Well done business plan — Issue #7
A business plan is about how to build startup and what measures to follow.
It includes earnings gains, costs, expenses incurred, customers’ target, accurate product or service description including UVP — Unique Value Proposition.
Once identified, both the problem both the hypothesized solution are of fundamental importance to define our unique value offering — our UVP.
The purpose of the product or service must be written in a clear, simple and unique way for better communication and hopefully succeed in alluring people on the product by driving them through the desire to know more about it.
The UVP is nothing more than a sentence or short message that effectively communicates the offer, purpose, goal of the product — service.
A business plan includes the marketing strategy — which distribution channels we reach the target and the identified customers with and the risks of our business and the problems that can cause it to fade.
I deliberately inserted this paragraph after analyzing the lean methodology because too often, in the startup ecosystem, it is required of entrepreneurs (if they are not just driven to such way of thought) that it is necessary to build a business plan from day zero before anything else.
A business plan must be based on a set of data that has already been collected, otherwise the outcome will be a business plan full of of theories and hypotheses that are not verified and therefore void.
In this world both startuppers both newcomers focus on the business plan with the intention of looking for investment before starting their business.
It is possible to list different hypotheses on why such is the case: maybe they do not want to risk their own pocket money; maybe, illogically, they think that huge amount of capital is needed without yet having an idea of what they will do and therefore, which expenses are being addressed; maybe that investors are ready to wait up for them, hoping to invest blindly in a new Facebook. Such are but fantasies.
In order to list a good business plan it is necessary to have proper data-in-hand and understand the logic behind the company budget such as economic, capital and financial logics — so that it can interface with the economic prospects and analyze them.
Writing down financial statements and accounting records is a key stepstone that every businessman has to do sooner or later to properly understand the economic and financial logic, as it is essential and indispensable for building a sustainable business.
Within the business plan we need to describe our entire strategy, our business drivers and what we want our business to become in the future.
To do so it is of outmost necessity to unearth actual numbers and metrics based on the data we collected in the first months of our business.
A well-done plan undertakes management control and relies on internal communication function for organization.
Startup relies on transparency and clearness, as both are of top-most importance: accessible information to all team members it’s extremely useful as it leads to unique prospects that show what are the results the startup expects to accomplish in short — long term.
In addition, the entire team can then check whether results have been achieved and what improvements have been realized to improve or rectify their actions.
At first there would be few data to rely on, but as time goes by there will be hypothesis to test possible outcomes with — its a smart way to better understand how to proceed with new business attempts.
On the management and control side, a well-made business plan allows a good idea of the nature of the financial limits of a business- costs to bear before generating revenue — through economic prospects are.
Operating budget: a time period within which we are going to analyze data attained from business planning — typically it covers a one-year period that ends whenever budget is reported.
Income statement: it is a prospect that analyzes data over a time span called administrative period. All the revenue and all cost we have sustained lead to a final number (profit or loss).
Trough income statement calculation it is definable how much loss has been generated within ended term and how much capital is ready-to-use in the future.
Balance sheet: the second useful prospect for our startup accounting, which is the starting point for new business. Still, it’s advised to be careful because there is a significant difference between income statement and balance sheet.
So the income statement sums up all the events of a given period — revenue and cost — as the balance sheet is more of a photograph at a given time (ie at the end of the financial year) to highlight assets and liabilities present at a given moment within our company.
Pretty much, income statement is the analysis of a period of time while the balance sheet is a single instance in which we understand how many sources we have invested in the company, how they were employed, how much is left and how much is being generated.
Finally, the Cash flow points to a prospect through which we understand no longer the sum of events that occurred within the period, as in the income statement, but rather the understanding of what has brought earning in and what has expended cash out — always from a monetary point of view.
The goal of the cash flow is to show us what has happened to our liquidity, what we have spent and what we have earned until we reach the exact amount of cash we have left.
Basically, such is the way we can understand how our business is performing, understanding whether we have generated liquidity over time or not.
It is a fundamental fact, and for such reason many brand new startups rely on this prospect to manage both their income both their outcome at set times.
Theoretically, if a startup starts with zero, the first need is to earn — usually this is not the case because some capital to create the product or service is required to identify the right distribution and marketing channels.
Making a well-made cash flow allows us to see exactly how many takeovers and cash outflows were there before actually earning revenue.
It is therefore required to analyze what among the drawings has been set in the past, therefore trying to figure out how much revenue will evolve in the future for a better prediction on whether the business will be sustainable or whether it will need new capital.
If it is not possible to pour new capital in it will be necessary to establish what time we modify both our plans both our experiments to remain sustainable.
Therefore it will be very important to analyze cash flow to understand where it is possible to invest and what stretch we can push.
Photos by Raw Pixel.
