1. Why Business Plan Evaluation Matters?
2. Executive Summary, Market Analysis, Financial Plan, and Management Team
3. Feasibility, Viability, Scalability, and Sustainability
4. How to Use SWOT Analysis, SMART Goals, and Benchmarks?
5. How to Avoid Biases, Assumptions, and Unrealistic Expectations?
6. How to Use Software, Templates, and Expert Feedback?
7. How to Improve Your Business Performance, Strategy, and Growth?
8. How to Apply the Business Plan Evaluation Criteria and Best Practices to Your Own Business Plan?
A business plan is a document that outlines the goals, strategies, and resources of a new or existing venture. It serves as a roadmap for entrepreneurs, investors, and stakeholders to evaluate the feasibility and potential of the business idea. However, not all business plans are created equal. Some may be too vague, unrealistic, or incomplete, while others may be too detailed, optimistic, or complex. How can one assess the quality and effectiveness of a business plan? What are the criteria and best practices for business plan evaluation?
To answer these questions, we need to understand why business plan evaluation matters in the first place. business plan evaluation is the process of analyzing and judging a business plan based on its content, structure, presentation, and impact. It is an essential skill for anyone involved in the entrepreneurial ecosystem, such as:
- Entrepreneurs: They need to evaluate their own business plans to identify their strengths, weaknesses, opportunities, and threats, and to improve their chances of securing funding, attracting customers, and achieving success.
- Investors: They need to evaluate the business plans of potential investees to determine their viability, scalability, and profitability, and to decide whether to invest, how much to invest, and under what terms and conditions.
- Stakeholders: They need to evaluate the business plans of their partners, suppliers, competitors, or regulators to understand their goals, strategies, and resources, and to align their interests, expectations, and actions.
Business plan evaluation is not a one-time event, but a continuous and dynamic process that requires constant feedback, revision, and adaptation. It is also not a subjective or arbitrary exercise, but a systematic and rigorous one that follows certain criteria and best practices. In this article, we will explore some of the most important and widely used criteria and best practices for business plan evaluation, and provide some examples and tips to help you apply them in your own context. These criteria and best practices are:
1. Content: This refers to the substance and quality of the information provided in the business plan. It covers aspects such as:
- Relevance: The information should be pertinent and applicable to the business idea, the target market, the industry, and the environment.
- Accuracy: The information should be factual, verifiable, and reliable, and should avoid errors, omissions, or inconsistencies.
- Completeness: The information should be sufficient and comprehensive, and should cover all the essential aspects of the business idea, such as the problem, the solution, the value proposition, the customer segments, the revenue streams, the cost structure, the competitive advantage, the market analysis, the risk assessment, the financial projections, and the exit strategy.
- Clarity: The information should be easy to understand, concise, and coherent, and should use simple, precise, and consistent language, terms, and definitions.
- Originality: The information should be unique, innovative, and creative, and should demonstrate the novelty, differentiation, and value addition of the business idea.
2. Structure: This refers to the organization and layout of the information in the business plan. It covers aspects such as:
- Logic: The information should be arranged and presented in a logical, sequential, and coherent manner, and should follow a clear and consistent framework, such as the lean canvas, the business model canvas, or the traditional business plan format.
- Balance: The information should be distributed and weighted appropriately, and should avoid being too sparse or too dense, too superficial or too detailed, too optimistic or too pessimistic, or too generic or too specific.
- Flow: The information should be connected and integrated smoothly, and should use transitions, headings, subheadings, bullet points, tables, charts, graphs, and other visual aids to enhance readability and comprehension.
- Focus: The information should be aligned and consistent with the main purpose, message, and audience of the business plan, and should avoid irrelevant, redundant, or contradictory information.
3. Presentation: This refers to the style and quality of the delivery of the business plan. It covers aspects such as:
- Format: The business plan should follow the appropriate format, such as a written document, a slide deck, a video, or a pitch, and should adhere to the relevant standards, guidelines, and conventions, such as the font, size, color, layout, design, and length.
- Tone: The business plan should convey the appropriate tone, such as professional, formal, informal, casual, persuasive, informative, or entertaining, and should match the expectations, preferences, and emotions of the audience.
- Voice: The business plan should reflect the personality, identity, and values of the entrepreneur, and should use a consistent, authentic, and engaging voice, such as active, passive, first-person, third-person, or mixed.
- Grammar: The business plan should use correct, clear, and fluent grammar, spelling, punctuation, and syntax, and should avoid errors, ambiguities, or confusions.
4. Impact: This refers to the effect and outcome of the business plan. It covers aspects such as:
- Feasibility: The business plan should demonstrate the practicality and achievability of the business idea, and should provide realistic, credible, and valid assumptions, data, and evidence to support its claims and projections.
- Scalability: The business plan should demonstrate the potential and capacity of the business idea to grow and expand, and should provide realistic, credible, and valid scenarios, strategies, and plans to achieve its growth and expansion goals.
- Profitability: The business plan should demonstrate the financial and economic viability of the business idea, and should provide realistic, credible, and valid estimates, calculations, and analyses of its revenue, cost, profit, cash flow, break-even, and return on investment.
- Sustainability: The business plan should demonstrate the social and environmental responsibility of the business idea, and should provide realistic, credible, and valid measures, indicators, and impacts of its social and environmental performance, such as its social mission, vision, and values, its social problem, solution, and impact, its environmental problem, solution, and impact, and its stakeholder engagement, management, and satisfaction.
To illustrate these criteria and best practices, let us consider an example of a business plan for a hypothetical venture called EcoBee, which is a social enterprise that produces and sells organic honey and bee products, while empowering rural women and protecting the environment. Here is a possible excerpt from the business plan, focusing on the problem and the solution sections:
Problem
Honey is one of the most popular and versatile natural products, with numerous benefits for health, beauty, and nutrition. However, the honey industry faces several challenges, such as:
- Low quality: Many honey products in the market are adulterated, diluted, or contaminated with chemicals, pesticides, or antibiotics, which compromise their quality, safety, and authenticity.
- Low income: Many honey producers, especially in rural areas, are poor, marginalized, and exploited, and receive low and unstable prices for their products, which limit their income, livelihood, and well-being.
- Low sustainability: Many honey production practices are unsustainable, destructive, and harmful to the environment, such as deforestation, monoculture, or overharvesting, which threaten the biodiversity, health, and survival of the bees and other pollinators.
Solution
EcoBee is a social enterprise that produces and sells high-quality, organic, and fair-trade honey and bee products, while empowering rural women and protecting the environment. Our solution consists of:
- Organic honey: We produce honey and bee products that are 100% natural, organic, and pure, and that meet the highest standards of quality, safety, and authenticity. We use organic, sustainable, and ethical beekeeping practices, such as natural bee habitats, diverse flora, and minimal intervention, and we do not use any chemicals, pesticides, or antibiotics in our production process. We also use innovative technologies, such as blockchain, to trace and verify the origin, quality, and purity of our products.
- Fair trade: We sell honey and bee products that are fair, transparent, and equitable, and that offer a fair and stable price to our producers, a fair and affordable price to our consumers, and a fair and reasonable profit to our enterprise. We use fair trade principles, practices, and certifications, such as fair wages, fair contracts, fair trade premiums, and fair trade labels, and we do not engage in any exploitation, manipulation, or intermediation in our value chain. We also use innovative platforms, such as e-commerce, to connect and communicate directly with our producers and consumers.
- Social impact: We empower rural women who are the main producers of honey and bee products, and who face multiple challenges, such as poverty, illiteracy, discrimination, or violence. We provide them with training, equipment, financing, and market access, and we enable them to become independent, skilled, and confident entrepreneurs, who can generate income, improve their livelihood, and contribute to their community. We also use innovative models, such as cooperatives, to organize and mobilize our producers and to foster collaboration, solidarity, and empowerment among them.
- Environmental impact: We protect the environment, which is the main source of honey and bee products, and which faces multiple threats, such as climate change, pollution, or habitat loss. We conserve and restore the natural resources, such as forests, flowers, and water, that are essential for the bees and other pollinators, and we promote and practice the sustainable use and management of these resources. We also use innovative solutions, such as solar power, to reduce our environmental footprint and to enhance our environmental performance.
Why Business Plan Evaluation Matters - Business Plan Evaluation Criteria: The Art of Business Plan Assessment: Criteria and Best Practices
A business plan is a document that outlines the goals, strategies, and feasibility of a venture. It is a crucial tool for entrepreneurs, investors, and stakeholders to evaluate the potential and viability of a business idea. However, not all business plans are created equal. Some may be too vague, unrealistic, or poorly structured, while others may be too detailed, technical, or optimistic. Therefore, it is important to follow some best practices and criteria when crafting and assessing a business plan. In this article, we will discuss the art of business plan assessment, and how to apply some common and effective criteria to evaluate different aspects of a business plan.
One of the most important and comprehensive parts of a business plan is the section that covers the four key elements: executive summary, market analysis, financial plan, and management team. These elements provide a clear and concise overview of the business idea, the market opportunity, the financial projections, and the people behind the venture. They are also the most scrutinized and evaluated by potential investors, partners, and customers. Therefore, it is essential to write this section with care and precision, and to address the following criteria:
- Executive summary: This is the first and most influential part of the business plan, as it summarizes the main points and highlights the value proposition of the venture. It should be brief, clear, and compelling, and answer the following questions:
- What is the problem or need that the venture aims to solve or fulfill?
- What is the solution or product that the venture offers or creates?
- What is the target market and customer segment that the venture serves or reaches?
- What is the competitive advantage or unique selling point that the venture has or develops?
- What are the main goals and milestones that the venture plans to achieve or accomplish?
- What are the key financial figures and indicators that the venture expects or demonstrates?
- What are the funding requirements and sources that the venture seeks or obtains?
- What are the main risks and challenges that the venture faces or anticipates?
- For example, an executive summary for a hypothetical online education platform could be:
> Edufy is an online education platform that connects learners and educators around the world. Edufy offers a variety of courses and programs in different fields and levels, from languages and arts to science and technology. Edufy's target market is the global population of lifelong learners who want to acquire new skills, knowledge, and credentials. Edufy's competitive advantage is its innovative and adaptive learning system that personalizes the learning experience for each learner, based on their preferences, goals, and progress. Edufy's main goals are to reach 10 million learners and 100,000 educators by the end of 2024, and to become the leading online education provider in the world. Edufy's key financial figures include a revenue of $50 million and a profit margin of 20% in 2024, based on a subscription-based business model. Edufy's funding requirements are $10 million in seed capital, which will be used to develop the platform, acquire content, and market the service. Edufy's main risks and challenges include the high competition in the online education market, the regulatory and legal issues in different countries, and the quality and retention of the learners and educators.
- Market analysis: This is the part of the business plan that demonstrates the market opportunity and the customer demand for the venture. It should be based on solid research and data, and show the following aspects:
- The size and growth of the market, in terms of volume, value, and segments.
- The trends and drivers of the market, in terms of demand, supply, and preferences.
- The characteristics and needs of the customers, in terms of demographics, psychographics, and behaviors.
- The segmentation and positioning of the customers, in terms of groups, niches, and profiles.
- The competitive landscape of the market, in terms of existing and potential competitors, their products, prices, and strategies.
- The market gaps and opportunities that the venture can exploit or create, in terms of differentiation, innovation, and value creation.
- For example, a market analysis for the hypothetical online education platform could include:
> The online education market is a large and growing market, with a global value of $250 billion in 2023, and an annual growth rate of 15%. The market is driven by the increasing demand for accessible, affordable, and flexible education, especially in the emerging and developing regions, where the traditional education system is inadequate or insufficient. The market is also influenced by the changing preferences and expectations of the learners, who want more personalized, interactive, and engaging learning experiences, as well as more relevant, practical, and credible learning outcomes. The customers of the online education market are diverse and heterogeneous, with different backgrounds, interests, goals, and motivations. However, they can be segmented into four main groups, based on their learning objectives and behaviors:
- Hobbyists: These are learners who pursue online education for personal interest, enjoyment, or curiosity. They are typically casual and flexible learners, who prefer short and easy courses, and who are not concerned about credentials or outcomes. They account for 25% of the market, and are willing to pay an average of $10 per month for online education.
- Professionals: These are learners who pursue online education for career development, advancement, or transition. They are typically serious and committed learners, who prefer long and comprehensive courses, and who are interested in credentials and outcomes. They account for 50% of the market, and are willing to pay an average of $50 per month for online education.
- Students: These are learners who pursue online education for academic preparation, enhancement, or completion. They are typically young and ambitious learners, who prefer medium and varied courses, and who are concerned about credentials and outcomes. They account for 15% of the market, and are willing to pay an average of $30 per month for online education.
- Entrepreneurs: These are learners who pursue online education for business creation, innovation, or improvement. They are typically creative and adventurous learners, who prefer short and practical courses, and who are interested in credentials and outcomes. They account for 10% of the market, and are willing to pay an average of $100 per month for online education.
> The competitive landscape of the online education market is crowded and dynamic, with many existing and potential competitors, offering different products, prices, and strategies. Some of the major competitors include:
- Coursera: This is the largest and most popular online education platform, with over 80 million learners and 4,000 courses. Coursera offers a wide range of courses and programs, from individual courses to degrees and certificates, in various fields and levels. Coursera's main strength is its partnership with leading universities and organizations, which gives it credibility and quality. Coursera's main weakness is its high price and low completion rate, which limits its accessibility and effectiveness. Coursera's main strategy is to expand its content and reach, and to improve its learner experience and retention.
- Udemy: This is the second largest and most diverse online education platform, with over 50 million learners and 150,000 courses. Udemy offers a variety of courses and programs, from individual courses to bundles and subscriptions, in different fields and levels. Udemy's main strength is its open and flexible platform, which allows anyone to create and sell courses, and which gives it diversity and variety. Udemy's main weakness is its low quality and consistency, which affects its reputation and value. Udemy's main strategy is to increase its quality and standards, and to optimize its pricing and revenue.
- Khan Academy: This is the most influential and respected online education platform, with over 20 million learners and 10,000 courses. Khan Academy offers a range of courses and programs, from individual courses to curricula and assessments, in mainly STEM fields and levels. Khan Academy's main strength is its mission and vision, which is to provide free and quality education for everyone, and which gives it trust and loyalty. Khan Academy's main weakness is its limited scope and depth, which restricts its appeal and impact. Khan Academy's main strategy is to diversify its content and partners, and to enhance its learner engagement and feedback.
> The market gaps and opportunities that the venture can exploit or create are:
- Personalization: There is a need and demand for more personalized and adaptive online education, that can tailor the learning experience to each learner's preferences, goals, and progress, and that can provide more relevant, practical, and credible learning outcomes.
- Interaction: There is a need and demand for more interactive and social online education, that can foster the learning community and collaboration among learners and educators, and that can provide more feedback, support, and recognition.
- Innovation: There is a need and demand for more innovative and creative online education, that can offer new and exciting courses and programs, in emerging and interdisciplinary fields and levels, and that can provide more value and differentiation.
- Financial plan: This is the part of the business plan that shows the financial feasibility and sustainability of the venture. It should be based on realistic and reasonable assumptions and projections, and include the following components:
- The income statement, which shows the revenue, expenses, and profit or loss of the venture over a period of time, usually three to five years.
- The balance sheet, which shows the assets, liabilities, and equity of the venture at a point in time, usually at the end of each year.
- The cash flow statement, which shows the cash inflows and outflows of the venture over a period of time, usually monthly or quarterly.
- The break-even analysis, which shows the point at
There are two companies that the AI Fund has invested in - Woebot and Landing AI - and the AI Fund has a number of internal teams working on new projects. We usually bring in people as employees, work with them to turn ideas into startups, then have the entrepreneurs go into the startup as founders.
One of the most crucial aspects of creating a successful business is to have a clear and realistic plan that outlines the goals, strategies, and resources of the venture. However, having a plan is not enough; it also needs to be evaluated and assessed by various stakeholders, such as investors, customers, partners, and regulators, who have different expectations and criteria for judging the potential and performance of the business. Therefore, it is important to understand and apply the common business plan evaluation criteria that can help to measure the strengths and weaknesses of the plan and identify the areas of improvement. These criteria are:
- Feasibility: This criterion evaluates whether the business idea is practical, realistic, and achievable, given the current market conditions, customer demand, competitive landscape, and available resources. It also considers the risks and challenges that the business may face and how they can be mitigated or overcome. A feasible business plan should demonstrate that the business has a clear value proposition, a viable target market, a competitive advantage, and a sound financial projection. For example, a feasibility analysis for a new online grocery delivery service would examine the size and growth of the online grocery market, the customer segments and their needs, the existing and potential competitors, the distribution channels and logistics, the revenue streams and cost structure, and the legal and regulatory issues.
- Viability: This criterion evaluates whether the business can generate enough revenue and profit to sustain itself and grow in the long term, given the expected costs and expenses. It also considers the cash flow and break-even point of the business, as well as the return on investment and the payback period for the investors. A viable business plan should demonstrate that the business has a profitable and scalable business model, a realistic and conservative financial forecast, and a clear and compelling exit strategy. For example, a viability analysis for a new online grocery delivery service would estimate the sales volume and revenue, the variable and fixed costs, the gross and net margins, the cash flow and working capital, the break-even point and the breakeven time, the return on investment and the internal rate of return, and the exit options and valuation.
- Scalability: This criterion evaluates whether the business can increase its output and revenue without compromising its quality and efficiency, given the potential growth opportunities and market demand. It also considers the scalability of the product or service, the operations, the team, and the technology. A scalable business plan should demonstrate that the business has a strong and flexible product-market fit, a lean and agile operational process, a talented and motivated team, and a robust and scalable technology platform. For example, a scalability analysis for a new online grocery delivery service would assess the product features and customer feedback, the operational capacity and bottlenecks, the team size and skills, and the technology infrastructure and performance.
- Sustainability: This criterion evaluates whether the business can maintain its competitive edge and customer loyalty in the long term, given the changing market trends, customer preferences, and competitive forces. It also considers the sustainability of the social and environmental impact of the business, as well as the ethical and legal compliance. A sustainable business plan should demonstrate that the business has a clear and consistent vision and mission, a loyal and engaged customer base, a differentiated and innovative product or service, and a positive and responsible social and environmental impact. For example, a sustainability analysis for a new online grocery delivery service would examine the vision and mission statements, the customer retention and satisfaction rates, the product or service innovation and improvement, and the social and environmental benefits and costs.
By applying these common business plan evaluation criteria, one can effectively assess the quality and potential of the business plan and make informed and objective decisions about the future of the business. These criteria can also help to communicate the value and attractiveness of the business plan to various stakeholders and persuade them to support and invest in the business. However, these criteria are not exhaustive or definitive; they may vary depending on the type, stage, and industry of the business, as well as the specific goals and expectations of the evaluators. Therefore, it is advisable to customize and adapt these criteria to suit the context and purpose of the business plan evaluation.
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One of the most important aspects of creating a successful business plan is assessing its strengths, weaknesses, opportunities, and threats (SWOT), as well as setting specific, measurable, achievable, relevant, and time-bound (SMART) goals and benchmarks. These tools can help entrepreneurs and investors evaluate the feasibility, viability, and desirability of a business idea, as well as monitor its progress and performance. In this section, we will discuss how to use SWOT analysis, SMART goals, and benchmarks effectively for business plan assessment, and provide some examples of each tool in action.
- SWOT analysis: A SWOT analysis is a strategic planning tool that helps identify the internal and external factors that affect a business idea. The internal factors are the strengths and weaknesses of the business, such as its resources, capabilities, competitive advantages, and disadvantages. The external factors are the opportunities and threats that the business faces, such as market trends, customer needs, competitors, regulations, and risks. A swot analysis can help answer questions such as: What are the unique selling points of the business? What are the potential challenges and pitfalls? How can the business leverage its strengths and overcome its weaknesses? How can the business exploit its opportunities and mitigate its threats? A SWOT analysis can be presented in a matrix format, as shown below:
| Strengths | Weaknesses |
| - high-quality products and services | - Limited market share and brand recognition |
| - Innovative and creative team | - High costs and low profitability |
| - Strong customer loyalty and satisfaction | - Dependence on a few suppliers and distributors |
| Opportunities | Threats |
| - growing demand for eco-friendly and organic products | - Intense competition from established and new entrants |
| - Expansion into new markets and segments | - Regulatory changes and environmental issues |
| - Diversification of product portfolio and revenue streams | - Economic downturn and changing consumer preferences |
- smart goals: SMART goals are specific, measurable, achievable, relevant, and time-bound objectives that help guide and motivate a business idea. SMART goals can help answer questions such as: What are the desired outcomes of the business? How will the business measure its success? How realistic and attainable are the goals? How aligned are the goals with the mission and vision of the business? How long will it take to achieve the goals? smart goals can be written as statements that follow the smart criteria, as shown below:
- Specific: The goal should be clear and concise, and state what, who, where, when, why, and how. For example: "We will launch our new line of organic skincare products in the US market by the end of the year, targeting women aged 25-40 who are health-conscious and environmentally aware."
- Measurable: The goal should be quantifiable and verifiable, and have indicators and metrics to track its progress and results. For example: "We will measure our success by the number of products sold, the revenue generated, the market share captured, and the customer feedback received."
- Achievable: The goal should be realistic and feasible, and have the necessary resources, skills, and capabilities to accomplish it. For example: "We have conducted extensive market research and product testing, and have secured sufficient funding, staff, and partnerships to launch our new line of organic skincare products."
- Relevant: The goal should be meaningful and important, and have a positive impact on the business and its stakeholders. For example: "Our new line of organic skincare products will enhance our brand image, increase our customer base, and improve our social and environmental responsibility."
- Time-bound: The goal should have a specific and reasonable deadline, and have milestones and checkpoints to monitor its progress and completion. For example: "We will launch our new line of organic skincare products by the end of the year, and aim to achieve a 10% market share and a 20% return on investment within the first year."
- Benchmarks: Benchmarks are standards or points of reference that help compare and evaluate the performance and progress of a business idea. Benchmarks can help answer questions such as: How does the business compare to its competitors and industry peers? How does the business perform against its own goals and expectations? How can the business improve its efficiency and effectiveness? Benchmarks can be derived from internal or external sources, such as historical data, best practices, industry averages, or customer feedback, as shown below:
- Internal benchmarks: These are benchmarks that are based on the business's own data and records, and help measure its improvement and growth over time. For example: "We will compare our sales, revenue, and profit margins of our new line of organic skincare products to our previous line of conventional skincare products, and aim to increase them by 50% within the first year."
- External benchmarks: These are benchmarks that are based on the data and records of other businesses or organizations, and help measure the business's competitiveness and market position. For example: "We will compare our market share, customer satisfaction, and brand awareness of our new line of organic skincare products to those of our main competitors and industry leaders, and aim to match or exceed them within the first year.
My advice for any entrepreneur or innovator is to get into the food industry in some form so you have a front-row seat to what's going on.
evaluating a business plan is not a simple task. It requires a careful analysis of the feasibility, viability, and desirability of the proposed venture, as well as the alignment of the plan with the goals and values of the investors or stakeholders. However, there are many challenges and pitfalls that can hinder the effectiveness and accuracy of the evaluation process. Some of these are:
- Biases: Biases are cognitive shortcuts that can lead to distorted judgments and decisions. They can affect the evaluation of a business plan in various ways, such as:
- Confirmation bias: This is the tendency to seek, interpret, and favor information that confirms one's preexisting beliefs or hypotheses. For example, an evaluator may overlook or dismiss the weaknesses or risks of a business plan that matches their own preferences or expectations, while emphasizing or exaggerating the strengths or opportunities of the plan.
- Anchoring bias: This is the tendency to rely too heavily on the first piece of information that one receives, and to adjust subsequent judgments based on that initial anchor. For example, an evaluator may be influenced by the first impression of the entrepreneur, the market size, or the financial projections of the business plan, and fail to consider other relevant factors or evidence that may contradict or modify the initial anchor.
- Overconfidence bias: This is the tendency to be more confident in one's judgments or abilities than is warranted by the evidence or reality. For example, an evaluator may overestimate their own expertise or experience in assessing a business plan, and neglect to seek feedback or consult other sources of information or perspectives that may challenge or improve their evaluation.
- Assumptions: Assumptions are beliefs or statements that are taken for granted or accepted as true without verification or validation. They can affect the evaluation of a business plan in various ways, such as:
- Market assumptions: These are assumptions about the size, growth, structure, trends, and dynamics of the market that the business plan targets. For example, an evaluator may assume that the market is large enough, stable enough, or accessible enough for the proposed venture, without conducting a thorough market research or analysis.
- Customer assumptions: These are assumptions about the needs, preferences, behaviors, and willingness to pay of the potential customers that the business plan serves. For example, an evaluator may assume that the customers have a clear and urgent problem that the proposed solution can solve, without validating the problem-solution fit or the value proposition of the business plan.
- Competitor assumptions: These are assumptions about the strengths, weaknesses, strategies, and responses of the existing or potential competitors that the business plan faces. For example, an evaluator may assume that the proposed venture has a sustainable competitive advantage or a unique selling proposition, without benchmarking the competitors or anticipating their reactions or countermeasures.
- Unrealistic expectations: Unrealistic expectations are expectations that are too high, too low, or too vague to be met or measured. They can affect the evaluation of a business plan in various ways, such as:
- Financial expectations: These are expectations about the revenue, cost, profit, cash flow, and return on investment of the proposed venture. For example, an evaluator may have unrealistic expectations about the growth rate, breakeven point, or profitability of the business plan, based on overly optimistic or pessimistic assumptions or projections.
- Operational expectations: These are expectations about the resources, capabilities, processes, and systems that are required to execute the proposed venture. For example, an evaluator may have unrealistic expectations about the availability, quality, or efficiency of the human, physical, financial, or technological resources that the business plan needs or utilizes.
- Strategic expectations: These are expectations about the vision, mission, goals, and objectives of the proposed venture. For example, an evaluator may have unrealistic expectations about the scope, scale, or impact of the business plan, based on vague or ambiguous statements or plans.
To avoid these challenges and pitfalls, evaluators should adopt a critical and systematic approach to business plan evaluation, using various tools and techniques such as:
- Checklists: Checklists are lists of criteria or questions that can help evaluators to cover all the essential aspects and components of a business plan, and to identify any gaps, errors, or inconsistencies in the plan. For example, evaluators can use checklists such as the Business Model Canvas, the Lean Canvas, or the Venture Opportunity Screening Tool to assess the value proposition, customer segments, revenue streams, cost structure, key resources, key activities, key partnerships, and channels of the business plan.
- Scoring models: Scoring models are methods of assigning numerical values or weights to different aspects or components of a business plan, and then aggregating or comparing them to obtain an overall score or rank of the plan. For example, evaluators can use scoring models such as the Venture Evaluation and scoring Tool, the Business Plan Evaluation Matrix, or the balanced Scorecard to evaluate the attractiveness, feasibility, and readiness of the business plan, based on various dimensions such as market, product, team, strategy, finance, and operations.
- sensitivity analysis: Sensitivity analysis is a technique of testing how the outcome or performance of a business plan changes when one or more of the input variables or assumptions are varied. For example, evaluators can use sensitivity analysis to examine how the financial projections or the return on investment of the business plan are affected by changes in the market size, growth rate, customer acquisition cost, price, margin, or churn rate.
By using these tools and techniques, evaluators can enhance their ability to conduct a comprehensive, objective, and realistic evaluation of a business plan, and to avoid biases, assumptions, and unrealistic expectations that may cloud their judgment or decision.
Evaluating a business plan is not a simple task. It requires a comprehensive and systematic approach that considers various aspects of the plan, such as its feasibility, viability, sustainability, and attractiveness. Moreover, it involves comparing the plan with the best practices and standards in the industry, as well as the expectations and requirements of the potential stakeholders, such as investors, customers, partners, and regulators. To facilitate this process, there are several tools and resources that can be used to assess the quality and effectiveness of a business plan. Some of these are:
1. Software: There are various software applications that can help with the analysis and presentation of a business plan. Some examples are:
- LivePlan: This is a cloud-based software that allows users to create, update, and share their business plans online. It also provides access to over 500 sample plans, industry benchmarks, and financial projections. Users can also track their progress and performance using dashboards and reports.
- BizPlan: This is another online platform that helps users to build and refine their business plans. It offers a step-by-step guide, a drag-and-drop interface, and a collaboration feature. Users can also get feedback from experts and investors through the platform.
- PlanGuru: This is a software that focuses on the financial aspects of a business plan. It helps users to create and analyze financial statements, budgets, forecasts, and scenarios. It also integrates with other accounting software, such as QuickBooks and Excel.
2. Templates: There are also various templates that can be used to structure and format a business plan. Templates can help users to organize their information, highlight their key points, and follow the best practices. Some examples are:
- Lean Canvas: This is a one-page template that summarizes the essential elements of a business plan, such as the problem, solution, value proposition, customer segments, channels, revenue streams, cost structure, key metrics, and unfair advantage. It is based on the lean startup methodology and is suitable for testing and validating business ideas quickly and efficiently.
- Business Model Canvas: This is another one-page template that describes the core components of a business model, such as the value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. It is based on the business model generation framework and is useful for designing and innovating business models.
- Executive Summary: This is a brief overview of the main aspects of a business plan, such as the company description, mission statement, products or services, market analysis, competitive advantage, financial plan, and funding request. It is usually the first section of a business plan and is intended to capture the attention and interest of the readers.
3. Expert Feedback: Another valuable resource for evaluating a business plan is the feedback from experts and professionals who have experience and knowledge in the relevant field or industry. Expert feedback can help users to identify the strengths and weaknesses of their plan, as well as the opportunities and threats in the market. Some examples are:
- Mentors: These are individuals who can provide guidance, advice, and support to users throughout the process of developing and implementing their business plan. Mentors can be found through various channels, such as online platforms, networking events, incubators, accelerators, or educational institutions.
- Consultants: These are individuals or firms who can offer specialized services, such as market research, financial analysis, legal advice, or strategic planning, to users who need assistance or expertise in certain areas of their business plan. Consultants can be hired or contracted through various sources, such as online platforms, referrals, or directories.
- Reviewers: These are individuals or groups who can evaluate and critique the business plan and provide constructive feedback and suggestions for improvement. Reviewers can be internal or external, such as team members, peers, customers, investors, or judges. Reviewers can be contacted or approached through various means, such as online platforms, competitions, or pitches.
How to Use Software, Templates, and Expert Feedback - Business Plan Evaluation Criteria: The Art of Business Plan Assessment: Criteria and Best Practices
Evaluating your business plan is not a one-time activity, but a continuous process that helps you monitor your progress, identify your strengths and weaknesses, and adjust your strategies accordingly. By applying the criteria and best practices of business plan assessment, you can reap the following benefits and outcomes for your business:
- improve your business performance. By measuring your actual results against your projected goals, you can identify the gaps and areas of improvement in your business operations, finances, marketing, and customer service. You can also use the feedback from your evaluators, such as investors, mentors, or peers, to gain valuable insights and suggestions on how to enhance your performance. For example, if your evaluation reveals that your sales are lower than expected, you can analyze the reasons behind it and implement corrective actions, such as improving your product quality, offering discounts, or expanding your distribution channels.
- refine your business strategy. By evaluating your business plan, you can also test the validity and feasibility of your assumptions, hypotheses, and strategies. You can verify whether your target market, value proposition, competitive advantage, and revenue model are realistic and aligned with your vision and mission. You can also assess whether your strategies are consistent and coherent across different aspects of your business, such as product development, marketing, and finance. For example, if your evaluation shows that your target market is too narrow or too saturated, you can revise your market segmentation and positioning strategy to reach a larger or more profitable customer base.
- accelerate your business growth. By evaluating your business plan, you can also identify new opportunities and challenges for your business growth. You can discover new trends, customer needs, market gaps, and potential partnerships that can help you expand your product portfolio, customer segments, geographic reach, and revenue streams. You can also anticipate and mitigate the risks and threats that can hinder your growth, such as changing customer preferences, regulatory changes, or competitive pressures. For example, if your evaluation indicates that your product has a high demand in a new market, you can explore the possibility of entering that market and adapting your product to meet the local needs and preferences.
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After learning about the various criteria and best practices for evaluating a business plan, you might be wondering how to apply them to your own plan. In this section, we will provide some practical tips and examples to help you assess your own business plan and improve it based on the feedback you receive.
- Tip 1: Use a checklist or a rubric to guide your self-evaluation. A checklist or a rubric is a tool that lists the essential elements of a good business plan and assigns a score or a rating to each element. You can use a checklist or a rubric to review your own business plan and identify the strengths and weaknesses of each section. For example, you can use the following checklist to evaluate your executive summary:
| Element | Score (1-5) | Comments |
| Provides a clear and concise overview of the business idea, the market opportunity, the competitive advantage, the financial projections, and the funding needs. | | |
| captures the attention and interest of the reader and motivates them to read the rest of the plan. | | |
| Matches the tone and style of the target audience and the purpose of the plan. | | |
| Is free of grammatical, spelling, and formatting errors. | | |
- Tip 2: Seek feedback from multiple sources and perspectives. A business plan is not a static document that you write once and forget. It is a dynamic document that you need to update and revise as you test your assumptions, gather new information, and encounter new challenges. Therefore, it is important to seek feedback from multiple sources and perspectives, such as your potential customers, investors, mentors, peers, and experts. Each source can provide you with valuable insights and suggestions that can help you improve your business plan and your business idea. For example, you can use the following questions to solicit feedback from different sources:
| Source | Questions |
| Potential customers | - What problem or need does your product or service solve for them?
- How do they currently solve this problem or meet this need?
- What are the benefits and features of your product or service that they value the most?
- How much are they willing to pay for your product or service?
- How do they prefer to buy and use your product or service? |
| investors | - What is the market size and growth potential of your industry and target market?
- What is your competitive advantage and how do you differentiate yourself from your competitors?
- What are your revenue streams and cost structure and how do they affect your profitability and cash flow?
- What are your financial projections and assumptions and how realistic and achievable are they?
- What are the risks and challenges that you face and how do you plan to overcome them? |
| Mentors | - What is your vision and mission for your business and how do they align with your personal and professional goals?
- What are your core values and principles and how do they guide your decision making and actions?
- What are your strengths and weaknesses as an entrepreneur and how do you leverage or mitigate them?
- What are the skills and knowledge that you need to acquire or improve and how do you plan to do so?
- What are the resources and support that you need and how do you access them? |
| Peers | - What are the best practices and lessons learned from other successful or failed businesses in your industry or market?
- What are the trends and opportunities that you can capitalize on or the threats that you need to avoid or prepare for?
- What are the feedback and suggestions that you have received from other sources and how do you incorporate or respond to them?
- What are the gaps or inconsistencies that you have noticed in your business plan and how do you address them?
- What are the questions or doubts that you have about your business plan and how do you resolve them? |
| Experts | - What are the legal, regulatory, ethical, and social implications of your business idea and how do you comply or cope with them?
- What are the technical, operational, and logistical aspects of your business idea and how do you execute or optimize them?
- What are the tools and methods that you use to measure and evaluate your business performance and progress and how do you use them?
- What are the standards and benchmarks that you use to compare and contrast your business with others and how do you use them?
- What are the best practices and recommendations that you can adopt or adapt from other industries or domains and how do you use them? |
- Tip 3: Use feedback to refine and improve your business plan. Feedback is only useful if you use it to refine and improve your business plan. Therefore, you need to analyze the feedback that you receive and identify the key themes, patterns, and insights that emerge from it. You also need to prioritize the feedback based on its relevance, importance, and urgency and decide which feedback to act on and which feedback to ignore or defer. Finally, you need to implement the feedback by making the necessary changes and adjustments to your business plan and communicating them to your stakeholders. For example, you can use the following steps to use feedback to refine and improve your business plan:
| Step | Description |
| Analyze | - Review the feedback that you receive from different sources and perspectives.
- Identify the key themes, patterns, and insights that emerge from the feedback.
- Categorize the feedback into positive, negative, and neutral feedback.
- summarize the main points and takeaways from the feedback. |
| Prioritize | - Evaluate the feedback based on its relevance, importance, and urgency.
- Decide which feedback to act on and which feedback to ignore or defer.
- Rank the feedback based on its priority and impact.
- Create an action plan and a timeline for implementing the feedback. |
| Implement | - Make the necessary changes and adjustments to your business plan based on the feedback.
- Test and validate the changes and adjustments with your stakeholders.
- Communicate the changes and adjustments to your stakeholders and explain the rationale and benefits behind them.
- Monitor and measure the results and outcomes of the changes and adjustments. |
By applying these tips and examples to your own business plan, you can ensure that your business plan is not only well-written and well-presented, but also well-evaluated and well-improved. This will increase your chances of achieving your business goals and objectives and creating a successful and sustainable business.
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