow depends on it. It is better to project 3 different situations;
    • Conservative estimate (sure-shot numbers)
    • Realistic estimate (reasonable visibility/probability, say 80%)
    • Optimistic estimate (aggressive plan, outreach, with riders)
  • Cost structure
    • What’s your cost structure?
    • Your fixed and variable assets
    • Operational expenses
    • Costs that are projected in line with your revenue projections (conservative, realistic, optimistic/aggressive)As highlighted before, this element is important so that you don’t run out of gas in the middle of your journey. It is better to see how long you plan to run your business as per the forecasted revenues, and look for avenues to raise money in advance to run your show. I have seen companies who do not plan their finances effectively and give up at a time when the momentum is picking up well.
  • Timelines and goals
    • Create action plans that is required to meet goals
    • o Need to have timeframe in place as anything that does not get measured, does not get done!

Risk mitigation 
Your plans can look rock solid, and you might have done a good enough groundwork. But still there may be uncertainties when the rubber hits the road. All battle plans may not follow the standard instructions just a few minutes into the battlefield. The marketplace is so dynamic that you will have to keep spotting the business risks, financial risks, operational risks, people risks, etc. and take effective steps to mitigate those risks, counter them from time to time.

The above points are just a bird’s eye view ones, and it will help you to start putting your thoughts into paper (or MS Word/Excel) right away.

This article has not covered the marketing, sales, business development angle as each one is an ocean by itself! Expect to read those in future editions…

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