Does your Plan Contain the Top 7 Components?

As a business start-up consultant, I have spent more than a decade evaluating business plans. As you can imagine, they come in an endless variety of formats, lengths and styles. No matter what the industry or business type, however, at my initial review, I look for these three critical components in every plan:

• A clear description of the target customer, because it’s the customers, not a business consultant, who really decide if a business idea is a good one
• A clever competitive advantage: done well, it demonstrates knowledge of company and personal strengths, an understanding of customer psychographics, and completion of thorough competitive research
• Profit potential: you would be surprised how many aspiring business owners don’t appear to be interested in making profit, which begs the question, Why bother?

Without these three components clearly defined, and woven together with compelling rationale, the hundreds of other essential details in a business plan instantly become unimportant; it’s time to rethink the business model.

When target customer, competitive advantage and profit potential are in place, the next four I look for are:

• Owner investment: there is no investor who will finance 100% of a start-up; the owner’s passion and perseverance is what will get the company through the demanding start-up period as well as every other roadblock in the years ahead; personal investment in the business is how this passion and perseverance is demonstrated
• Realistic sales targets: the fine line between over-zealous optimism and targeting at least the minimum revenue to keep cash flow in a healthy state
• Investment in marketing: the vast majority of start-up and early-growth businesses underestimate the challenge of advertising, in terms of creativity, cost and time, and therefore don’t budget for the variety and relentlessness that makes for a successful marketing campaign
• Healthy cash flow: businesses can fail because of a shortage of cash even while profitable, so profit potential mentioned above is not enough

Once these Top 7 are in place, then I can look at my secondary checklist - the other fifty or so critical components that allow me to determine feasibility of the concept. And this is where the real fun begins!