In our previous blog posts, we outlined the steps to build a basic marketing plan. Now it is time to get some coffee ready and dive into creating our business plan. The format we will use is one I personally like as it flows well and allows us to use portions of the context in the marketing plan as a starting point. We are starting with a firm foundation in place, which makes drafting the Business Plan easier, but there will still be much work to be done. If you missed the posts on developing the marketing plan, click here.
The business plan we are going to create is broken into four main categories. After the Executive Summary we will have the following primary sections: Opportunity, Execution, Operations, and Company. At the end of the business plan, we will also add all of the supporting documents and spreadsheets as an appendix.
Before we begin, remember that the Executive Summary should be a brief summary of what will become a lengthy document. Best practice suggests that this opening section be written upon competition of the other sections of the business plan. The Executive Summary should hit on the major aspects of the four main sections. Pick bullet point items that speak strongly towards your business and the established plan. Remember that most people will judge the document by this first introduction. Assume that the reader is not going to read the rest of the business plan and this summary is the only exposure they will have to the plan.
Be sure to, in a page or less, hit on the key points of the opportunity that is available, how the business plan will be executed, how it will operate, and how the company will be stable with an overview of the budget, forecast, and returns.
Compressing a long document into one page is a lot like compressing years of experience and education into a one-page resume. It is a challenge, but it grabs attention and has the most impact!
If there is not an opportunity to capitalize on, you might as well stop here. The purpose of a business is to take an opportunity into the market and capitalize on it. If you have made it this far, then you have identified an opportunity, which you feel is strong and lucrative. As we build out the opportunity section we need to answer the following questions:
- What Problem is There?
- What is Our Solution?
- What is The Market for This Solution?
- Is There Competition? If so, Who?
- Why is Our Solution, THE Solution?
Every opportunity is born to resolve a problem. Perhaps the problem you are solving is brining authentic Italian cuisine to an area that does not offer it. Possibly you have the next big information technology startup that solves logistics issues for small business. No matter how big or how small the problem, there must be a problem to solve to be a viable business.
In this section of the business plan, we should write out and describe the key problem or unmet need that we are addressing with our business. For traditional style businesses, the problem you are solving may be offering a lower price, having a more convenient location or better hours. Possibly you have a unique specialty that solves a need in the community.
For companies like software or inventions, describe the problem that your creation solves. If there are other solutions explain why they do not solve the issue.
Your business may solve multiple problems. You should describe them all in detail. Make the reader feel the pain of those with the unmet need so that in the next section we can wow them with our solution.
Now that the reader feels the pain of the problem(s) outlined in the previous section, we can present our solution(s). Be sure to outline each service or product that you offer and how they provide a solution to any problems or unmet needs.
You know your solution better than anyone. The best guidance that I can provide here is to describe the solution clearly. When you are done let someone, who isn’t as familiar read this section and make sure that they were able to understand it. One thing I have observed is that us entrepreneurs often use industry lingo and technical jargon to describe our solution. We need to assume that the reader is unfamiliar with the industry, acronyms, and other technical details.
By now you should be familiar with market segmentation. Now that we have outlined the problem we are solving and our solution, we need to illustrate how we can capitalize on the opportunity. In this section we need to describe our target market and our ideal customer. Be sure to outline the different demographics regarding who our customer is and how our product or service solves the problem they are suffering from.
The best way to break down our market segments is by outlining the different types of customers, their different and recognizable demographics, needs for the solution, and their expectations. Additionally, outlining a number of potential customers in each segment. This takes some research, but is vital to determine the best customer segments to market to, to achieve the highest returns.
Now the sizing portion of these segments is critical. Research and try to find the number of people in the segment and what they are willing to spend over the course of the year.
If a segment is too small and won’t allow you to properly capitalize it, it may not support a successful business. With that information in mind, if you find a segment may not be fruitful do more research and try to find a segment that will yield higher returns. This is an area where a business consultant or small business development center may be able to help you find the best market opportunity.
Now that we have discussed the problem, our solution, and the target customer audience, we need to analyze the competitive landscape. From our research for the marketing plan, this should be easier since we understand both direct and indirect competition and how to look for them. We need to detail the current competitive landscape for our business and other companies or method that could solve the problem that we are setting out to solve.
What I like to do is create a table of all of the competitors. In that table, I outline who they are, what they offer, why customers may choose them, and what their product is missing in comparison to ours.
Remember that no matter what your creation or business idea, you have competition. Take the automobile for example. Ford was the first to the market and did not have competition for the automobile yet, but he did compete against horse-drawn buggies, walking, and bicycles. There is always another solution. As entrepreneurs it can be difficult to acknowledge them as competition. Analyze this deeply. If there truly is no competition you can find, why is that? Could there be a reason nobody else has entered the market? Could it be possible that the market is not viable? This is something an investor may ask if they do not see various types of competition.
You might be wondering, who will invest in my business now that they know about all of these potential alternatives? The answer is in our advantages. Every business has competition, but having clear advantages over other alternatives is what will set your business apart and give you the best shot at a foundation that leads to success.
Now that our competitors are listed, we need to identify all of the key advantages we have over them in the market. We may have the best price, our solution may be more conveniently located, we may offer better customer service, our product may be faster, or easier to use. You will know your key advantages better than anyone. You have started to build this business because you identified a problem in the market. Now, here is your time to shine and show why your product or service is the best one on the market.
There are a lot of website developers out there. Say we wanted to start a website design business. We may have identified that our competitors in the region are slow, expensive, and fail to meet deadlines. Our key advantage could be that through proper project planning, we are able to deliver work in less time, meet deadlines, and offer a lower cost.
Notice I did not say we were competing on price. Remember nobody wins a price war, but our advantage here is that we plan everything out so that there is less wasteful time that the customer has to pay for, which allows us to offer lower costs and a higher level of customer service.