By Mark Chodosh, Minneapolis Business Mentors
Many people have very creative ideas for products and services. If this were a football game we would ask how to transition from idea phase to getting the ball into the end zone. The end zone represents a sustainable business model whereby revenue is generated, expenses are controlled, further growth can be achieved, and shareholder value is enhanced.
This process can be daunting. Fortunately, there are experienced business volunteers available from organizations such as Minneapolis Business Mentors to assist in the process of moving from concept stage to actual commercialization. Paramount to this process is determining if a market exists to support a sustainable business. Importance must be placed on a Business Plan to validate the concept. It is often stated that most businesses fail because they did not have a business plan.
A number of my clients have liked the analogy of writing a business plan to that of erecting a skyscraper. A person can have an image of a building. An architect may render an outline, a schematic, determine materials needed, and begin to focus on many additional details. Physically, an initial hole needs to be dug, which is the foundation or premise that the business stands on. Steel girders are then raised which can be business disciplines each representing Marketing, Sales, Procurement, Manufacturing, Finance, and Operations. Then each floor is placed into position. A floor can represent market research, which offers feedback on the idea and its feasibility.
The next floor may be the target audience. The next floor can represent the channel strategy implemented to reach the target audience. The premise is simple…there may be a vision for a tall building. But it does not just go. There may exist a great vision for a business, but there are many steps to conquer.
Another important aspect of having a business plan is to stay focused. An architect cannot start a project designing a tall building for office space, and transition to designing a gymnasium. A business plan keeps one focused on the project. It is very easy to get sidetracked. This often occurs when additional ideas are suggested, and each week the vision of the business shifts. These may all be good ideas with good intentions. However, getting sidetracked with each person’s input can be a great distraction, leading to the project not going forward but around in circles. I have had a mentee realize through their business plan that margin compression would not allow for a meaningful profit. I have also had a client that had ample cash flow for a finite period of time, and each business idea led to another business idea, which led to another idea, until the money ran out. Each stage in the sequence seemed like a big opportunity, until time ran out. Again, a business plan allows for structure and focus.
It is also common for clients to have much expertise in an area and identify a niche that sounds like a viable business idea. In these instances, there is expertise in the subject area, but a lack of familiarity with the formal business process. This is very natural. Fortunately, it is reassuring to know there are many resources available to assist in each phase of the project.
In summary, in the path to develop a business plan, it is imperative to evaluate the target audience, market size, fixed and variable expenses, channel strategy, all costs, and what a business model will look like at completion. There are instances when ideas are faced with too many constraints to be successful and there are examples whereby we have guided clients on to successful businesses or brought significant value to an existing enterprise. The key determining factor has often been a well completed business plan.
Need help developing a business plan for your business? Contact us at info@mbmentors.org