Anyone considering starting a business should be able to answer a few basic questions about their new business. I recommend the Business Model Canvas as a way to help aspiring entrepreneurs achieve their business creation goal.
Creating a written business plan greatly increases your chances of succeeding in your business. Doing this homework for your business forces you to think about, for example, whether your assumptions are realistic.
The canvas is a simplified version of a business plan. Its one-page diagram has nine cells: customer segments, value proposition, channels, relationships, and revenue comprise the left, customer-facing side of the canvas. The right side includes key resources, key activities, key partners and cost structure – the “behind the scenes” part of the operation.
On the other hand, if you are seeking funding from an external source, then you will need to write a comprehensive 40-page business plan. It will help you answer many important questions, but you’ll have to do a lot of research – there’s no getting around it! But the more variables you consider, the greater your chances of success.
Many small businesses can make do with a simple one-page plan when testing their hypothesis to see if their business model makes sense. The Business Model Canvas is meant to be modified as you undoubtedly discover unforeseen twists and turns in your startup.
A simpler tool
Going up a notch, there’s another even simpler tool called Zero-Draft Business Plan for Startups, developed by my friend Bob Theis Jr., who has an MBA from the Wharton School at the University of Pennsylvania.
Why does he call it the Zero Draft? “Everyone knows what a first draft of a plan is, but a zero draft is even before a first draft,” says Theis.
“I developed this Zero-Draft plan as a roadmap to the success of any business venture,” says Theis.
He has used the tool successfully with travel agencies, mortgage companies, real estate companies, engravers and restaurants. He also created a similar plan for customers who already have a business.
“If you can’t answer these basic questions, you probably shouldn’t start a business,” says Theis.
Questions about the draft business plan
1. Why are you starting this business? How was the idea born? Who is involved? What are your origins? What is your background in this area?
2. What is your product or service? What is your sales geography? How does it actually work? Why is it necessary? Who said it was necessary?
3. Who exactly is your customer? Have you conducted a face-to-face interview with potential customers?
4. Who exactly are your competitors? Where are they located? What do they charge? (Attach a competitive matrix.)
5. What three things make your product (service) really different from your competitors?
6. How will you sell your product (service)?
7. How will you market your product (service)?
8. How much will you charge? Why?
9. What is your total sales forecast for the first year (best case and worst case)?
10. Where will you get your products or materials? What are the costs of your product (service)?
11. For the first year, list your specific expenses (including salaries, rent, sales, marketing, accounting, legal and other administrative costs).
12. How much money will you invest? How will you get extra money if needed?
13. Have you considered buying an existing business that does 70% of what you describe above? Have you considered licensing your product?
less is more
“I’ve realized working with clients, sometimes less is more,” says Theis. “It is important to have these basic questions answered before a business owner commits their personal funds. I have personally witnessed the same questions come up time and time again, whether someone is starting up or buy a business.
I asked Theis why he would use his Zero-Draft Business Plan instead of the Business Model Canvas.
“It gets the conversation started,” he says. “It’s really simple, really basic and it’s easier to do. These are the minimum questions that need to be answered. If the entrepreneur cannot answer these questions, he must keep his money in the bank. »
Theis has seen several clients come to the conclusion that the numbers in their original plan weren’t working. Often they pivot and come up with a new plan that is achievable.
Questions for customers who already have a business follow the same format as those for startups. Theis has used this tool successfully with many new and established clients.
The Zero-Draft plan results in asking the entrepreneur to list three immediate action items with a start date for each.
Whether it’s the draft business plan or the business model canvas, Theis emphasizes, “Having a written plan is critical to helping your business succeed.
Dennis Zink is an Exit Strategist, Business Analyst and Consultant, Certified Value Creator and SCORE Mentor, and former Chapter President of SCORE Manasota. Dennis created and hosts “Been There, Done That!” with Dennis Zink,” a nationally broadcast business podcast series and “SCORE Business TV” available on Time4Exit.com. He leads CEO roundtables for the Manatee and Venice Chambers of Commerce. Dennis led a SCORE team to create the Exit Strategy Canvas and Exit Strategy Roadmap program that provides a real-world methodology for achieving business equity. Email him at [email protected]