We all know that some businesses require capital, small or big. Some industries, even require capital-intensive funding to start and operate. A robust and complete business plan for these industries is definitely a very important element.
Writing a good business plan is absolutely necessary for any startup, even though you are not in the condition of seeking investment. A business plan can give you better vision and estimation of what you need to do, how and when will you achieve the goal.
Before you begin, there are some questions you need to answer beforehand. These questions are essential to be included in your business plan. Here they are:
1. What is the uniqueness of your product?
Have you done any research related to your product? Are there any competitors that produce or sell similar product? If there are, you have to recognize the uniqueness of your product to differentiate it from the competitors.
Then comes one question, ‘Why should customers buy from you instead of purchasing from your competitors?’ If you can’t answer this question clearly, you might need to go back to the drawing board to redefine the idea.
2. How easy it is for your competitors to copy your product?
You have came up with a good idea and you are very sure it is going to succeed. But don’t forget that the more successful a product, the more fragile it is to be copied by others.
There are large number of competitors that can afford to copy a successful product. That’s why, we have seen many similar products circling in the market.
One thing you can do is by protecting it through a patent. The intellectual property you can protect include idea, technology, feature, etc.
3. How big is the market segment?
Size of target market is one of the most important factor that define your sales. So, do your research and estimate the market segment. Narrow it down by removing the percentage of people who won’t need and won’t be paying for your product. Learn and calculate it clearly. Make sure the market size is still economically reasonable to enter. Otherwise, if it is not viable enough, you might need to rethink the business and product.
4. How much capital do you need to start the business?
There are two types of capital you need to calculate, fixed capital and working capital.
Fixed capital is what require to start the business, such as location, office renting and any tools you need to begin the business.
Working capital is what require on day-to-day operation of the business such as, employee salary, operational cost, etc.
Whether you are using your own cash or seeking investment, the capital should be define in the business plan.
5. How will the ROI looks like?
In the end of the day, every businesses are looking for revenue. Business use ROI to understand how much cash it earns in return of the cash invested. And it strongly determine, whether a business runs well or not.
Projecting return-on-investment is absolutely necessary to estimate what the business could get in a certain amount of time, when is the break-even point and how big the business could be in the future.
Starting a new venture can be exciting, but there will be risk we experience on the run. Answering the above 5 questions before writing your business plan, could help you minimize, at least, common known risks.
Wahidin Wong is a digital marketer. He is also a jazz and bossa lover.