You will love how he tested my capabilities. The first time I met him was shortly after i wrote the book “3S Rules: How to Build a Billion Dollar Business Model”. I was to meet him to become my mentor, in a new city I was relocating to.
Fortunately, I met him on that fateful day, the first question he asked me was; what can you do? I told him that I’m an entrepreneur, a business model expert (business analyst), alongside a copywriter.
He looked at me and smiled. He proceeded by saying Progress, here is an idea I’m working on. This is your assignment; develop a business model and produce a business plan from it. I want it ready in a week’s time.
Truly, I went to work in order to prove my capability. You know you have to prove your worth to new people. I was able to deliver before the deadline. The work was good, and he has believed in me, since then.
So, I will be showing you in this analysis how to produce or draw a business plan from a business model. But before then, what do we mean by a business plan?
Investopedia defines a business plan as a document that shows how a business will achieve its goals. This goal has three components to note in order to write a winning business plan.
The components of the goals as highlighted in an article on Harvard Business Review are; the market goals, the investors’ goals and the entrepreneurs’ goals.
We shall see how we can successfully produce a business plan from a business model with the above goals in mind.
How to produce a Business Plan from a Business Model
In order to do this successfully, we shall break a business plan into four components and link them to some segments of the business model. Well, at this time I assume you have an idea and a business model.
If you don’t have yet use this strategic business model template to come up with one.
- How Does Your Business Work?
This is usually the first thing I love to address when preparing a business plan that will be convincing to investors and to me. It is your business model that shows how your business works to unlock value.
So, visit the friction (problem) section, value proposition section and product section of your business model to write this aspect. This aspect shows the investors, partners and team how your business solves the market friction or how you model to solve the market frictions.
- The Market Plan:
The market plan is one of the important considerations of a business plan. It shows the commercialization aspect of your invention or product. You need to have a market plan that shows elements such as; an analysis of the market data of your market, the pricing, the marketing strategies, retention strategies etc.
Your business model already has the customer section or the market segment section, it will make it easy for you to research more about them, without thinking much about who is your target.
You must know your customer properly and the segments they are. For example, 1,000,000 smallholders farmers may be the market size but may not be your market target.
It may be 100,000 of those smallholder farmers that have smartphones and farmland of not less than 10 hectares each.
Competitive Advantage and Scalable Advantage:
The competitive advantage of a firm or a product is what gives it advantage over the existing players. This is very crucial as your competitive advantage to an extent determines your scalable advantage.
It is simply what makes you different from another? You can employ SWOT analysis and the Porter Five Forces analysis to explain how you differ from others.
Scalable advantage is how your competitive advantage will help your business to grow at a low marginal cost of serving a new customer.
- Financial Forecast or Financial Projection:
This is determined from your revenue models of the business model. How will your business make money?
In a profit-driven business , it exists to make money by creating value. So, you should be able to determine the unit economics of the product and use that to project on a large scale.
You can project revenue for five years and make plans to get there.
Don’t forget that your financial forecast includes; revenue analysis, cost analysis and profit analysis . In an established business, you will have to show the cash flow, Profit and Loss account and the Sales Forecast of the business.
It is very important for a start-up to analyse the financials based on revenue, cost and profitability metrics.
With this approach, it will be easy for you to draw your business plan from the business model. This will help you to secure the needed funds you need and win the support of others.
I will analyse in my next article how to produce a Pitch Deck from a business model. Watch out.