Business planning’s potential is not fully exploited because founders often lack awareness of its importance, which in turn may harm the success potential of a business.
This is according to Jil Sörensen from Hamburg University Media School who presented “financial planning for digital business models” at the World Media Economics and Management Conference (WMEMC) held at the Lagoon Beach Hotel in Cape Town from Monday until Thursday.
The conference, taking place between May 6-9, saw hundreds of delegates, including world leaders and researchers of media management and media businesses taking a critical look at threats and opportunities for a sustainable African and global media industry, and mapping out the ingredients for a robustly independent, credible and relevant journalism in a world sapped by “news noise” and information.
“Business planning helps entrepreneurs in developing their business and investors making the right decision. A common framework that suggests key performance indicators (KPI) for specific models is missing and presenting promising revenues based on optimistic estimations is a well-known strategy to attract investors,” said Sörensen.
She said that entrepreneurs needed business models to explain how enterprises would work or as an architecture for how a firm would create and deliver value to customers and the mechanisms employed to capture a share of that value.
Sörensen added that the essential part of this business model is financial planning as it goes more into detail of business planning including negotiations for the raising of capital, business valuation, examination of profitability and financial controlling. She urged digital business entrepreneurs to take financial planning seriously and also identify the archetype of their business models.
“Make assumptions about revenue KPIs and plan your cost KPIs. Reduce uncertainties about these assumptions, improve the estimates on the basis of reference values and test the robustness of your financial plan,” Sörensen added. (via African News Agency)