A business plan is not just for obtaining financing. It will help you correctly position yourself relative to the competition while ensuring your business stays on course. Ultimately, a good business plan will help you make the best decisions. Patrick Rwagatore and Victor Morgado, from National Bank Business Central®, share their advice for creating a solid plan. These nine tips were inspired by a chart created by the National Bank – HEC Montréal Institute for Entrepreneurship.
1. Define your value proposition
A value proposition allows you to determine the added value of a product or service. What are the features of your product or service? What are its advantages? What sets you apart from the competition? “This question comes up less in the case of a dentist or an accountant,” explains Patrick Rwagatore, Sales and Services Director. “But when you’re offering a new product or a new service, you need to take the time to fully define your offering. The bank is there to validate an entrepreneur’s idea or approach. We offer confirmation. And even more importantly, we’re there to help entrepreneurs effectively communicate their offering.”
2. Identify your market segments
Market segments represent the various customer groups targeted by an entrepreneur. In order to properly identify your market segments, you need to ask yourself the following questions:
· Who am I creating value for?
· Who are my targeted customers?
· What are their needs or problems?
“Studies and statistics exist for different market segments,” adds Victor Morgado, Business Account Manager for National Bank’s Technology Group. “You can search for information by geographic area, age, sex, etc. As part of the support we offer, we put entrepreneurs in touch with people or organizations that can help them find that information.”
3. Determine your channels
Next, you need to determine the best communication and distribution channels for your company. Keeping in mind the various existing channels (website, online store, brick-and-mortar location, warehouse, etc.), think about the most effective ways for reaching your customers. What is the best way to distribute your products and services? “You need to push your thinking as far as possible,” says Rwagatore. “Is opening a physical store the best option? Which is better, renting or buying a location? Will you need to keep your inventory on-site? These are the kinds of details that will determine your business’s fixed costs and that will ultimately make a big difference.”
4. Determine the kind of relationship you will have with your customers
Identifying your market segments allowed you to establish the customers you intend to target. Now you need to define the type of relationship and support service that will best answer the needs of this customer base. Some products and services require a personalized approach, while others need less after-sales service, for example. “You need to have something that follows logically from your distribution channels,” clarifies Morgado. “Do you want to maintain a relationship with the customer after the sale or when the service is offered? Unfortunately, many entrepreneurs don’t address this fully despite the fact that it can have a major impact on their operating costs.”
5. Identify your resources
Resources include everything an entrepreneur owns that contributes to the functioning of the business. There are many possible resources and they can include, among other things, qualified personnel as well as the tools, assets, permits, and patents belonging to the business. It could also include the knowledge, experience, and reputation of the entrepreneur and their team. “This is usually the most neglected point in the plan,” states Rwagatore. “Here is where entrepreneurs often realize they lack resources or money or that they will lack them eventually.”
6. Identify your core activities
Core activities are those that enable an entrepreneur to realize their value proposition and make it available on the market in a competitive way. A manufacturer or producer stands out in the market not only through their product, but also by inventing an innovative, patented method of production. The same is true in a professional services firm. What activities do you need to perform to realize your value proposition? “Besides putting in 80-hour weeks, is the entrepreneur willing to go the extra mile to drive the business further? Entrepreneurs need to ask themselves what direction they will need to head in to realize their goals.”
7. Identify your partners
To launch a company that’s profitable, an entrepreneur needs to collaborate with suppliers, subcontractors, distributors, and other facilitators that are essential to the realization of the value proposition. Which partners provide you with resources that you don’t have internally? “Of course you need to take precautions, but you should never be afraid to look for partners,” emphasizes Morgado. “Financial institutions know a lot of people and they can facilitate collaborations.”
8. Analyze your sources of revenue
The flow of revenue is as important for companies as it is for investors. Whether a company’s revenues come through fees, fixed prices, subscriptions, leasing, or licensing, it is important to determine these in relation to the price a customer is willing to pay. In what ways will you obtain your revenue? Which of your products or services will be most profitable? How will customers pay you? How would they prefer to pay you (cheque, debit card, credit card, etc.)? “When a foreign customer pays by cheque, the money is frozen for 21 days,” explains Rwagatore. “A bank transfer will be made in six hours. These are the kinds of things we explain to companies to help them recover their money more quickly.”
9. Determine your expenses
Businesses can have many expenses. These can be related to resources, employees and their training, relationships with partners, distribution, operations, and even taxes. It is essential to understand all of your business’s expenses. “This is the most complex section,” says Rwagatore. “The goal is to understand how to stay profitable. You therefore need to determine your actual profit margin. Indirect costs are all too often underestimated, or even completely overlooked. Accountants know a lot about this. This makes them an important ally for your company.”
To help you visualize things more clearly, National Bank offers tools to entrepreneurs who are ready to start writing their business plans. Your advisor can guide you in the launch of your business idea.
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