"To have a success business, you need to have a clear understanding on what you're going to sell and who you're selling it to. 99% first-time entrepreneurs don’t put a great deal of thought/ financial into their niche."
Follow-up on my previous article , some asked about how to get started on Stage one. I summarised in the following approach.
Mindmap
Business Case P&L (Spreadsheet) for at least 36 months forecast
A detail Go-To-Market tasks list for coming 3 months
Contingency plan (and agreed) if the result not as expected.
Instead if using a Mindmap, I would start with a tool which most new Entrepreneur missed out at the beginning of the stage. Most Entrepreneur is excited about the new business and all in their head are marketing, sales and go to market; which is not essentially wrong, but we should look at the business from a bird-eye view.
The financial section of your business plan determines whether or not your business idea is viable.
Create a simple excel with a matrix of 37 x 20 cells. Create a section of Revenue. You may put an estimate number of revenue you wish/ hope/ plan for in coming 36 months in monthly basis. You should always use Price x Quantity to determine the revenue, if you are a service business, you can put Quantity as number of customers. Then start asking yourself one simple question; HOW do you get that Revenue number? Repeat the same for the expense. Including but not limited to Cost of Good Sold, Salaries, Rent, Telecom Expenses, Utilities, Raw Materials, Cost, Distribution, Promotion and etc. Now look at your Profit, is the business as viable as what you think of? Don't give up at this point!. You can start change the cost model (by decreasing it) and think of a way to increase the revenue. After few round of tweaks, likely you can get a better picture of your business.
Profit is a flow, but unlike cashflows that deal with “real money”, Profit mentioned in above is measured in “accounting money” as defined by the accruals principles. Revenues (sales) in the P&L is not the same as cash received (“cash-in”), because most sales are credit sales: customers pay for services and goods sold a number of days after the invoicing date. Copy the entire sheet and shift the income by 2 months (60 days) later, that would be the CASH required to operate your business. (I assume it is common to give 60 days credit to your customer?)
Please refer to my earlier article regarding the "Slash", you may realised why I emphasis of "AND". Because you do need a cashflow to survive the business when the actual not realised as per plan.