Business model canvas
One tactic some have used to sketch out a basic overview of a business concept is called the business model canvas. On one page, in a visual format, a novice entrepreneur who has come up with an idea for a product or technology can begin to think about some of the considerations necessary to turn an idea into an actual business.
en·tre·pre·neur·ship key terms
Assumption sheet
A statement that briefly outlines the information a company used to come up with its financial projections, such as market size, profit margins, and key expenses.
Business model canvas
A tool for describing some elements of a new business in a one-page, visual format. It was originally created by Swiss management consultant Alexander Osterwalder.
Business plan
A document outlining how a company will achieve its goals. A business plan can describe the concept and projected development of a start-up company or the new product or project of an existing company. It assesses all critical aspects of a business—including its mission, market, industry, competition, team, operations, financials, objectives, and more—and identifies a sustainable strategic position.
Business planning
The act of examining and researching the development of a new or existing company. Although the act of business planning doesn’t necessarily require the creation of a written business plan, it does require an entrepreneur to rigorously evaluate and determine a company’s fundamentals in order to successfully launch, grow, and even save a business.
Digital presentation
A computer presentation, also referred to as a “slide” show, a “deck,” or a “preso” (each frame of a computer presentation is called a “slide”).
Elevator pitch
A concise summary of a company’s service, business, or product idea that can be delivered in a very short time.
Executive summary
Highlights the most important aspects of a business, summarizing key points of its business plan.
Nondisclosure agreement (NDA)
Protects a company’s ideas. By signing an NDA, a person promises not to disclose any of the confidential information they learn during their dealings with another company.
Sources and use of funds
A one-page description of a company’s sources of money and how that money will be used.
A business model canvas can be particularly useful for someone who has a number of ideas and wants to outline those various ideas to see which seem most viable before beginning an actual plan for their business. Tools such as these, however, can easily lead the aspiring entrepreneur to treat assumptions as facts. They are no substitute for doing the real business planning—researching data, investigating markets and industries, developing detailed financial forecasting, challenging assumptions—necessary to launch a successful company. Users with significant business experience or knowledge may find a business model canvas more useful than novice entrepreneurs.
REAL-WORLD RECAP
Business plan success factors
Use these factors to guide you as you develop your business plan:
■ Formulate your business concept
■ Understand the market
■ Investigate industry health and trends
■ Create a consistent business focus and clear strategic position
■ Hire capable management
■ Attract, motivate, and retain employees
■ Take control of your finances
■ Anticipate and adapt to change
■ Emphasize company values and integrity
Business plan success factors
Creating your business plan provides a means of crystallizing your ideas and challenging your assumptions. The ultimate purpose of developing such a plan is to establish a successful business. The following factors play the biggest part in business success, so use them to guide your planning and thinking.
■ Formulate your business concept. Your business concept is about meeting needs. In fact, meeting needs is the basis of all business. You can devise a wonderful new machine, but if it doesn’t address a real and important need or desire, people won’t buy it and your business will fail. Your business plan should clearly and succinctly lay out your business concept and explain how it will offer the market something it won’t be able to resist.
■ Understand the market. It’s not enough to have only a great idea or a new invention as the basis of your business. You must also identify a market that’s sufficiently large, accessible, and responsive. If your market isn’t big enough, you can’t succeed. If it’s too big, you won’t be able to reach it efficiently. If it isn’t ready for you, your business will fail, no matter how good your concept. Your business plan must contain an overview of the market you intend to enter and an explanation of why it’s ripe for receiving your product or service.
■ Investigate industry health and trends. Generally, your company is subject to the same conditions that affect your overall industry. If consumer spending declines nationally, there’s a good chance your new consumer product will also experience poor sales. Thus, as you develop your plan, you need to respond to industrywide factors that will affect your own company’s performance. Although it’s certainly possible to make money in an industry that is experiencing hard times, you can only do so if you make a conscious effort to position your company appropriately. For example, if you plan to start a construction business and the number of new-home starts is down, you may want to target the remodeling market or the commercial real estate market rather than the new-home construction market. But you need to understand industry conditions and address them in your business plan.
Do the right thing
A company is strengthened by integrity. In the long run, when you deal with everyone—customers, suppliers, and employees—with fairness and honesty, you create a more sustainable and successful business. Integrity inspires customer and employee loyalty, helps avoid lawsuits and fines, and makes decision-making easier.
■ Create a consistent business focus and clear strategic position. Key to creating any successful business is developing a clear, strategic position that differentiates you from your competition—and then maintaining focus on that position. All too often, businesses fail because management loses sight of the central character of the enterprise. Defining a clear, strategic position enables you to capture a particular place in the market and distinguish yourself from your competitors. Different companies may sell a similar product, yet each may have a quite different sense of what its business is really all about.
■ Hire capable management. Perhaps more than any other factor, competent management stands out as the most important ingredient in business success. The people in key positions are crucial in determining the health and viability of your business. Moreover, because of the importance of capable management to business success, many investors and venture capital firms place the single greatest emphasis on this