Evaluating a business model
A business mode! such as this can be completed and presented to give a readily understand¬able one-page overview of the opportunity to potential investors and lenders. It can also be revised easily to account for different scenarios. It is important to be aware of the criteria which potential investors and other decision makers may use in evaluating a business model:
- Are the assumptions and information on which the model is based realistic and reli¬able? Or are, for example, your expectations of the rate of customer acquisition and sales growth over-optimistic?
- Are fixed costs kept as low as possible (e.g. avoiding unnecessary expenditure - hire or
lease rather than buy)? Are costs controlled overall?
- At what point are break-even sales reached?
- Are the levels of gross and especially net profit both realistic and attractive?