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| Updated on April 24, 2011

What entrepreneurs should do before writing a business plan?

This question was posed to MentorSquare, a global pool of experienced professionals and business leaders committed to guiding entrepreneurs on their journey to business success. Mentors shared their thoughts on this topic in a talk posted in www.mentorsquare.com. Here are some of the highlights:

Every entrepreneur wants to know what to do before he chalks out his business plan. There are crucial areas which the founder should research on before taking the next step.

“First, there should fundamentally be no flaws in the business idea, the fashion, conviction and tenacity of the entrepreneur are highly important for any business to succeed,” shares a mentor, adding “the most important thing which the best entrepreneurs possess is passion to make it happen. However, they also ask themselves, why will this business work when most others will fail. Thus understanding the odds.”

Most business plans never raise money, you don't want to end up running a lousy business. Why is that the case, one might wonder? Many fail for opportunity related reasons, lack of scope, or industry-related reasons. For instance, it is too easy to enter the market - thus increasing the chances of competition, or the entrepreneurial team might lack what it takes to cope with different market forces.

MentorSquare Mentors provide an effective approach to uncovering these flaws upfront. First, you must try and avoid disaster, by identifying any flaw in a new business idea. This saves time and money, which could have otherwise been wasted on fundamental flaws. The next step once these flaws are identified, is to modify or abandon them all together before it is too late.

“Just as new buyers do a test drive before buying car, this is a road test for entrepreneurs.

Fatal flaws are uncovered, leaving the entrepreneur glad that he didn't put too much into that business plan.

In case, there are flaws identified that are not fatal in nature - they can be fixed by targeting a different market, or changing the product or even entering at a different value chain, say, as a distributor not manufacturer and by improving skills in the team.

Most flaws were already identified - this is the best case scenario for start-ups, and also the rarest. This acid test provides the start-up with solid evidence based research to make an effective business plan,” says the mentor.

Every entrepreneur should be prepared to make a decision on whether it is worth fixing a particular business plan or abandoning it altogether.

Second is to address each hurdle as you start building business plan so you are more prepared while facing investors or launching your business. There are crucial elements to keep an eye on: markets, industries and the entrepreneur team.

Markets and industries aren't the same thing. Many a times the difference between markets and industries are fuzzy. A market consists of a group of current customers with ability to buy products - buyers, whereas an industry is one which offers products that are similar but not the same.

Macro and micro-level research is important. While assessing the scenario in a macro perspective is relatively simple, due to the overload of data available over the Internet, Micro level is difficult to invest time in, say mentors.

At the micro level, entering market is a critical barrier to overcome, since customers are already satisfying their needs in some way. In such cases, the entrepreneur must understand customer needs better and fulfil them better than was being done before.

Review your team, with more depth than just their character or ability to perform. See how well they fit into the role for your particular business idea.

Most industries are unattractive. Therefore, identify which industry your business will be in, on a broader spectrum, because if your eye is too narrow, you will end up neglecting close substitutes, thus not noticing competitors! Make sure you work out what threat your company would face with others coming into your market. In markets where the buyer and supplier power are both strong, you will be stuck in the middle, which will be challenging to overcome.

If you are looking at entering a very competitive market, make sure there is enough business for everyone to get a slice of the pie! Lastly, check if the team you are assembling is capable, do they have the knowledge, can they deliver on critical success factors. It is always better to tick all these boxes before writing a business plan.

Have a question or a business issue that you would like our mentors to give their insights on? Tap into a rich pool of experienced business leaders who can mentor your business to success. Do send your queries to >hindubusinessline@mentorsquare.com.

Published on April 24, 2011

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