Click here to go to the previous lecture for a better understanding.
Reality Test:
A business plan is to be compared with reality from the side of an entrepreneur.
External Component of Reality Test:
The attractiveness of the industry is seen through the external component of the "Reality Test". The industry is judged by the external component of the "Reality Test".
What is meant by the external component of the reality test?
Investors check if the product has an existing market and if the product has an existing market, investors check the size, growth, return on investment.
Internal Component of Reality Test:
Product or service is to be judged by the internal component of the "Reality Test".
What is meant by the internal component of the reality test?
The quality and details of the product or service will be judged. One has to check if the manufacturing or providing the product or service is possible in a particular design. One has to check if the product or service is fulfilling the demand.
Competitive Test:
External Component of competitive Test:
Externals or creditors see if the product of the business plan maker can compete with competitors in the industry. If the product of the business plan maker can compete with competitors in the industry, how much return can be given by the business plan maker.
Internal Component of Competitive Test:
Creditors will check the skill, ability, experience, etc of the business plan executives. Creditors will judge profiles of the business plan executives.
Value Test:
Creditors check how much money will be returned from investing a certain amount of money.
Customer appeal is checked through the value test. The value test is customer-related.
One has to check if the product or service of the business plan will create customer value. For instance, if one has the willingness to pay BDT 12 instead of BDT 10 for the product or service that means the product or service has created the value of BDT 2.
Customer value creation = perceived value - paying value
Value creation refers to the ability of satisfaction creation compared to the price or costing of the product or service.
The solidity of a business plan increases the success rate of the business.
Click here to read SME-Part B-Lecture 8-Sub Lecture 8B
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