Before You Write a Business Plan

By Vivek Wadhwa | Wednesday,July 29,2009 | 3 Comments

omers as you can. Ask them if they will buy your product or service if you build it. Learn about what features they need and what they will pay for, ask them for more ideas, and be sure that there is a large enough market.

3. Build a prototype of your product or offer a test run of your service and again ask potential customers what they think about it. You'll find that customers usually provide much better input when they can actually try out a product.
Defining the Business Model

As you make progress in building your product, your next challenge will be to create a business model (BusinessWeek, 5/12/06). This is usually a lot harder than it seems, especially if you are creating innovative products and services and venturing into new markets. Here are the questions you'll need to answer:

1. How are you going to find customers or have them find you? Are you going to advertise, cold-call, or rely on word of mouth?

2. How will you differentiate your product or service? There is always competition, so how are you going to set yourself apart?

3. What can you charge for your product or service that's profitable for you and provides value to the customer?

4. How are you going to persuade potential customers to buy from you? Even great products or services don't sell themselves, you have to develop a process for closing deals (BusinessWeek, 7/12/05).

5. How will you deliver your products or services to your customers? Are you going to have a direct sales force, sell through distributors, or over the Internet? Can you do this cost-effectively?

6. How are you going to support your customers if your product breaks? Are you going to provide a telephone hotline, on-site support, or answer e-mails?

7. How are you going to ensure customer satisfaction and turn customers into loyal fans? Your success will ultimately depend on how happy your customers are.
Back to the Drawing Board

Getting all this right takes a lot of trial and error. Most entrepreneurs I know have found themselves going back to the drawing board to rethink their product or services as they developed their business models. As you do all this, you will also become aware of gaps in your management team (BusinessWeek, 5/19/06). And you will develop realistic expectations of what your business can achieve and how much funding you need.

The good news is that once you've perfected your business model, professional investors are likely to be much more interested in you. And you will have all the information you need to create a credible business plan they will take seriously.

The article was published earlier in Business Week. The author of the article is Vivek Wadhwa, a Senior Research Associate at Harvard Law School and an Executive in residence at Duke University.

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Reader's comments(3)

1: Awesome article. It will help me a lot, as I'm a newbie.

Thanks Vivek

Sanjay S Nair
sanjay@sanjaysnair.com

Posted by:Sanjay S Nair - 9th May 2011

2: Great article. Having founded and led two startups for over 16 years and closing the fund for a third one, I can relate to every bit of what Vivek has written.

All said and done, founding a startup is NOT a rocket science. It needs discipline, dedication, perseverance, hard-work and belief in the idea and oneself.

Thanks Vivek for writing this good article.

Ram Ayyakad
ayyakad@gmail.com

Posted by:Ram Ayyakad - 25th Nov 2010

3: good things

Posted by:Prabeen Kumar Patra - 31st Mar 2010

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