Business Planning Concepts
The old saying "Failing to plan your business is planning your business to fail," applies to everyone, even you. Approximately 50 percent of all new businesses fail within the first five years, and the major reasons are failure to plan and lack of money.
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Value Proposition
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In order to make money, you must offer some kind of value that people will pay money to receive. This can be products or services, but no matter how valuable you think they are, if your customers don't think they are as valuable as the money they cost, you have not created a successful value proposition. The the first step in planning a business is determining its feasibility, or whether you realistically can sell your product or service for more than it costs you to produce.
Return on Investment
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The next important concept involves how much markup your market will bear and whether that markup can support the operational costs of your business and have extra money left over. This extra money is profit. Without enough profit, your business will eventually fail. Profit is necessary for growth. You invest money to start your business and, after that money has been earned back, the profit is the return you receive on your investment. The money you get in profit each year is traditionally invested in expanding your business, so you compound the return on your investment by investing your profits in more facilities, equipment and employees. In planning, determine the balance between total expenses and revenues, and tweak your plan to lower expenses and increase revenues so you optimize profitability.
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Strategic Development
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Once you have figured out what you are going to do and how you are going to make money doing it, your next task is to determine the best way to start. This is where the concept of strategic development comes in. Do not put all your eggs in one basket. Plan your launch so that you can invest your capital in stages, producing revenues early to replace at least some of the capital invested. You may not produce profits right away, but moving slowly at first and reserving your capital for unforeseen problems is a wise strategic development tactic.
Competitive Edge
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A competitive edge refers to how you can offer something better, cheaper, faster or sexier than your competition, and how you can continue to do that throughout the life of your company. Better, cheaper and faster relies on how you plan your production and order fulfillment. Sexier refers to your design, marketing and sales transaction capabilities. Detailed planning of these factors gives you a boost in the value proposition you present.
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References
Resources
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