We’ve read a lot of business plans and heard more business pitches then we can count, the biggest mistake that we find in all the plans comes at the end, in slide 11 in our business plan course, where you present the business financials. It’s where things really come apart and where credibility is won and lost. We find the reason is because generally Entrepreneurs are creative and focus on solving a problem for a customer, they don’t like to run numbers, they want to build the solution. Financials can seem boring and tedious to develop. However, building the financial plan is what will help you learn about every part of the business you want to build or scale into a large business
While the business finance slide comes towards the end of the business plan, it’s really the foundation of which the whole business plan is built. When we help people build their plans we suggest doing at least do a rough cut with our one page financial worksheet of the numbers so we have an idea of what we are looking before we get started. This helps people start to think about different parts of the financial model and realize where each of the other slides numbers will get plugged in and how important it is to get the other slides right.
It also important to do a rough cut on the numbers to vet the business in the first place, can you produce the product and scale it for less then the market will pay? The best idea or product in the world that does not make money is not a business, it’s a hobby because in the end you have negative cash flow from producing and selling that cool product. We’re not saying you still can not do your idea, we’re saying at least you have an idea of what the economics look like to make a choice of where you are going to invest your time. If the business financials do not make sense and the return is that it makes you feel better to solve the problem for people then maybe the choice is to create a non-profit so you can raise money to provide the product for people.
Maybe you find that you can not make money selling a low volume of a product but that above 10,000 products you can economies of scale and start making a profit. This will mean you will have to get capital for your business in some form, you can provide it or maybe you choose to raise money from investors.
All of these paths are viable options to build your business and we want you to understand that going into it so you can build the business and the business plan around what will make the most financial sense.