BY FRED VICTOR.
In my decade-long experience,
building a good business plan is always a challenging moment for many
entrepreneurs, for any number of reasons. It’s indeed the reality that I had
personally experienced myself when I was once a novice in business way back in
the 90s, and later the business consulting experience that I’ve accumulated
from hundreds of both local and international business plan cases here at GE
Consult. Never the less one of the major challenges that stands in the way of a
good business plan is the fact that the evaluations of a business plan would be
assessed by more than one investor.
Interestingly, every investor is inevitably
different in terms of their goals, approaches and tolerances due to their
different backgrounds and personalities. I’d believe that this is one of the first
few lessons that startup entrepreneurs and founders need to learn. But what
should a good business plan require in order to fulfill each and every
requirement, from any investor, from any walk of life? I observed, here are at
least 3 extremely critical questions a good business plan should answer by
ranking.
Q1: How unique your business is?
This is one of my favourite
questions when meeting with my SME clients. Ask yourself if the products or
services that you intend to offer are appropriately unique, and will be able to
create entry barrier through practicable intellectual property (IP) while
enhancing competitive edge to the business in not only short-term, but also medium-
and long-term. Undoubtedly, a brief audit of the competitive landscape to witness
viable positioning is required. For instance, I was once involved in the Southeast
Asian bedding industry, and was fortunate enough to craft a brand new white products
series (a range of pillows, bolsters, quilt etc.) through an international
collaboration with a leading European fibre supplier. I created the brand name
called Sleepedia (means Sleep Encyclopedia) with forthright marketing message –
to provide quality sleep experience to people in Southeast Asia with the German’s
revolutionary fibre technology that significantly improves health. Without a
doubt, Sleepedia has outplayed the competition across regional markets
including Malaysia, Singapore, Thailand, Indonesia, Brunei, Vietnam, Cambodia, Taiwan
etc.
Q2: How profitable your business
is?
A favourite “numbers-driven” question of mine
indeed. In my opinion, the key to any successful business is to be a profitable
company, not just a high turnover company. In other words, a good business plan
should be able to articulate how a product or service will enter the market with
realistically high gross profit (GP) margins and viable operating profits, to facilitating
achievable breakeven point (BEP) and possible 2-year payback period, ideally. Ask
yourself if you prefer the “High-Margin, Low-Turnover” or “Low-Margin,
High-Turnover” approach? For instance, here at GE Consult, I have personally
worked with many incredible high margins small-and-medium enterprises (in consumer
goods, textile, F&B, education etc.) in moderately expanding markets, the yearly
turnover numbers have been a better-than-average growth with high margins
coupled with relatively low operating costs (due to low turnover). Isn’t it
small is beautiful? Now, you should agree more with one of Jack Ma’s favourite
quotes: “Small is beautiful”.
Q3: How will the business be stuffed
and staffed?
This question is in relation to the initial resources
required to establish a business, in other words, it’s the initial capital
including capital expenditure (CAPEX) that incurred to purchase fixed assets
(e.g. property, tools, equipment etc.), and fulfill future operating and
variable costs (e.g. rental, salaries etc.) with aims to create future benefits.
In my opinion, CAPEX formula actually reveals whether or not to invest,
therefore in a good business plan, startup companies and SMEs should be
underspending when it comes to capital expenditure and, in fact, many of them
may be overspending! Fancy office and overstaffing are some classical examples. In my observation, low
CAPEX may equal to low expenditure. With such low CAPEX condition, a startup
company or SME would likely not be overstretched by high short-term commitments.
If I'm not seriously wrong, keeping a healthy cash flow is vital to any business at any scale, whether a business is in its startup, developing or developed situation. In accounting terms, a good business plan aims to achieve ideal Quick Ratio and
CAPEX-to-Sales Ratio (possibly high cash inflows and low cash outflows
situation) so that the company will be able to self-sustain while meeting its
short-term obligations (e.g. paying rental, salaries etc.)
***
About GE Consult
Founded
since 2003, GE Consult has helped numerous local SMEs/SMIs in
developing their company profiles, business plans, business proposals
etc. assisted clients in securing business deals and contracts. If you
are looking for a winning company profile or any professional services,
please do not hesitate to contact us at (+6017) 330 8077 and/or email rachel@geconsult.org for further service explanation.
