Starting a business involves research, discovery, planning, making key financial decisions, and completing a series of legal activities. Starting a business should not be one of those "if you build it, they will come" situations. Starting a business involves a plethora of moving parts and pieces, some more exciting than others. For a new business venture, this process can seem overwhelming.
What type of business plan should you create? The two basic types are a traditional business plan or the lean start-up method of business planning utilizing the Business Model Canvas. We believe this isn’t an either/or decision. As a new business, you should utilize both models. The Business Model Canvas (BMC) is all about searching for a business model. As a new business, you haven’t developed a business model yet. The BMC is the 9 key activities you go through to develop that business model and the process will give you most of information you will need to create the traditional business plan. The traditional business plan is about tactics and execution. You will want to create both.
The greatest value in working through the Business Model Canvas and then creating a strategic business plan is not the words and ideas on the paper. It’s validating your business model through discovery, communication, prioritization, clarity and focus on real facts, not a hypothesis. All too frequently the research, tactics and financial forecasts in a plan are too vague and hypothetical to be of any real value in starting your business or securing financing.
What is the purpose of the Business Model Canvas?
The Business Model Canvas is a tool that helps you map, design, discuss and invent your business model. It is especially critical when you are starting your business and uncovers many of the unknowns that most new business ventures face. The 9 boxes of the canvas let you visualize all the components needed to turn customer needs and wants (problems and solutions) into a profitable business.
The 9 basic building blocks of the Business Model Canvas:
- Value proposition, product/service the company offers (what is the benefit to customers)
- Customer segments: Seniors, moms, teens, hospitals, schools, etc.
- Distribution channels to reach customers and offer them a researched value proposition
- Customer relationships: How do I get, keep and grow customers
- Revenue streams generated by the value proposition(s)
- Key activities necessary to implement the business model
- Key resources needed to make the activities possible
- Key partners: 3rd parties needed to make the activities possible
- Pricing: Cost structure resulting from the business model. What price should I charge?
At Venture School we take businesses through the Business Model Canvas process. Learn more about Venture School.
What is the purpose of a business plan?
A traditional business plan has two primary purposes. It should be used to help run your company with a more cohesive vision. It is your roadmap. For a new business, it becomes your go-to-market strategy.
The second purpose of a business plan is to assist you in obtaining financing. Financial institutions or other lenders will not invest in your business unless you can demonstrate that you have a roadmap to success and you will have the ability to re-pay them.
The key elements of a business plan are:
- Executive Summary
- Company Description
- Market Analysis
- Organization Structure/Management Team
- Marketing/Sales Strategy
- SWOT Analysis
- Financing/Funding Requests
- Financial Projections (3 year proforma)
At the Pappajohn Center we have counselors that can help you navigate through the challenges of starting and growing a business.