In: Economics
How a business will generate profits, or its business model, is generally developed before the completion of a business plan. Review criteria for the business model and for the feasibility analysis. Which would you recommend be done first? Why? (Atleast 300 words)
A business will generate profit,
when the innovative ideas will be converted into products and
services for the target audience and create value for them by
satisfying their needs and want. In the process, the business
generate revenue and covers fixed cost, variable cost, and pay
other necessary expenses. Finally, the business generates profit.
Hence, to generate profit, a business requires accumulation of
required resources and capabilities that come at a cost.
Afterwards, planning is required to convert ideas into the products
& services and satisfy the demand of the consumers. It
generates revenue, break even and then profit over a period of
time.
A business model is developed before a business plan, because
business model is one part of the business plan. Business model
shows the channelization of ideas and resources to meet the demand
and generate revenue for the business, but a business plan also
tells the sources of funding, feasibility study, forecasting of the
financials as well as setting up the performance metrics and review
criteria of the business plan. A business plan is intended to
convince the potential investors also. So, a business plan is broad
in nature and takes more time to prepare than that of the business
model.
Feasibility analysis involves the identification of demand as well
as marketability of the idea so that demand can be met and
production can be scaled. Review criteria involves reviewing of the
business on selected parameters. Here, the feasibility analysis
should be done first, because it tells that whether the business is
to be conducted or the idea should be dropped due to
non-marketability of the idea. Hence, it is required to ascertain
the scope of business first, then the business should establish the
review criteria to make it more meaningful and successful. Besides,
it is the business and specific parameters related to the business,
that sets the review criteria. So, the feasibility analysis should
be created first.