Writing a Business Plan

When you’re done with your business feasibility study and you find that your business idea is feasible, the next step is to write your business plan. Writing a business plan is important, as it will be your guideline in running your business. Your business plan should explain exactly how you will run your business, with all the exact figures including the capital needed to start the business. You should also provide the calculation of payback period in your business plan. You can use all the calculation that you put in your business plan to do a review on your business in the future. You can compare the figures in your business plan to the figures that you currently have to see whether your business is running better or at least just as planned, or not.

If you don’t have enough capital to start your business and you plan to attract some investors, you need to put some extra efforts in writing your business plan. Investors are investing their money to get profit, so they would need to see an excellent business plan before they decide to invest in a business. Your business plan should explain how your business can generate profit, how long will the investors get their return of investment, and how much profit they will get. In short, you should try to see from the investors’ point of view when you write the business plan. 

Calculation of Payback Period

Payback period is the time that we need to get the return of investment that can repay the amount of our initial investment. The calculation of payback period is simple. For example, when we invest $7500 in a business that gets $2500 per year, we would have a three year payback period. In calculation of payback period, the time value of money is not taken into account. Payback period is simply being used to measure how long a business takes to pay for itself.

Even though payback period has some limitations, it is being widely used as a method of analysis (especially by people who are running small businesses) because of its simplicity. In any kind of business, shorter payback periods are better than longer payback periods. However, in the calculation of payback period, the time value of money, risk, opportunity cost, financing, or other important considerations are not taken into account.

Feasibility Analysis for Small Business

Most people want to have their own small business. Unfortunately, we can see that many of them are failing. The failures of small businesses are caused by many different things. One of the things that can cause a small business to fail is the lack of feasibility analysis.

Before starting their own small business, people need to perform a simple feasibility analysis. The main objective of the analysis is to see whether the business idea is worth pursuing. 

The following are several things that people should do when doing their feasibility analysis:

Financial Feasibility Study

In order to know whether a proposed project is financially feasible or not, a financial feasibility study needs to be conducted.

In a financial feasibility study, we analyze the total costs of a proposed project (including all construction costs and operating costs) and the potential revenues that the project can get. If the potential revenues of the proposed project can cover all of the costs, then the project is financially feasible.

Feasibility Study Template

I am preparing a business feasibility study template, and it should be ready in a few days. The template is only a rough draft actually, just to give the basic idea of how to make a feasibility study report. When it’s done, I will put the download link here and you can download it for free.

My template is just a basic template. If you need a professional feasibility study template, you can buy one here.

New-product Forecasting

To predict the degree of success that a new product will likely to enjoy in the market, we need to do new-product forecasting. Quantitative forecasting methods are not suitable for predicting the success of new products, because they depend on a historical data. To make forecasts for new products, judgmental methods are better because there are many uncertainties and few known relationships. However, there are many ways to make reasonable forecasts for new products. They usually include both qualitative judgments and quantitative tools of one type or another.

Economic Feasibility Study

Economic analysis is used for evaluating the effectiveness of a proposed system. This method is also known as cost/benefits analysis. The procedure is to determine the benefits and savings that are expected from a proposed system and compare them with the costs.

If the benefits outweigh the costs, then the decision is made to design and implement the proposed system.