Your Business Plan
The business plan can be the road to your success and provide your company with the perfect foundation and perhaps even open the doors to venture capital. But there is no recipe for the “right” business plan.
It is one thing is to have a good idea, but another to develop that idea into a business. That is why it might be worth going over the idea and its potential by following the five Steps in this simple model, which is also being used by Danfoss Ventures. The five Steps is, at the same time, a good starting point for a business plan
Step 1: Identify the good idea
To determine if the idea is basically viable, you should start by assessing whether there is any justification for the idea at all. Ask yourself:
- for who
- who needs what
- can this solution
- offer the following advantages
- as opposed to competing solutions
- the idea therefore offers the following unique advantages
The deciding factor is, of course, whether there is a sufficient amount of potential customers who would be interested in your idea – and who are willing to spend money on purchasing your solution.
Step 2: Control your chaos
At the beginning of every project there are often a large number of aspects that have not been clarified properly. It is therefore important to get an overview of the situation and make a plan: Where to start and where to end? You can get an overview of the situation by making a list of the knowledge you already have and what your prerequisites are.
You should examine these four areas: technology, market, organisation, resources.
For example: Have you assumed that your idea is patentable? Will you have to manufacture the product at a lower price than a competing solution for it to be justifiable? Do you need people with very specific skills and are these people available? Rank the list of the prerequisites to get an overview of the most critical requirements for making your idea a reality.
Step 3: Market research
In the previous steps you started considering who your product is for. If you haven’t already segmented your market – which group of people it would be more attractive or obvious to start with – you should do it now. Focus on single segments - instead of just applying a scattergun technique.
The next step is to gain experience. You should find a few customers from the chosen segment who can help you test and evaluate the product. By doing this you will gain a very valuable insight into how your costumers think and what is most important to them. Consequently you will be able to tailor your products so that they match the segment’s needs and wishes.
Step 4: Business model
Before seriously entering the market you must choose a business model. You have to consider every link in the chain:
- product development
- production
- sale and marketing
- destribution
- service and support
Which of these will you yourself be responsible for, and which of them are you going to place with subcontractors and/or partners? Are you able to stand out and do things differently, smarter, or cheaper than the present players on the market?
Step 5: Resource allocation
The allocation and prioritising of resources should be understood in the broadest sense of the term, for which reason you should be taking into account the following points:
- physical boundaries
- financing / liquidity
- staff
- subcontractors
You have to make sure that the resources match your business plan and your budgets.
When you have gone through these five steps you have amuch better chance of reaching your goal – partly because you have uncovered the most important traps and partly because you, during the process in a structured manner, have been forced into prioritising your further efforts in the best possible way.