Starting a business is often a life changing event. For some it is an entry into the real world, while for others it is “the next logical step”, having worked and gained a level of expertise in specific business functions or domains. Irrespective of your background, the experience for an entrepreneur while launching a business is nothing short of shaping one’s own destiny. Therefore, proper business planning and financial forecasting are essential activities that will help transform your idea into reality. In this article we discuss the building blocks required to start a business and capture elements of the journey an entrepreneur may undertake; from the inception of an idea to seeding a business venture.
Every business opportunity starts with an idea. This is an intuitive process and for an entrepreneur, is potentially the “eureka” moment of their professional lives. However, it is important to step back and take a rational view of the idea from a business perspective. The following pointers may help to get a grip on the validity of your great idea.
- Analyze your idea – Think and rethink your idea. At this stage you need to analyze if your idea is something that is implementable at a larger scale, or is it just a great thought. Get the thinking cap on.
- Business Value – This is when you need to start setting expectations around your idea. Try and assess the market failure that your idea can address and the commercial opportunity that it may present. At the end of the day, you need to implement the idea and generate revenues out of it.
- Demand – People often speak about certain businesses being nothing more than a “me –to” of a more successful and similar venture. There is nothing wrong with that, but it is very important for you to identify business reasons as to why consumers will transact with you and not with the existing more established players existing in the industry. It could be because there is a demand – supply mismatch, an uniqueness in your delivery model, existing players do not meet consumer expectations or simply put, you just have a great idea. Irrespective of your USP, nail it down.
- Skills and dependencies – This is a critical component of your ideation phase. Do you have the skills to implement your idea and transform it into a successful business? If you believe fundamental gaps exist, look for co-founders who have complementary skills. Get a strong team together and leverage of each other’s capabilities. Ensure that compliance issues are addressed and if appropriate, a legal entity is established. Brain storm and start to document your idea. It is here that most entrepreneur’s struggle, as transferring a thought into a structured document, more popularly known as a business plan can prove to being challenging.
A business plan is a strategic document that helps an entrepreneur define business objectives, operational milestones and financial forecasts. In essence, it brings to life ideas and opportunities in a structured documented format. A business plan is the first step – change of an idea into a potential business opportunity. Before starting on a business plan it is critical to assess its final utility. While a business plan is extremely important prior to launching a new business or, while seeking funding, it is equally relevant for expansion purposes and in running a business on a day to day basis. Each business plan needs to be customized for a purpose. Therefore, identify the use and objectives of the business plan before drafting it. Seek professional help if required, but get it well documented. Generally a business plan will cover the following:
- Company overview – This section gives the reader an understanding of the company, its objectives, mission, vision and what it is trying to achieve. As someone starting a business, in essence this is the story of your organization. It needs to reflect your aspirations and commitment towards the business.
- Team – The founders and management team who operate or will operate the business venture. This is something that investors look into carefully. Get a great team in place with a complete spectrum of skills for starting a business and running the needed to set up and run your venture successfully.
- Products & Services – What is it that you are going to sell? This segment demonstrates your product or service portfolio. Ensure that the portfolio on offer is described in a clear and concise manner.
- Market Research – Trends, growth potential, competitors, industry dynamics, industry analysis etc is captured in this section. For a business it demonstrates the size of the opportunity and market dynamics. This is fundamental to a business and investors alike.
- Business & Operations Strategy – This is where a more practical approach needs to be undertaken. Visualize your idea being implemented prior to starting the business and identify how multiple stakeholders, technology, processes and the organization will engage together in a seamless manner. Look into industry best practice norms and set out a well defined strategy. Keep revisiting your strategy as this is a dynamic activity and will need constant refining.
- Marketing Strategy – Generally people believe that a marketing strategy defines ways in which a product or service can be sold. This assumption is both correct and wrong. Marketing is a three phase activity i.e. identifying your target segment, both while starting a business and on an ongoing basis, reaching out to them and engaging with them, before a sale is generated. Ensure that your business plan provides a strategic overview for each of these phases. Use the power of the web to establish your business and harvest the more mature off line strategies to create a niche segment for your business.
- Financial Forecasts – This is where every activity boils down to tangible numbers. The days of crazy valuations and unrestricted expenses are long gone and dusted. Financial forecasts have to be robust and achievable. Remember, an investor will validate numbers and you need to substantiate your forecasts. The projected income statement, cash flows and balance sheet statements should be in line with market trends and be realistic in nature.
Implementation of Business Plan
If you are ready to launch your business and operationalize it, your business plan will form the foundation for the implementation strategy. The key steps for successful implementation considered before starting a business are shown in the diagram below.
- Define Activities – A business plan should typically give a clear set of strategic options across the business spectrum. Based on your budget and business fundamentals, identify the activities that you want to implement, be it in the arena of technology, marketing or operations and list out the steps that need to be undertaken. At this stage you are in project management mode and having a well defined program and project management structure in place with input output norms, timelines, costs and dependencies will increase transparency and help you in managing the implementation schedule better.
- Map Processes to Activities – Ensure that the project implementation processes are clearly mapped, with risks, touch points and activity based costs incorporated into the overall structure. The project implementation framework and schedule should be the only reference point for all stakeholders, as it is important that “everyone sings from the same hymn sheet”. Get this right and you will have a good grip over the implementation schedule. Leave nothing to chance as the stakes are high.
- Measure Outcomes – At the defining activities phase we mentioned timelines and input output norms. Utilize a project measurement framework, to ensure that the final outcomes are in line with your expectations, are delivered according to timelines and within its specified budget. Escalate problems at its very inception.
- Governance Framework – Who is responsible for actions being undertaken in the implementation team? Where are the touch points, especially if you are working with external suppliers and consultants? What is the escalation and embargo resolution process? All of these need to be managed through a governance board or framework. A delay because of internal conflict will hurt you financially and the opportunity cost of a delayed entry into the market will have both tangible and intangible outcomes. Take a stance immediately and resolve issues as soon as they crop us. As an entrepreneur it is your idea and business that is at stake. The journey from ideation to implementation is not easy, especially since an entrepreneur has to travel across rugged and uneven terrain. However, with proper planning, a structured approach, firm implementation framework and support of skilled associates, a large number of potholes that come on the way can be avoided.