Invest in Market Analysis

The market analysis section of your business plan can make or break your chance at financing. Take the time and spend the money to really get to know your industry, its trends, and where it’s headed. If you don’t, it could cost you the financing you’re trying to get.

Your audience probably doesn’t know anything about your industry. Start by defining your market in terms of:

• Size
• Structure
• Growth prospects
• Trends
• Sales potential

Define Your Target Market: This is the niche that focuses on a single segmentation of your market that will best be served by your product or services. Make it too broad and you have a shotgun effect with poor results on sales. Make it too narrow, and you leave no breathing room for future sales.

From your target market, estimate the share of the market that you can capture with your product. With the market research you have, you should be able to come up with the number of estimated customers you can reach.

Pricing: Naturally, your price must cover your costs and leave some room for profit margin. The lower you can get your costs, the higher your profit. Your price should reflect demand for your product as well as changes in your market as a whole.

Distribution: In this part of your plan, define where and how you will distribute your product. Do you have geographical restrictions?

Promotion: How will you promote your product? Lay out how you will use advertising, packaging, public relations, promotions and sales to increase exposure of your product.

Business Plan Don’ts

You’ve spent time creating what is, in your mind, the perfect business plan. But investors aren’t impressed. Where did you go wrong? Here are some helpful tips to avoid having to throw out your business plan.

Don’t get bogged down in details. You are excited about your plan and lay out every single detail of how your new product works and how it will change the face of the company. Investors don’t care. They want the general idea, and how it will make money. Spare your audience the details of the superneuron splitting technology, and instead focus on how it will attract government contracts.

Don’t make “everyone” your target market. Investors have read plenty of plans, and they see red flags if your target audience is too broad. For instance, if you sell diamond studded pet leashes and say your customer base is anyone with a dog, is that true? It’s not, and it shows your inexperience to say so. Focus on a niche that you can corner, and that will assure your investors that you have a chance to make serious money on their investment.

Don’t be too narrow. Just as big a problem as being to broad is being too narrow. If your niche market is too niche-y, you can’t possibly make enough sales to get a return on investment. If you want to sell your diamond leashes to upper class women with poodles in LA, your prices better be pretty hefty for you to make a profit year after year. After your clients buy one leash, are they really going to come back and buy another? How many leashes does one wealthy dog need?? Pay close attention to the details of your plan to increase the likelihood of pleasing an investor.

Creating a Plan: DIY or Hire Help?

Depending on how hands-on you are as a business owner, you will have to decide whether you want to write your own business plan or hire a consultant to help you.

Do It Yourself: A business plan isn’t rocket science, especially if you’re writing it for your own purpose. There are dozens of free and cheap marketing and business plan templates available online, and you can easily plug in your own information in to get a satisfactory plan.

Additionally, there is software that helps make it easy. These can help you create longer plan presentations for investors or clients, and range in price from affordable to not-so-affordable for small businesses.

Consultant: If you’ve learned the hard lesson for most entrepreneurs, you can delegate this task to someone who knows what they’re doing. There are professionals all over the world that assist small businesses with marketing and business plans, and can help you with a professional grade plan that the bank will approve of.

If you’re worried about a consultant getting your business, don’t. In fact, since they’re outside of the situation, they may be able to see the bigger picture better than you and make good suggestions to create a great plan for your business.

There are many organizations that can assist you with developing your plan, including Small Business Development Centers and Chambers of Commerce.

No matter how you decide to put your plan together, dedicate enough time on it. A business plan is not something to take lightly, and spending a good amount of your time on it now can prevent headaches down the road.

No Company is Too Small (or Big) for a Marketing Plan

As a small business, you may be bootstrapping your way with no financial backing. Every sale may go into your bank account to pay bills. But if you’re not investing at least some money back into your company, you will quickly find yourself lumped in with 95% of all small business owners, who find themselves in the small business graveyard within the first five years of operations.

How can you avoid this morbid outlook? Get a marketing plan.

I know, you’re thinking, “Marketing and advertising are expensive. I can’t afford them!”

You can. Let’s start at the beginning. First, you need a plan. You need to do some research to see what forms of advertising you can afford, and what are best suited for your type of business. Depending on what you do, you should consider:

• Direct mail
• Internet advertising
• Search Engine Optimization
• Advertising in local publications
• Press releases
• Networking

These are all very affordable options that will help get you a boost of publicity without breaking the bank.

Once you determine which methods are right for your business (if you’re a local spa, online advertising may not be as effective as direct mail), lay out your budget. If you set aside just 10% of every sale, will that provide you enough capital to invest in at least one form of advertising a quarter? Could you afford to put aside 20%? You’d be surprised how quickly you can save enough money to have a decent marketing campaign if you only plan!

Organize your plan on your calendar. Decide exactly when you want to do each type of advertising and set deadlines for yourself. By doing this, you plan for your future, and can stay out of the small business graveyard!

What’s Your Objective?

Part of any good business or marketing plan is laying out your business’ objective. By writing it down, you are effectively dedicating your company to meeting that goal.

Before you start your plan, brainstorm. Imagine your business in five years. Ask yourself these questions:

• What will my business look like?
• What will my revenues and profits be?
• How many employees will I have?
• What will my product/service offering look like?
• How many locations will my business operate in?
• How involved will I be as owner?

Quantify Your Goals
It’s important to avoid vague ideas like “my business will be successful.” You need hard numbers that you can measure against your actions. And make the goals realistic. If this year your profit is $50,000, it will be impossible to reach $1 million in profit in just a year.

Set your standards high, but attainable. If you want to reach a certain number in sales, lay out how you will reach your metric. Will you add sales staff? Will you increase promotional campaigns? Lower prices of products?

Your plan should give clear-cut, step by step actions to achieve your goals. If you don’t come close to your goal by the end of the period (year, five year mark), reassess your plan and make changes that are more realistic.

When to Update Your Plan

Just as your business changes, your business and marketing plans should change too. Your business’ objectives will likely change over time, as the industry landscape changes, your competitors get sharper, and your product line improves.

Here are some key times in the life of your business when you need to assess your plans and make adjustments as necessary.

• New financial period. Whether it’s a new month, quarter or fiscal year, take the time to review your plans to see if you’re on track. If you’ve recently made major changes to your business structure, be sure to add that in to your plans.
• Change in financial need. Perhaps you decided this year that you want to expand into a larger facility to accommodate the increase in orders you’ve been receiving. You will be asking someone for financial assistance, be it bankers, investors or shareholders. Now is a good time to update your business and marketing plans so that they accurately reflect where you stand.
• Your market is changing. If you operate in an ever-fluctuating industry like oil and gas, you make changes frequently. Make sure your business plan does too.
• You’ve added to your product line. If you add products, make changes to them, or implement new technologies to save on your bottom line, this will affect your future plans.
• You’ve met your goals. Maybe your business plan had a goal of reaching $1 million in revenues and you hit that last year. Decide what your objectives are for the future and recraft your plans around that.

Ingredients of a Business Plan

A business plan can be formal (if you’re presenting it to investors or a bank) or informal (if it’s just for your reference), but whatever style you write it in, there are certain components you should include.

Executive Summary: This is the Cliff’s Notes of the business plan. It gives an overview of the entire plan, and if you’re asking for investment or financing, it lays out exactly what you’re asking for. Keep it to no more than a half page, and be sure to include:

• Business Concept
• Financial Details
• Financial Requirements
• Current Business Stats
• Major achievements

Business Description: The next section is an overview of both the business and the industry, as well as the outlook for growth and opportunities you may be able to take advantage of.

Market Strategies: Here you assess your target market through analysis and discuss pricing, distribution and promotional strategies.

Competitive Analysis: List your top three to five competitors and assess their strengths and weaknesses.

Developmental Plan: This section outlines your product’s design and how you plan to develop it.

Operations and Management: Outline the operations organization and define the roles of each of the key players in your business. Discuss opportunities to grow your staff.

Finances: Here you include all income statements, cash flow and balance sheet so investors can see what your assets and liabilities are.

5 Reasons Your Company Needs a Business Plan

You know what your business does. You have plans for the future. Why bother with a business plan?

We tend to look at our businesses from within and often miss the bigger picture. A business plan allows us to step outside operations and see what’s really going on. Here are more reasons you need a business plan.

1. Set a plan in stone. Writing out your plan and objective for your business goes a long way toward making it happen. While laying it out makes it official, don’t be afraid to go back and make changes to the plan as necessary.

2. Make your team a part of the plan. Your employees like to feel like you know what you’re doing with your business. By sharing your business plan with them, they have an understanding of where the business is going, and can gauge their place in it.

3. Make smart decisions about buying assets. You may have bought equipment and long-term assets on an as-needed basis. A business plan lets you make arrangements in advance so that you’re not taken by surprise. For instance, if your lease is up on retail space in a year, include considering buying commercial property in your plan now.

4. Attract investors. Even if you’re not currently seeking financing, there may come a day when you will. Investors don’t talk to you if you don’t have a business plan, so get in the habit of using one now.

5. Take yourself seriously. The reason you don’t have a business plan yet may be because you don’t take your small business serious. Writing out your goals is a good exercise in really seeing if they’re feasible or not.

Finding the Plan That’s Right for Your Business

Too long. Too short. Too formal. Too casual. Goldilocks would have problems finding the right business plan, and you may too. There are several types of plans, and all fit different needs. Review each one and decide what’s right for your business.

· Mini-Plan: Fairly short and to the point, a mini-plan doesn’t take too much time and research to put together, and can be a good way to get out an idea or concept on paper to see if it’s feasible. It’s not the best option for serious finance inquiries, as bankers usually want a hefty document to look over.

· Plan in Action: This is a work-in-process, and primarily serves to help you run your business. You’ll use this plan frequently in operations, and will update it often. There’s no need to include information on key executives or other information aimed at an audience outside of your business.

· Pretty Plan: This is the professional presentation you will give to bankers and investors. It contains all of the necessary elements, including financial statements and research.

· E-Plan: E-plans can be short or long, formal or informal, but rather than being printed, they are sent electronically. These are useful if you have business partners in other parts of the country or world.

Can You Handle The Truth (Found in Your Marketing Plan)?

You may be eager to put together a marketing plan so that you can better define your goals for your business. But are you prepared to find out the ugly truth about your business??

Because a marketing plan involves heavy analysis of not only your industry and competitors, but also of your own business, you may learn things you wish you hadn’t. While you’re eager to define your company’s strengths, you may unintentionally find weaknesses you didn’t realize were there. Are you prepared to turn the weaknesses into strengths, or will you want to bury them with the rest of your business’ problems?

Examples of weaknesses you might find include:

• Inadequately trained staff is creating problems in sales support
• Lack of organization in promotions plan causes decreased sales
• Marketing budget is being overspent each year

A marketing plan uses data and research to help you make important decisions about your business’ growth. But if the data is faulty, you could make a very costly mistake as a result. Make sure that the data you base your plan on is reliable and accurate.

It’s important for you to face your business’ characteristics: the good, the bad, and the downright ugly. Before you start your marketing plan, prepare to face your problems and find solutions. It will make you a stronger company as a result.

Marketing vs. Business Plan: Do I Need Both?

You hear people talk about marketing plans and you hear people talk about business plans. What’s the difference? Why would you need both?

A business plan is a detailed presentation or report that discusses:

• Company Goals
• Products/Services
• Operations/Management
• Product Development
• Financial Position
• Income Statements, Cash Flow, Expenses

A marketing plan, which may be included in part within a business plan, focuses more on the marketing and promotion of the products or services a company offers.

Not everyone needs both a marketing and business plan, but it’s always a good idea to have one if not both to better understand your company’s strategies and goals. Use them as benchmarks throughout the year to ensure you’re on track to meeting your goals.

If you plan to seek financing from investors, you absolutely need a business plan that is well laid out and provides a professional presentation. A marketing plan is optional to investors, in most cases.

If you’re a small company and don’t plan on applying for a loan or other financing, you don’t have to rush out and create a business or marketing plan, but having one can help you stay in line with your business. Consider creating both plans at the beginning of the year when you’re starting with a clean slate for your company’s goals and strategies.

Components of a Marketing Plan

Creating a marketing plan is a great opportunity for you to step outside of your business and see what’s going on in your industry. By understanding the market and your competitors, you can better prepare and plan your next move for your company’s future. There are several key components of a marketing plan:

• Purpose/Mission: This introduces the reader to your company by explaining the purpose of the marketing plan. Are you implementing a new product line? Setting a sales goal for the year? Creating the plan as a tool for your company?
• Target Market: Who are your clients? Explain in detail the specific niche you serve, and why you provide better products or services than your competitors.
• Services/Products: List your products or services and explain what they do.
• Market Research/Analysis: This should include an in-depth study of your industry and trends, as well as future projections. Analyze your top competitors’ strengths and weaknesses. Do the same for your company.
• Marketing Strategy: Explain how you use promotion, advertising, sales, positioning and pricing to effectively capture your target market.
• Marketing Budget: Define how much money you will invest in the marketing and promotion of your products each quarter or year. Break down the budget into specific categories, such as advertising, promotion, and technology.

Developing Your Design and Development Plan

Because your product or process may change frequently to keep up with competitors and rising supply costs, the Design and Development Plan portion of your business plan should be kept up to date and reflect your current development goals.

Just like your marketing plan, your development plan should have a goal. Quantify it and provide as much detail as possible. Maybe you want to find a cheaper way to manufacture your helium balloons. Or increase production of your handmade soaps.

Process: Once you have your goal defined, start your plan with the process. Explain how your product (or service) is produced. Keep in mind, the plan is going to be read by investors, not scientists, so while details are important, write the process at the eighth grade level to make it easy (and interesting) to understand.

Development: This is where you can discuss plans for research and development. How will you continually keep your product relevant and affordable to produce? How often do you assess the product and decide whether or not to make changes?

Investors want to see improvement, not stagnation. If your product hasn’t changed in 20 years, and your margin has been shrinking, you can be assured investors will pass on your plan in favor of one that stays innovative and on the cutting edge.

Fleshing Out Your Operations and Management Plan

The Operations and Management section of your business plan is extremely important, so spend enough time getting it right. Investors will scrutinize how your organization is set up and how experienced your management is at running a business, so be sure to give as much relevant information as possible.

Operations: Whether you’re a one-woman show or run a business with hundreds of employees, you likely have duties broken out into the following categories:

• Marketing and sales (include customer service)
• Production
• Research and development
• Administration

You may not have a department for each or you may overlap a few to make up for having a small staff. However your business is organized, define the tasks of each department as well as goals for each for the next month/quarter/year.

Management: You may want to give a brief bio of each member of the management team, outlining each leader’s experience in your industry and his or her tasks specifically. This helps investors understand what kind of leadership your business has, which can help them gain confidence that you will repay any loan you apply for, or will be able to generate a return on their investment in your business.

Essentially, investors want to know your business is not only viable but also organized. This section of your business plan is your chance to prove that you run a tight ship!

Don’t Get Caught Without a Business Plan

While a business plan may be the last thing on your mind as a multitasking entrepreneur, it should be the first thing on your mind. Unfortunately, when starting a business, many of us skip over this crucial part of our business’ success.

A business plan can help you see the bigger picture and get organized, as well as:

· Help you commit. You may have an idea of your company’s goals in your head, but if you put them down on paper, it goes a long way toward making them happen.

· Makes you a team player. By sharing your business plan with your employees, you make them feel like part of the company’s operations. You give them an understanding of what the business’ goals and objectives are, and they can help achieve them.

· Help you make smart decisions. If everything is according to your business plan, you won’t be taken by surprise by needs you didn’t foresee. Planning well can help you make decisions about commercial property lease or purchase or equipment procurement.

· Attract investors. A business plan draws investors like a moth to a flame! Even if you don’t need financing today, one day you may.

· Create an action plan. While you may know what your goals are, you may not know how to make them happen. A business plan can include action items that stimulate you to reach your goals.