New Business Planning

Process
Feasibility Analysis, Business Modelling, and Crafting a Business Plan
Success of a Plan
Business idea
Feasibility analysis (Should we proceed with the business idea?)
Business model (How to proceed with the business idea?)
Business plan (Detailed analysis of the previous two steps)
Execution
Feasibility Analysis
Industry and market feasibility analysis
Product (or service) feasibility analysis
Financial feasibility analysis
Entrepreneur/Team feasibility analysis
Industry and Market Feasibility Analysis

Focus
- Identify industry attractiveness
- identify possible niches a small business can occupy profitably
Concerns: Size, growth, profitability and margin, trends, product value to
customers, threats and opportunities, level of competition, and age of the
industry
Porters Five-Forces model (Michael E. Porter, Harvard Business School):
- Rivalry among competitors,
- Bargaining power of suppliers
- Bargaining power of buyers
- Threats of new entrants
- Threats of substitutes
Industry Attractiveness: Five Forces Matrix
Answers the question: Is this industry a good home for my
business?
Force Importance Threat to Industry Weighted
(1: Not Important, (1; Low, 3: Medium, Score
5: Very Important) 5: High) Col. 2 Col. 3)
Rivalry among competitors, 5 2 10

Bargaining power of suppliers 2 2 4

Bargaining power of buyers 2 4 8

Threats of new entrants 3 4 12

Threats of substitutes 4 1 4

Total: 38
The lower the score, the more attractive the industry is.
Niches in the Industry for a Small Business
Questions: Is there a niche that is large enough to produce profit?
Can we position our company uniquely in the market to
differentiate it from competition in a meaningful way?
Niche strategy:
- Advantages: Less marketing cost, less competition, more price
- Disadvantages: Thorough knowledge of customer need, niche
may change requiring adaptability, niches can dry up, they
attract competitors
Product (or Service) Feasibility Analysis

Primary research
- Customer surveys and questionnaire survey, Focus groups,
Prototypes, In-home trials, and Wind shield research
(observing queue length at competitors outlet, etc.)
Secondary research
- Trade associations and business directories, Industry databases,
demographic data, forecasts, market research, articles, local
data, and the Internet
Financial Feasibility Major Elements
Initial capital requirement
Estimated earnings
Time out of cash
Return on investment
Entrepreneur/Team Feasibility
Entrepreneurial Readiness
Are knowledge, skill, and experience adequate?
Does the business satisfy the wealth ambition of the team?
Entrepreneurial self assessment
What gets you excited and energetic and motivated?
What do you like to do with your time?
What drains energy from you? (work/personal relationship)
How do you measure personal success in life? (family, friends, hobbies, and society)
What do you consider success in your business career (short- and long- term)
What are your goals for your business and career (income, free time, recognition,
impact on community)
What do you like to do? (in 1 year, in 5 years, in 10 years, at retirement)
Entrepreneurial self assessment - Core Values
Core personal values that you would like to your business (treating
people fairly, giving something back to the community, etc.)
Where does these core values come from? (religious faith, family,
etc.)
Why is each of them important to you?
Personal Entrepreneurial Readiness
Reasons to start a business
Hours in a day you can devote
Your tolerance for uncertainty and risk
Do you trust other people working with you?
Why or why not?
Financial risk you can take (personal asset,
personal debt)
Your feelings of not starting the venture and
someone else doing well in such a business
Non-financial risks in your business
Your reactions to failure
Your reaction to personal stress in life
Your income level to support your current
lifestyle
How long can you survive without a
paycheque?
How much money do you have to start a
business?
Which of your personal asset would you be
willing to borrow against, or sell to start a
business?
Which non-financial support is important
(family, spouse, etc.)
Developing and Testing a Business Model
Most develop a whiteboarding visual model of key components that
can make their business successful.
The questions asked there:
- Who is the target customer?
- What does the business offer to the customer?
- How do they want to get the product?
- What will be the price?
- What key resources are required?
Business Model Canvas

Key Partners Key Value Customer Customer

Activities Proposition Relationships Segments

Key Channels
Resources

Cost Revenue
Structures Streams
Value Proposition
It is a collection of products and/or services that the business offers
to meet the needs of the customers.
The unique feature that forms the core of competitive advantage.

Customer Segment
Narrow or wide?
May be a market niche, a mass model, or a segmented market model
based on age gender, geography, or socioeconomic grouping.
Channels
They refer to both communication and distribution channels.
Communication channels: Web site, Social network, blogs, ads

Key Activities
A checklist of what are to be done
The business plan expands on this list.

Key Resources
A checklist which the business plan will expand.
Key Partners
Key suppliers, key outsourcing partners, and other external entities

Cost Structure
Fixed and variable costs and their estimates
Expanded in the business plan

Revenue Stream
Sources of revenue
One time or a stream of flows?
Four-Phase Development Process of Business
Model
1. Creating a whiteboard initial business model canvas
2. Engaging the customers to create your business and listening to
them
3. Testing the business model in the market (lean start-up)
- Business prototyping: Sell your products through the Internet
such as Flipkart, and gauge customers response.
- For a lean start-up, develop a minimum viable product.
4. Changing and adjusting the business (pivoting)
Business Plan
A written summary of ones proposed business venture.
It addresses the integration and coordination of objectives and strategies
both long and short term.
Product design, Operational plan, Financial details, Marketing
opportunities and strategies, and Managerial skills.
A roadmap on the journey to start a business
It is like a travel map.
A proof that proper research has been done on the product value, the
market, and the profitability.
Raises the probability of success of the business
Investors, suppliers, and even customers will require the business plan.
Who Reads the Plan
Employees, investors, bankers, venture capitalists, suppliers,
customers, advisors, and consultants.
Three perspectives:
1. Perspective of an entrepreneur
2. Perspective of a customer
3. Perspective of an investor
The depth and detail depends on the size and scope of the venture.
How Do Potential Investors or Lenders
Evaluate the Plan?
Suppliers who have to decide on the volume of production of items to be
supplied
Customers who decide whether to buy the product.
They like to see the your product/service as a solution to a problem, the
competitive edge in the marketplace, business model, and proof of profitability.
Lenders, interested in 4 cs (character, credit, cash flow, and collateral), would like
to see the history of credit, cash flow, and asset position.
Investors, particularly the venture capitalists, are more interested in the character
of the entrepreneurs (checking with the background), much more than a usual
lender does.
The Plan should be shared with external entities. In almost all cases, the
potential investors and external advisors are bound by a professional code of
ethics not to divulge or use it without the permission of the entrepreneur.
Who Writes the Plan
The Entrepreneur
Should consult with lawyers, accountants, marketing consultants, and
engineers.
Such services are also offered by government organizations, NGOs,
small business development organizations, universities, training and
consulting organizations, and friends and relatives.
The Internet also provides templates or outlines.
Often the services are paid for or given in exchange of equity.
The Pitch: Presenting the Plan
Usually the entrepreneur is asked to present the highlights of the
business concept and sell them in a pre-specified period of time.
The important issues are the following:
- Why this is a good opportunity
- How the opportunity will convert into reality
- What are the risks and how they will be addressed
- What will be the results (sales and profits)
Functions of a Business Plan
Chart the companys future course and devise strategy to guide its
growth and development
Attracts lenders and investors who want proof that proper evaluation
of the risks is done
Three Tests for a Business Plan
Reality Test
- Internal test: Product uniqueness
- External test: Customer value, market niches
Competitive Test
- Internal test: Ability to gain an edge over the rivals
- External test: Competition from rivals
Value Test
- High probability of acceptable rate of return.
- Needed by investors and lenders
 Elements of a Business Plan
Title Page (Companys name, logo, Business and Industry Profile
address, names and contact
Goals and Objectives
information of the founders)
Table of Contents with page numbers Business Strategy
for various sections Competitor Analysis
Vision and Mission Statement Marketing Strategy
Company History (for existing Visualizing the Ventures Risks and
companies) Rewards
Description of Products and Services
What Lenders and Investors Look for in a
Business Plan
Capital
Capacity
Collateral
Character
Conditions