Business Map 

Who is your business plan for? That sounds like a simple question, but it’s not really. As a business owner, it’s important to have a business plan to guide your operations. Sometimes you also have to produce one for other people. Those different audiences are going to want different things from your plan.

You still need to answer all the questions, but the amount of time you spend on each section will vary depending on who the plan is for.

 BANKERS

If the primary objective of your business plan is to secure financing from a bank, start and end with the numbers. The financial section of your plan will be the section they turn to first. They are likely to dive into the assumptions you have used to build your proforma financial statements.

• Writing for this audience it is often helpful to create the projected financial statements first and then develop a plan to achieve those specific goals
• Present your assumptions clearly and consistently throughout the plan.
• If you haven’t made any sales yet, include compelling research information which supports your sales forecasts.
• Include a discussion of critical risks in the operation section. This is not being negative, it is being realistic. Bankers want to see you have clearly thought through what could go wrong and how you’re going to pay back the loan even if things don’t turn out quite the way you expected. They tend to be risk averse, so give them confidence by demonstrating you have thought through some of the worst case scenarios.

INVESTORS

Savvy investors know entrepreneurs are overly optimistic with their financial projections. so they are less interested in the numbers. They want to see the follow clearly explained in your plan:

• Market Focus. Clearly describe the needs of potential customers rather than simply being infatuated with an innovative idea.
• Evidence of Customer Acceptance. Provide evidence your product will sell or is already being used, even if only on a trial or demonstration basis.
• Believable Forecasts. Entrepreneurs are naturally optimistic when explaining the future prospects for their businesses. Are your forecasts reasonable? If you have no sales, consider including compelling research information which supports your sales forecasts.
• Ability to lead the company to success.  Demonstrate how the skills and experience of your leadership team make you uniquely qualified to run this business.

YOU AND YOUR TEAM

If you are writing this business plan for yourself and/or your team spend the bulk of your time on the action section of your business plan. Business owners tend get bogged down in the introductory sections of the plan and end up burning out before tackling the real meat of the plan; the strategy and operation sections. Action steps are overlooked and impede the growth of the business. Don’t let that happen to you.

And finally, identify the milestones which will tell you you’re heading in the right direction.

ASSIGNMENT:

Answer the simple question, who is this plan for?

A good business plan helps you look ahead, anticipate opportunities and risks, allocate resources, and measure your progress. Use it the same way you study a map to plan a route, determine where to turn, and locate key landmarks.

You plan should include the following:

• Company Background – This section includes history, mission, vision, values, goals and performance to date.  Include a general introduction of the business structure, products, services and key team members.
• Market Research – Who are the target customers and what is important to them? What makes key competitors successful? What market trends indicate there is opportunity for success?
• Business Strategy – How will you meet the needs of your target customer? What will your pricing, marketing, distribution and product strategies be? For example, will you try to be the low cost alternative or a premium product? Do you want to be known for innovative products or great service?
• Operations – The strategy section looks at the external side of your business and the promises you make to clients about what they will get when they buy your product. The operations section focuses on processes and resources required to support your strategy. These resources may include things such as training and bonus structure, staffing and facility or technology needs.  Will you need to hire new people, expand your space or make capital expenditures to achieve your goals? That information should be captured here. Don’t forget to include a timeline or milestone that indicates what will occur and who will be responsible for critical tasks.
• Financials – The financials should look at both your capital needs ( money to buy equipment) and operating funds (money to cover the day to day expenditures). This section also includes your projected results. If you follow the plan and everything goes right, what will your results be? What are the results if you have a less than successful year?
• Executive Summary – Although it appears at the front of the plan, the summary is written last, capturing the highlights of the plan document, just as a traveling itinerary reflects the key happenings of a trip but does not account for every minute spent. It should be clear and concise, just two or three pages in length. Lenders, investors, and venture capitalists receive far more business plans than they are capable of funding. You must grab the reader’s attention so they are willing to dig more deeply into your opportunity.

What are the short-term and long-term goals of your company? Goals must be specific and measurable, and may include: sales volume in dollars or units, number of customers, size of company and number of employees.

RESOURCE – Podcast Create Common Goals (Run Time 5:04)

This section is dedicated to the people who make up the company. The purpose is to give the reader confidence that the leadership has the talent, background, and necessary skills to lead the business to success.

Use simple, jargon-free language to give the reader a strong picture of what you do. If you must use technical terms, be sure to explain them.

Primary Research – This is new research conducted to answer your specific questions. You may do it yourself or hire a research company to collect data directly from the source. Most relevant, it may also be expensive to conduct a primary study.

Secondary Research is information from studies conducted by others, like governments. While not specific to your project, this research often helps answer broad questions market size and current market conditions.

Quantitative Research – It is all about numbers and figures. Quantitative research explicitly specifies what is measured and how it is measured in order to uncover and quantify opinions, attitudes, and behaviors. Data is collected in a structured consistent manner.

Qualitative Research – Is particularly helpful for exploratory research (e.g. during the pilot stage of a research project, for example). It is primarily used to discover and gain an understanding of individual experiences, thoughts, opinions, and trends. The data collection toolkit of a qualitative researcher is quite versatile, ranging from completely unstructured to semi-structured techniques.

Everyone is not Your Customer

The more well-defined your customer, the more confidence the reader has that you actually know your market. What is the geographic scope of your market? Is this a hard or soft boundary? Describe demographics of target customers. Why will a customer buy your product? Who are the innovators – the ones who will be first to buy – among target customers?

Use this workbook to define your ideal client – T13 IdealClient2024

Looking for more help defining your target customer, this video can help.

What is Important to Your Customer

From the customer’s perspective, describe the three most important features of your product. Which of the following elements will be most influential in your customer’s buying decision? Which are irrelevant?

Select 2 – 3 elements from the list below you consider most critical. This is where you need to focus your actions and marketing messages. ( Don’t guess! Be sure to ask clients why they buy from you)

• Sevrice and Quality
• Your Reputation and Customer Service
• Product Appearance and Size
• Packaging, Ease of Handling, and Trans-portability
• Variety
• Operating Characteristics
• Location, Facilities, and Hours of Operation
• Credit Terms
• Advertising and Promotion
• Seasonal Cycles

Even new, completely innovative products have competition. Long before your product comes into the market, customers have found ways to solve their problems. Understanding who your real competitors are is critical to your business success. As you analyze your competitors, it can be helpful to think about the three levels of competition.

Level 1 – These companies solve the customer’s problem with products or services that are very similar to yours.

Level 2 – These companies offer an alternative solution to your customer’s problem.

Level 3 – These companies do not solve the same problem, but compete for your customer’s limited resources.

YES! YOU HAVE COMPETITORS.

YOUR BUSINESS DOES NOT EXIST IN A VACUUM

Your success or failure will be affected by the opportunities and challenges of changing marketing conditions. How do you prepare to face challenges such as the rise of new competitors, changing regulations or the introduction of new technologies?

DOWNLOAD THE SWOT MATRIX to get started. 

In the simplest terms your place strategy will explain where people will buy your product. And there are many options; online, from a retail outlet, directly from you, through a network of distributors or through specific associations.

Each channel offers challenges and benefits so be sure to address these for your chosen channel. Place conversations can also consider where products will be manufactured, whether you will have an office or completely virtual team. And if you are selling products online, your website is not a marketing tool, it is a store front

This is one of the most common questions business owners must answer. Defining your pricing strategy is critical to your success because it tells prospective customers a lot about your business, helping them place you in relationship to other companies in the market. So how do you come up with that price?

There are many different approaches to pricing. Some are easier to implement and manage than others, and some are more appropriate for specific types of businesses. Let’s take a look at some of those alternatives to help you select the right pricing strategy for your business.

Cost Plus Pricing Strategy

This is the simplest approach and very common in construction and contracting industries. Essentially you start with what it cost you to build or to provide a service. Then you simply add your profit margin on top of that number. The “cost plus” your profit margin. If something costs $100 to build and you want to make $25, you sell it for $125.

While the cost plus approach will guarantee a profit, it doesn’t mean you’re pricing your product or service appropriately. Maybe your cost plus analysis results in a price of $125, but people are willing to pay $200 or $300 because of the value. In this case you are leaving money on the table.

Value Based Pricing

Business owners often confuse the cost of producing the product with the value it brings to the customer. When it comes to establishing a price for your goods or services, the value of your product has absolutely nothing to do with production cost. The value is based on how much you help clients save, increase, reduce or improve.

Quantifying these benefits gives you a foundation for establishing an appropriate price for your goods or service

Marketing Position
Start with your competitors. What are they charging? Once you know where the market is, decide if you want to be a market leader or follower.

Leaders set the pricing at the top of the market. To successfully select this option, you must have the best product available. If your product is average for the the market, playing it safe will put you firmly in the middle of the pack.

Or you can choose to be the low cost service provider. This is, however, a difficult position to maintain and you could end up in a price war, with your profits spiraling down as you try to defend that position long-term.

Capacity Based Pricing Strategy
One of my favorite approaches is capacity based pricing. In this pricing model you set your price based on how many units you can deliver. If you’re selling your time that is a limited resource. If you are consistently booked 30 – 35 hours a week, you should probably raise your price.

Conversely, if you have lots of free time, inventory in your warehouse, or capacity on your manufacturing machines you may need to drop your pricing slightly.

Quantity Discount
Another strategy is the quantity discount. With this model you are trying to influence buyer behavior, encouraging people to come back and buy more of your product or service. You might offer a discount for a full year contract or a discount if multiple units are purchased at the same time.

This is a win-win approach. The advantage to the customer is they save money and the advantage to you is you’ve got lower selling costs because you don’t have to find a new customer for each one of those units.

Product bundle
This is a variation on the Quantity Discount. Instead of selling multiple units of one product, construct a product bundle which includes two or three related products. Bundled together the price is less than buying each of those units individually.

As with the quantity discount, the customer saves money and you don’t need to find as many customers.

In your business plan you don’t need to full blown marketing plan. What you need is an outline of the key elements of your marketing defining how you will translate your unique benefits into marketing messages including taglines and general themes.

Also include a list of the types of media you will need and the marketing channels you will rely on to drive your message to the market

Be sure to include a budget for what you will send on marketing and an explanation of how you will measure the effectiveness of your marketing.

It  doesn’t matter how simple or complex your business plan is. The process, not the finished product, is what’s important.  Your business plan is an annual process, beginning with a review of what you accomplished in the previous year. Did you miss, meet, or exceed your goals? Were your systems sufficient? Did you correctly anticipate market trends and competitor activities?

Once you have completed your assessment of the past, it is time to look forward. Reevaluate your answers to each question, revising as necessary for the coming year.
Actually, a good business plan is never finished. The best business plans are not beautifully bound documents gathering dust on a shelf. They are tattered and smudgy from frequent use as a roadmap, showing where a business is going and how it plans to get there.

Now it is up to you!