“If we study all the successful as well as failed companies, it will become obvious that the difference between the successes and the failures were really determined by how well the entrepreneur managed to convert the original idea into a working business with all the bells and whistles that make a business tick.” Mr Inderjit Singh – The Art and Science of Entrepreneurship.
Many have ideas, creative ones at that, but out of those most fail to turn them into valuable businesses. It is the part of transforming an idea into a viable business where many falter.
So what do we need to turn an idea into a business; we need a plan.
Get that Paper Napkin Ready
Many ideas come to us unexpectedly. We could be roaming around town, having lunch with friends, in the middle of the night, or even showering (many tend to get best ideas here). It is always good to have a way to note things down on the fly. It is always best to have a small notebook or something to write down ideas in, all the time. Today many people carry smart phones and tablets, which are great devices to capture ideas and thoughts when they enter your mind. You never know when an idea will strike and you should take it down before you forget.
A rough sketch/mind map on a paper napkin can be sufficient to help you see an idea more clearly.
Back of The Envelope Plan. 1 – The Art and Science of Entrepreneurship
Back of The Envelope Plan. 2 – The Art and Science of Entrepreneurship
“In my personal experience, this part of converting the idea into a business strategy and a workable business model has been among the toughest experiences I’ve had. There are so many things to consider, spanning all the aspects of doing a business, such as the people to be hired, the marketing plans, the competitive analysis, the risk factors, the financial plan, the market survey, etc.
It is not only the thinking or the planning that is important, but also the ability to convert the concepts, plans and vision into a total plan that makes sense.” – Mr Inderjit Singh – The Art And Science of Entrepreneurship
What needs to be in a Business Plan?
A business is always about making money, if making money is not on the top 3 of your company’s goals, then perhaps you should consider something else.
So What Are We Going To Do? How Are We Going To Make Money?
To get things going we need some certain principles or guidelines, that will help the company take shape and grow. Below are some important things you need to take note of while planning a business.
Business Model: A business model describes the rationale of how a company creates value (economic, social, or other forms of value). – Wikipedia
The business model helps to define what the business is about. It shows what problem that is being solved, or what innovation is being brought to the market to help make things better. A business model shows what value a company adds to the society, be it economic (helps people make money), social (makes people’s life easier), or other forms of value as well.
Asking questions is a very good way to get plans going. By asking questions, you will be able to start defining the business and how it is to be built. This will help you to formulate the plans to help build and grow your business.
– What problems are you solving? What do you want to achieve (mission/goals)? Is there a lack of this product in the market, or are you improving an existing product?
– What type of company are you? A Charity? A Trading Company? A Fashion Brand?
– Which industry are you working in? Do you manufacture products or provide a service?
Revenue Model: To successfully run a company, you should be able to turn it into a money making machine. Look at different revenue models and figure what fits your company and your market. It sometimes can be good to have more than one revenue model.
Here are some examples of Business Models:
Subscription Model: Customers pay a fee to access the product/service for a certain period.
Example: Monthly Newspaper Subscriptions.
Pay As You Use Model: Customers are charged as per their usage of a product/service. Example: Prepaid mobile phone packages.
Direct Sales Model: Selling the products directly to the customers.
Franchise Model: Allowing for the duplication of your store through others for a fee.
The way in which a company makes money is very important. It has to sustain its employees and other overheads to as to keep running, and it also has to be able to provide for its owner as well. Also this is normally one of the first few questions that are asked by investors.
Business Strategy/ Vision: A plan of how the company intends to reach its goal and accomplish its mission. This is usually done with timelines and milestones. It is best to include the marketing and financial strategy in this part. In most schools of thought, it is said that when making plans it is best to be as detailed as possible. It is also true with start-ups, but the plan should be made flexible, to accommodate changes along the way.
It is very important to identify who the target market is. This will help when creating the product and spreading the message. By identifying and understanding the right markets, we are able to send out the right message to the right people, turning them into customers for our product.
When creating a product/service, we need to understand who our customers will be, how do they think, how do they feel. Is the problem we are trying to solve very serious to them? Do the customers care that this problem is solved?
Depending on your target market and type of product you would have to formulate an appropriate strategy to market your product to your customers. Using traditional platforms and new technologies (social media) you should plan a way to get the word across to the people, so that they will come to use your product.
There is a need to identify what resources are needed to run the business. Here are some examples, to get you started. Land (office, warehouse, factory), Human Resource (staff), Machinery etc.
Lastly in this list, but a very important part is the finances. We need to determine the costs, forecasts and projections. This will help the running of the company. It will be very difficult if suddenly there is no money to run day-to-day operations, or expand the company if you are not on top of the finances. Here are some examples, Staff Payroll, Utilities, Rent, Cost of Input, Research, Experiments, Travel, Financial Cost Projections and Sales Projections.
Building a business requires special skills, to implement and adapt a plan. It will take lots of energy and willpower to do all these things in the first few years of a company’s life. Many companies do not make it past this stage and many people move on from becoming entrepreneurs. Many investors will focus on this area, and will be able to judge whether the entrepreneur and the team is capable enough of doing the business, based on the plan. They will be able to see if the team has been able to transform the idea into a proper business, and do they have what it takes to build a profitable enterprise, by seeing if the entrepreneur has been able to identify all the necessary actions to get the transformation done.
It is good to start with the sections above. They will help you to shape your idea into a viable business plan. There are a lot more parts to making a proper business plan and we will be going in depth into the sections above in future lessons. The activity below will start you on the path of asking questions that you should look at to cover all the angles for planning your business. Asking all the small questions and breaking down all your doubts will help you build a better business.