In Part 1 of Credo’s Business Plan Series, we outlined the mission statement and executive summary as initial, qualitative descriptions of your business. Here, in Part 2, we will explore the demand and ability to execute.
Before jumping in, take a moment to reflect on the following facts:
- 20% of new businesses fail within a year of opening.
- The number-one reason for businesses failing is that people do not want or need the product/service being sold
- 42% of businesses that fail do so because of a lack of demand
Accordingly, Credo’s recommendation is to create an informed business model and set of financial projections before any major investment is infused into the company or new venture1.
Your primary effort should be in keenly understanding what market you are entering. Performing market research mitigates the number-one reason for businesses failing. Depending on the industry and scope of the business, the effort will be unique. Reading trade journals, attending conventions, soliciting feedback from the community, or performing statistical analysis on local demographics are all potential avenues one can venture down to properly gauge demand. Likewise, an established mentor, third-party advisor, or business network can provide sounding boards and insights to help the trajectory of one’s journey.
The next key step is to assess your ability to execute. Through a combination of strategy and operations, your focus should now turn to how to deliver the good or service profitably. While the evaluation is dependent upon many factors, such as your business’s size and industry, there are certain core questions that need to be on your list, including:
- How will I differentiate from my competition?
- Can I hire the right people?
- How do I price to win business, but also be profitable?
- What are those things that drive demand in your business?
- Do you have the resources to execute?
1 To expand, CredoCFO considers this recommendation as relevant not only for startups, but also for owners/stakeholders who are looking to expand their business—whether by releasing a new product, expanding a geographical territory, or acquiring a new business.