The Five Questions Your Business Plan Faces
Are you in the process of getting your business off the ground? During the early days of a business venture, an entrepreneur will be faced with the task of developing a business plan. It is easy to draft a plan that covers a lot of information without it really answering the important questions. Consider the following five questions your business plan must face:
Question #1:
The first question that requires a “yes” answer is: Is your product or service feasible? Believe it or not, it is possible to create a product that can’t be built or a service that can’t be delivered. There are many reasons why a product or service is not actually feasible. Consider the following examples:
- The technology simply does not exist at this point in time
- Certain required scientific breakthroughs have not occurred
- Legal factors prohibit the operation of your venture at a desired location
- A required business licenses is not obtainable
Before you can make any financial commitments or agreements – like hiring employees or leasing equipment – you have to be able to give this question a positive answer. You must be able to prove that your product/service is feasible.
Question #2:
The second question you must answer is: Is there a demand for my product/service? If there are already businesses selling the items/services that you plan to sell, then you know that this demand does indeed exist, at which point you may wish to seek out resources, like this TradeBeyond article, that can help you figure out how to get your product out there too. (Unfortunately, this also is a disadvantage if customers are already loyal and satisfied customers to another business.) For most ventures, customer demand is not always obvious. Before you begin a new venture, you must first prove that this demand is real.
Question #3:
The third question to explore is: Can my business operate profitably? Unfortunately, it is not uncommon for businesses to deliver exceptional products or services to a large group of customers and clients, but the business still fails. Why? This business did not utilize a profitable business model.
You would be surprised to learn how many small business owners are guilty of selling their product/service for less than what that product/service costs. Or, they make the mistake of selling products at prices that exceed what that product costs wholesale – failing to fully pay for the operation’s overhead. In short, your business plan must show that your operations will be profitable.
Question #4:
On to the fourth question: Does your business have working capital available? Have you looked into resources like L3 Funding? Whether your business is big or small, capital is essential to any new venture. So it is crucial that you understand where this money is coming from. While there are many business funding sources, you must assess whether that source fits your business’ specific needs before jumping in. If you choose to work with an investor or lender, for example, you must know ahead of time that you can offer whatever return he or she needs. Just because capital is available, does not mean that it is also affordable.
The majority of banks turn small businesses away for funding. Why? A new business venture is typically deemed as “high risk”. Because of this, many small businesses have turned to a merchant cash advance from an alternative lender – like First American Merchant – for their business funding needs. An advance gives the small business owner a readily available option that is also affordable.
Question #5:
The last question you must ask yourself is: Do you and your team possess the necessary managerial and industry skills needed to make this venture a success? Even if your business has a solid customer demand and a profitable structure, if the people behind it lack the knowledge necessary it will not work. An undergraduate degree or MBA in managerial experience provides an individual with the general management skills they need. However, there are many people that did not have the opportunity to formalize their learning in a business school setting. Unfortunately, those MBA business programs are extremely difficult to get into. That’s why so many people don’t get to go. However, for those who aspire to attend business school, they could always consider visiting https://fortunaadmissions.com/ for help with their application. The people at that company know what the schools are looking for, so they can help people to stand a better chance of being accepted.
There are so many other ways to gain the knowledge and skills you need, without spending five or even ten years in another firm in the same industry. Consider the endless number of informative books related to management, strategic planning and strategy:
- Peter Drucker’s Innovation and Entrepreneurship (Harper & Row 1985) and The Effective Executive (Harper & Row, 1967).
- Michael Gerber’s The E-myth Revisited (Harper & Collins, 2009) or one of the occupation or small-business specific editions, such as The E-Myth Contractor, and Eliyahu M. Goldratt’s The Goal: A Process of Ongoing Improvement (North River Press, 2014).
- Michael E. Porter’s Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1998).
So, as you write your business plan, keep these five questions in mind. They will help you map out a plan that provides quality answers about your business – rather than a quantity of information. Years from now, your successful business will thank you for it.