How to analyze a business plan

As a new or transitioning General Manager, a new skill needed is having the ability to simply understand how your your new business makes money. If you haven’t developed a means of analysing business plans in a logical way, then I’ve set out a means below?

By analysing your businesses strengths and weaknesses also enables you to focus your attention on where your business needs you RATHER than where you are most comfortable.

The way I do this is to ensure I clearly understand how the business organises itself to perform simple processes.  Business modelling assesses how business creates, delivers and captures value (volume x [price – cost)]) and thereby make a profit and  a return on shareholder investment.

More specifically, I use the model to assess business innovation and assess if the new businesses core idea is unique and differentiated, or the reinvention of an existing business.

This approach is of particular relevance during times of economic turbulence and intense competition, or when a new business sets up.

Alexander Osterwalder described the nine dimensions (orange boxes) of a business model as outlined in the diagram below:

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Here’s a brief description of each of the boxes the aim is to summarize the current status in the business and whether these elements provide the basis of a business that has an advantage over competitors and can either reduce costs or enable higher pricing or increased volume sales.

Core Capabilities – describes an organisation’s key activities in relation to its products and services. Are these capabilities rare, valuable, distinctive?

Partner Network – describes the business alliances and collaborations that an organisation establishes to link with producers of raw materials, parts, machinery, marketing skills, media and a link with ultimate customers. How strong and distinctive are these networks? Do they provide a competitive advantage?

Value Configuration – are resources the organisation requires to combine capabilities and partners inputs to deliver sustained value to the customer.

Value Proposition – describes the differentiated offer of products and services that the organisation provides to its target customers to deliver value. Is this relevant to customers, distinctive from competitors, motivating to customers and consistent?

Target Customer – describes the group of customers targeted within a market segment for what the company offers.What are their needs- jobs to be done, problems to be fixed, opportunities to fill?

Customer Relationship – describes links and relationships established between an organisation and its customers. How relevant and effective are these connections? How cost efficient are these?

Distribution Channel – describes the means by which an organisation delivers its products and services to the target market segment.

Cost Structure – The costs associated with manufacturing and delivering products and services.

Revenue Stream – The way an organisation generates a variety of income flows.

In describing clearly the constituent parts of the business model you can clearly see within the business plan what has been thought through and what is missing. Within each box ask is the content sufficient to propel the business to success. What do they need to do more of, less of, ignore, or add as they have ignored. How differentiated is the offering compared to the competition. How compelling is the part to customers? Aim to be SIGNIFICANTLY better at the parts more compelling to customers rather than trying to do everything 1% better than the competition.

And by modifying one or more of the nine dimensions of the business model through implementing and recombining innovative approaches this will enable the business to find ways to increase value (reduce costs, increase volume or increase price). This could also enable you to provide feedback to enable the business to be reinvented. It can also be used as a means to describe the current situation of a business and identify changes to be made in the future. It can also be used to compare your business to a competitors business to benchmark how well you do and where you need to do better to succeed.

Good luck using this approach, its worked for me, and with some thought can work for you.