Entrepreneurship

Business Model and Plan

Tuan Nguyen, PhD
Business Model

• A business model is the plan your business has for making money. It’s an explanation of how
you deliver value to your customers at an appropriate cost. This includes descriptions of the
products or services you plan to sell, who your target market is, and any required expenses.
• The business model lets entrepreneurs experiment, test, and model different ways to structure
costs and revenue streams. For those just starting out, exploring potential business models can
help you determine if your business idea is viable, attract investors and guide your overall
management strategy.
• Many different types of business models. Common models: direct, multisided, and marketplace
• Direct businesses are the most common and involve one-sided actors—that is, users—becoming
your customers.
• A coffee shop is a classic example; other examples include retail stores, software as a
service (SaaS), many mobile apps, hardware stores, and stores that sell physical goods.
• In multisided models, users and customers—multi-actors—are usually different people. Ad-
based models, big data, and enterprise are common examples where the products are free to
users, and their value is monetized by a different customer base.
• Marketplace models are a more complex variant of multisided models made up of two different
customer segments of buyers and sellers. eBay and Airbnb are well-known examples of
marketplace models.

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Business Model

• New businesses tend to be small in the beginning, it is much easier to be agile and make quick,
efficient changes to the business model during the startup stage. Then, if successful, the
business can scale as the young business model is tested and validated through early action.
Equally, if the changes don’t seem to work, then it is easy to spot the flaws and adjust them
accordingly before large-scale investments are made.
• However, the ability to tweak and change business models is not as quick or as efficient for
some larger or more established organizations, and some of them have ultimately failed
because of their inability to change their business models
• Example:
• BlackBerry, stormed the business, government, and consumer markets with its
smartphone technology in the early 2000s. Within a decade, BlackBerry failed to adapt
to new competitors offering sleeker smartphones with additional functions such as
touch interface and video/photo transmission, putting the company on the decline
• Kodak failed to adapt to the digital camera revolution quickly enough, and as a result
struggled for years before filing for bankruptcy protection in 2012.
Business Model

• The point is that the business model in any company (big, small, new, old) must always be
poised for adjustment and changes as new information is received and markets change.
• The key to a successful business model is focusing on what customers want and where they are
going
• Amazon is a great example of a company that continually invents new business models to stay
relevant, moving from selling books to other products to brokering sales for other companies
(small companies as well as other retailers) to selling cloud computing IT services to selling
hardware (the Kindle)
• As Bezos says, “I really look where the customer is going and where I need to deliver value for
that customer, and I don’t care about legacy. I will do what it takes”
• The business model consists of four main interlocking parts that together create “the business.”
These are as follows: the offering, the customers, the infrastructure, and the financial viability
Designing the Business Model

• In standard business usage, a business model is a plan for how venture will be funded; how the
venture creates value for its stakeholders, including customers; how the venture’s offerings are
made and distributed to the end users; and the how income will be generated through this
process. The business model refers more to the design of the business, whereas a business plan
is a planning document used for operations.
• Each business model is unique to the company it describes. A typical business model addresses
the desirability, feasibility, and viability of a company, product, or service. At a bare minimum, a
business model needs to address revenue streams (e.g., a revenue model), a value proposition,
and customer segments.
• address what your idea is, who will use it, why they will use it, and how you will make
money off it.
• A canvas is a display that would-be entrepreneurs commonly use to map out and plan different
components of their business models.
• There are several different types of canvases, with the business model canvas and the lean
canvas being the most commonly used.
Designing the Business Model

• The business model canvas has nine components

Designing the Business Model
Designing the Business Model
Designing the Business Model

• A value proposition is a product that helps customers do a job they’ve been trying to do more
effectively, conveniently, and affordably.
• Finding the intersection of your customers’ problems and your solutions is how you create a
unique value proposition

• While the business model canvas and the lean canvas are similar in format, there are differences
in how they are used. It is generally accepted that the lean canvas model is a better fit for
startups, whereas the business model canvas works well for already established businesses. The
lean canvas is simpler; the business model canvas provides a more complete picture of a mature
business.
• Both the business model canvas and the lean canvas are designed for constant iterations,
allowing for multiple versions and changes throughout the entrepreneurial process.
Designing the Business Model

• The target customer is integrated into the canvas from the start through the use of a customer
empathy map and a number of design-thinking ideation activities.
• The customer empathy map is a portrayal of a target customer—the most promising candidate
from a business’s customer segments—that explores the understanding of that person’s
problems and needs

• Customer empathy maps also strive to address customer pains (in this case, fears, frustrations,
and anxieties) and gains (wants, needs, hopes, and dreams).
Conducting a Feasibility Analysis

• A feasibility analysis is designed to assess whether your entrepreneurial endeavour is feasible

or possible. It focuses on helping answer the essential question of “should we proceed with the
proposed project idea?”
• By evaluating your management team, assessing the market for your concept, estimating
financial viability, and identifying potential pitfalls, you can make an informed choice about the
achievability of your entrepreneurial endeavour
• Determining early-on that a business idea will not work, saves time, money and heartache later.
• It ultimately tests the viability of an idea, a project, or a new business. A feasibility study may
become the basis for the business plan, which outlines the action steps necessary to take a
proposal from ideation to realization.
• A feasibility study allows a business to address where and how it will operate, its competition,
possible hurdles, and the funding needed to begin.
• A feasible business venture is one where the business will
• generate adequate cash-inflow and profits,
Organizational
• withstand the risks it will encounter,
• remain viable in the long-term and meet the goals of the founders.
Feasibility
Analysis

Financial Market
Conducting a Feasibility Analysis

• Organizational Feasibility Analysis: aims to assess the prowess of management and sufficiency of
resources to bring a product or idea to market
• The company should evaluate the ability of its management team on areas of interest and
execution.
• Typical measures of management prowess include assessing the founders’ passion for the
business idea along with industry expertise, educational background, and professional
experience.
• Founders should be honest in their self-assessment of ranking these areas.
• A Financial Feasibility Analysis seeks to project revenue and expenses (forecasts come later in the full
business plan); project a financial narrative; and estimate project costs, valuations, and cash flow
projections.
• The financial analysis may typically include these items:
• A twelve-month profit and loss projection
• A three- or four-year profit-and-loss projection
• A cash-flow projection
• A projected balance sheet
• A breakeven calculation
• Projections should be more than just numbers: include an explanation of the underlying
assumptions used to estimate the venture’s income and expenses.
• The financial analysis should estimate the sales or revenue that you expect the business to
generate.
Conducting a Feasibility Analysis

• Market Feasibility Analysis: enables you to define competitors and quantify target customers
and/or users in the market within your chosen industry by analyzing the overall interest in the
product or service within the industry by its target market
• can define a market in terms of size, structure, growth prospects, trends, and sales
potential. This information allows you to better position your company in competing
for market share.
• After you’ve determined the overall size of the market, you can define your target
market, which leads to a total available market (TAM), that is, the number of potential
users within your business’s sphere of influence. This market can be segmented by
geography, customer attributes, or product-oriented segments.
• From the TAM, you can further distill the portion of that target market that will be
attracted to your business. This market segment is known as a serviceable available
market (SAM)
• Other items you may include in a market analysis are a complete competitive review,
historical market performance, changes to supply and demand, and projected growth
in demand over time.
The Business Plan

• The business plan is a formal document used for the long-range planning of a company’s
operation. It typically includes background information, financial information, and a summary of
the business.
• Investors nearly always request a formal business plan because it is an integral part of their
evaluation of whether to invest in a company. Although nothing in business is permanent, a
business plan typically has components that are more “set in stone” than a business model
canvas, which is more commonly used as a first step in the planning process and throughout the
early stages of a nascent business.
• A business plan is likely to describe the business and industry, market strategies, sales potential,
and competitive analysis, as well as the company’s long-term goals and objectives.
• An in-depth formal business plan would follow at later stages after various iterations to business
model canvases. The business plan usually projects financial data over a three-year period and is
typically required by banks or other investors to secure funding. The business plan is a roadmap
for the company to follow over multiple years.
The Business Plan

• The business plan can range from a few pages to twenty-five pages or more, depending on the
purpose and the intended audience.
• It has several distinct sections

• Both brief business plan and standard business plan aim at providing a picture and roadmap to follow
from conception to creation.
• The brief business plan, you will focus primarily on articulating a big-picture overview of your
business concept.
• The full business plan is aimed at executing the vision concept and a more detailed and
structured roadmap
• Need to have the people who receive it sign a nondisclosure agreement (NDA)
• The business planning process includes the business model, a feasibility analysis, and a full business
plan
Purposes of a Business Plan

• A business plan as an internal early planning device, a follow-up to one of the canvas tools, an
organizational roadmap, that is, an internal planning tool and working plan that you can apply to
your business in order to reach your desired goals over the course of several years.
• The business plan should be written by the owners of the venture, since it forces a firsthand
examination of the business operations and allows them to focus on areas that need
improvement.
• A major external purpose for the business plan is as an investment tool that outlines financial
projections, becoming a document designed to attract investors. In many instances, a business
plan can complement a formal investor’s pitch. In this context, the business plan is a
presentation plan, intended for an outside audience that may or may not be familiar with your
industry, your business, and your competitors.
• You can also use your business plan as a contingency plan by outlining some “what-if” scenarios
and exploring how you might respond if these scenarios unfold.
The Business Plan

• The brief business plan is similar to an extended executive summary from the full business plan.
This concise document provides a broad overview of your entrepreneurial concept, your team
members, how and why you will execute on your plans, and why you are the ones to do so.
• Brief Business Plan summarizes key elements of the entire business plan, such as the business
concept, financial features, and current business position. It is your opportunity to broadly
articulate the overall concept and vision of the company for yourself, for prospective investors,
and for current and future employees.
• In the business concept phase, you’ll describe the business, its product, and its markets
• Describe the customer segment it serves and why your company will hold a
competitive advantage. This section may align roughly with the customer segments
and value-proposition segments of a canvas.
• Next, highlight the important financial features, including sales, profits, cash flows, and
return on investment.
• Like the financial portion of a feasibility analysis, the financial analysis component of a
business plan may typically include items like a twelve-month profit and loss
projection, a three- or four-year profit and loss projection, a cash-flow projection, a
projected balance sheet, and a breakeven calculation.
• You can explore a feasibility study and financial projections in more depth in the formal
business plan. Here, you want to focus on the big picture of your numbers and what
they mean.
The Business Plan

• The current business position section can furnish relevant information about you and
your team members and the company at large. This is your opportunity to tell the story
of how you formed the company, to describe its legal status (form of operation), and to
list the principal players.
• In one part of the extended executive summary, you can cover your reasons for
starting the business: Here is an opportunity to clearly define the needs you think you
can meet and perhaps get into the pains and gains of customers. You also can provide a
summary of the overall strategic direction in which you intend to take the company.
Describe the company’s mission, vision, goals and objectives, overall business model,
and value proposition.
The Business Plan

• Full Business Plan:

• The executive summary should provide an overview of your business with key points
and issues. Because the summary is intended to summarize the entire document, it is
most helpful to write this section last, even though it comes first in sequence. The
writing in this section should be especially concise.
• Readers should be able to understand your needs and capabilities at first glance.
The section should tell the reader what you want and your “ask” should be
explicitly stated in the summary.
• Describe your business, its product or service, and the intended customers.
Explain what will be sold, who it will be sold to, and what competitive advantages
the business has.
The Business Plan

Different components
of an example of
Executive Summary
The Business Plan

• Full Business Plan:

• The Business Description describes the industry, your product, and the business and
success factors. It should provide a current outlook as well as future trends and
developments. You also should address your company’s mission, vision, goals, and
objectives. Summarize your overall strategic direction, your reasons for starting the
business, a description of your products and services, your business model, and your
company’s value proposition.
The Business Plan
The Business Plan

• Full Business Plan:

• The Industry Analysis and Market Strategies define your market in terms of size,
structure, growth prospects, trends, and sales potential. This is a place to address
market segmentation strategies by geography, customer attributes, or product
orientation. Describe your positioning relative to your competitors’ in terms of pricing,
distribution, promotion plan, and sales potential.
The Business Plan
The Business Plan
The Business Plan
The Business Plan

• Full Business Plan:

• The Competitive Analysis is a statement of the business strategy as it relates to the
competition. You want to be able to identify who are your major competitors and assess
what are their market shares, markets served, strategies employed, and expected response
to entry?
• You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities
Threats) and complete a competitive-strength grid or competitive matrix.
• Outline your company’s competitive strengths relative to those of the competition in regard
to product, distribution, pricing, promotion, and advertising. What are your company’s
competitive advantages and their likely impacts on its success? The key is to construct it
properly for the relevant features/benefits (by weight, according to customers) and how the
startup compares to incumbents.
• The competitive matrix should show clearly how and why the startup has a clear (if not
currently measurable) competitive advantage. Some common features in the example
include price, benefits, quality, type of features, locations, and distribution/sales.
• A competitive analysis helps you create a marketing strategy that will identify assets or skills
that your competitors are lacking so you can plan to fill those gaps, giving you a distinct
competitive advantage.
• When creating a competitor analysis, it is important to focus on the key features and
elements that matter to customers, rather than focusing too heavily on the entrepreneur’s
idea and desires.
The Business Plan
The Business Plan

• Full Business Plan:

• The Operations and Management Plan outline how you will manage your company.
Describe its organizational structure.
• Address the form of ownership and, if warranted, include an organizational
chart/structure.
• Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of
members of the management team.
• This is also the place to mention any other stakeholders, such as a board of directors or
advisory board(s), and their relevant relationship to the founder, experience and value
to help make the venture successful, and professional service firms providing
management support, such as accounting services and legal counsel.
The Business Plan
The Business Plan
The Business Plan

• Full Business Plan:

• The Marketing Plan outline and describe an effective overall marketing strategy for
your venture, providing details regarding pricing, promotion, advertising, distribution,
media usage, public relations, and a digital presence.
• Fully describe your sales management plan and the composition of your sales force,
along with a comprehensive and detailed budget for the marketing plan.
The Business Plan
The Business Plan
The Business Plan
The Business Plan
The Business Plan

• Full Business Plan:

• The Financial Plan seeks to forecast revenue and expenses; project a financial
narrative; and estimate project costs, valuations, and cash flow projections. This
section should present an accurate, realistic, and achievable financial plan for your
venture.
THANK YOU