A viable business plan is based on a viable business model. Your business plan should outline ways that your company will produce and market its products and services to keep its customers satisfied and earn a sustainable profit. To determine whether a business idea can actually be viable, your business plan should present a value proposition and then explore the details of potential market size along with product and distribution channels and cost structure.
To explain what is meant by a viable business idea, imagine the elements that will help your business to live and breathe on its own, such as attracting the right customers and earning enough money to survive and grow.
Why Write a Viable Business Plan?
Your business plan is the road map to starting and running your business. The process of writing its text and generating its financials is an opportunity for you to think through details and hash out scenarios. You'll never be able to accurately predict how things will actually unfold once you start your business, but if you take the time and make the effort to envision how your company could succeed and cope with adversity, you will be well positioned to set your ideas in motion.
In addition to being a vital thought exercise for your own planning, a viable business plan is a necessary tool for approaching lenders and investors. The individuals and institutions who will be able to provide access to the capital you'll need will understandably want to make sure that your endeavor will be a worthwhile investment and that you'll be able to repay any sums you borrow.
If you base your business plan simply on the fact that you like your product, and you assume everyone else will enjoy it as well, you will show investors right off the bat that your idea isn't viable. Instead of basing your financials on shoddy research and wishful thinking, you should do careful research and be transparent about your assumptions.
Elements of a Viable Business Plan
- Value proposition. Your business plan should explain what your business will offer, who will want it and why. If you understand and can explain the answers to these questions, you'll have the basic elements of your marketing plan, which will outline how you intend to attract the customers who are your best prospects.
- Marketing research. To be viable and realistic, your business plan should demonstrate that you've collected real data about who will want your product and how large a market you anticipate reaching. This information should address demographics such as age and gender and psychographics such as tastes and personality traits.
- Production and distribution. By addressing these aspects of how you expect your business to unfold, you have the opportunity to show that you have a realistic grasp of the nuts and bolts of your endeavor. This section will address scale and technologies as well as procurement and delivery logistics.
- Financials. Your business plan will be largely theoretical until you start plugging in numbers. Develop realistic projections detailing anticipated revenue and outlays. Show how much cash you expect to need and where you expect to find it. Do multiple versions of these spreadsheets showing best-, worst- and medium-case scenarios.
Testing the Viability of Your Business
A business plan is an exercise in anticipating the future. It is a useful and important part of your business development process, but the true test of your business plan's viability is the process of actually running your business. Rather than existing as a static testament to your initial ideas, your business plan should be a living, breathing document. Revise it often as you grow more familiar with the landscape in which your company will exist and use this process to update your operations and your objectives.