Planning for New Business Ventures
Executive summary: Avoiding planning mistakes other people commonly make will help your new business succeed.
John Otte
Published: Aug 7, 2009
A business plan’s key purpose is to let you run your business on paper be-fore you commit real dollars. New business ventures are slightly different but serve the same purpose.
Thoroughly thinking through how your business will operate boosts the odds you’ll make correct decisions and trims the odds you’ll get unpleasant sur-prises.
“Overall lack of focus is the weakness we see most often,” says Jay Akridge, Dean of Agriculture and Ag Economist at Purdue University.
Your plan for the new venture needs to:
- Drive straight to your idea.
- Get directly into how your idea differs from everyone else who is thinking about the same thing.
- Focus on the specific data supporting your idea.
- Pinpoint a specific market and why potential buyers want and need your product.
- Identify who your specific competition will be.
“Your business plan needs to dig into the specifics of making a profit,” Ak-ridge says. “A plan that’s too general, too generic, won’t make it.”
A niche winery’s business plan, for example, called for capturing a 0.005% share of all wine sold in Indiana. That’s an admirable goal. But it’s irrelevant. What is the specific group of customers this winery will target? How will it com-municate to its target customer that the winery is a destination worth traveling too? How will the winery attract people passing by to stop and buy on site?
In many cases, people tend to focus a lot on the product, and don’t give much attention to the business model – how they’ll actually make money. Will you make money by processing? Will you sell a value-added product? Will you rent something? Will you provide a service to earn a profit?
The point--selling a product to a customer is only one way to make money. Think about the ‘business model’ that best fits the opportunity you have identi-fied.
Your business plan needs to identify the two or three most critical assump-tions and what will happen if those assumptions don’t come true. Say you’re opening a meat processing facility and your biggest assumption is you’ll ink a contract with a retailer or exporter. What happens if you don’t get the contract? What if you don’t get it as fast as you expect? Or suppose you’re ready to start slaughter then find that your anticipated--but not committed--customer is using you to leverage both you and your competitors down on price?
“You can’t plan for every contingency,” admits Akridge. “But you can identify the most important ones and be thinking about alternative plan B.”
Lastly, get an outside opinion. It may throw a dose of reality your way.
“We can easily fall in love with our idea and become blind to the holes in it,” says Akridge. “Asking someone you trust to give you an honest opinion can sharpen your thinking.”
Find someone who is familiar with the industry, understands the nuances of the finances, can read through the finer points of the plan, has the integrity to tell you just exactly what he thinks and is not emotionally involved.
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