The interest around obtaining Canadian permanent resident status and citizenship via opening a business is ever so prominent. It takes both ample resources and sound strategy for an entrepreneur to excel in a new market environment. That is why quality business plan is a vital prerequisite of successful business development. Of course, one may argue that certain enterprises flourish even without formalized planning, especially in booming sectors of economy. However, this is hardly the case for a highly competitive economy such as Canada.
In theory, there regarded to be three main objectives in business-planning. The first is to create an effective strategy for growth of your business. Second, it helps to determine financial needs of your project. Third, the business plan along with project presentation serves to attract potential investors and lenders. All in all, taken seriously a business plan can be leveraged by the shareholders as a powerful tool for decision-making.
To all this we should add the fourth objective pertaining to immigration: a business plan is key for immigration process under self-employed category, for business immigration (including the owner/operator pathway) as well as intra-company transfers.
So what a proper business plan should look like content-wise? In this material we merely intend to go through the main «what-could-go-wrongs» in business planning. Of course, there is no silver bullet for all potential mistakes, yet an awareness of the main planning principles gives way to possibility of its success. As the general Karl von Clausewitz renowned by many business writers once put it: «Strategy is the necessary response to the inescapable reality of limited resources». Let us proceed to the possible mistakes in strategic business planning now.
The business planning must commence with the right assumptions. Unfortunately, this crucial step is often overlooked. Failure to conduct a thorough market research or lack of quality information sources result in too optimistic a definition of demand (market share) and supply of the product or service in question. The business plan needs to communicate your valid value proposition to the market and be free of illusions that it is omnipotent and fits everyone’s needs. Currently, we witness an ever growing importance of understanding not only the geographic and demographic, but also the psychographic features of a target market segment (audience).
Additionally, an effective business growth strategy is hardly possible without adequate consideration of competition. Downplaying or ignoring its existence in present and future is not a healthy option for a business undertaking, especially in the long run. A lack of competitor analysis can result in assuming a hockey stick growth curve – a completely unbridled explosion of volumes and revenues. A business and its plans obscure of such limitations will be subject to tough reality check. Forces and significance of competition are better to be over- than underestimated.
As far as pitfalls in determining financing requirements are concerned, it is always better to secure services of a professional local financial consultant or accountant. Otherwise it may well be the case that there will be factual, logical or even math mistakes in the financial plan, which render it null and void. Ideally, a financial model for a new enterprise must stem from disclosed and tested list of assumptions (regarding operational details, cost items, tax, interest and exchange rates, etc), which are often omitted or not detailed enough. Financing need implies timely availability of adequately measured free cash flow under control of the business to perform its operations and functions towards various stakeholders. All too often, it is the inability to forecast cash flows in timely manner, as opposed to planning of profits, that leads to problems for the management.
From the investor and lender point of view, there are criteria to assess the quality of a business plan as well. For the business community this document is a «presentation packaging» of the business idea and management team at its core. It can only be frustrating when a promising concept is being sold without taking perspective of this target audience. The business plan capable of winning investors must be «written in their language», i.e. present the project highlights which are of the most interest. Apart from concern areas covered above, these highlights are generally to do with management competences and business risks.
Any economic model for a project has to be underpinned with a «road map» - an operational plan of how the anticipated capture of the market (share) will happen. So, a lack of developed operational and organizational dimensions (regarding technologies and resources other than funding) significantly reduces the worthiness of a business plan. Usually investors tend to be industry-specialized. That is why any vagueness about the route of your product or service from raw materials to the market through adequate distribution channels will also do no good. The same applies when the authors of business plan underestimate, do not understand or try to conceal the risks of the project. Each and every investment theme has its peculiar operational, financial and other risks as well as mitigation tools thereof. Yet these techniques are sometimes beyond capacity of the management, due to lack of knowledge or experience.
Generally, a more thorough consideration of the mistakes outlined above is what bridges the gap between a business idea on a napkin and a quality business plan, satisfactory both for Canadian immigration authorities and broader demands of future business stakeholders.