Heptalysis refers to the method of analysing seven factors that should be considered in the early stage of starting a business. It is mostly used in analysing of venture capital funding for a novel idea or product where recognizing the risk is an important factor. In this technique one reviews a business planning with respect to the current knowledge of the potential market and also the resources that are needed. The following factors are the subjects of the early stage analysis in this method.
- Market Opportunity. Business in one word is best explained by the name of a product, service or solution. If there is no market, even the best idea and product has no economical value. Here we list a few questions that must be answered about the potential market for a product.
- Who are the potential customers for this product?
- What is the benefit of it for the customers?
- Where and how it can be used?
- What is our advantage over the competitors who produce the same product?
- Is there a sustainable market for the product?
- When is the best time to introduce the product to the market?
- …
- Product/Solution.
- What are we going to bring to market? service, product or a combination of them?
- Are there any follow-up products?
- Are the follow-up products in the scope of our activity?
- …
- Execution Plan. Here the main question is “how to do it?”. Making a good and detailed plan for each activity is a main factor in running a business smoothly and with less trouble. These items must be covered in each planning
- Marketing and Promotion
- Sales and Distribution
- Production and Quality
- Compensation
- Growth
Each of those items should be studied with respect to the available financial and human resources. Also to monitor their progress one must define proper milestones and measurements.
- Financial Engine. From the first day of running a business there are expenses that consume constantly the resources, such as salaries, lease, maintenance fees and marketing expenses. They may be paid by internal resources like current cash flow or from external resources. If there is a bright horizon in front of the business then the required funding may be taken from an external source, say loan. As another option we have to mention factoring
- Human Capital. Human are a very important source for a business. Finding a good team and keeping them together to achieve the business goal is very vital. Also having a knowledgeable group of employees is a very important factor if the growth and sustainability of a company. With respect to the level of the activity and the technology that is uses, employee needs constant training. Also for changing the roles and promotion to a higher rank need not only experience but also knowledge. Accounts receivable factoring is an alternative solution for managing cash flow problem in a business.
- Potential Return. Having a realistic idea of the market situation is the first step in forecasting the potential revenue. There are some question that must be answered for a better understanding of the expected revenue of a business.
- What is the expected share of market?
- What is the pricing strategy?
- Is the price affordable by the majority of potential customers?
- How long does it take to achieve profits?
- …
- Margin of Safety. To prevent a catastrophe one need to have a realistic assessment of risks that involved in a business planning. There are two class of risks that involved in each activity. The internal risks that generally result from bad planning or mismanagement. The external risk refers to events that are out of ones control, like global recession or changes in laws or policies. From those risks the external risk is the hardest to anticipate and mange. Since with a deep and thorough study one can prevent the planning risk. Also the mismanagement risk is avoidable in human resources. No matter what is the source of a risk, it is vital for a business to have a good risk management plan for different scenarios.