Success in business is not a lucky happenstance right out of the blue. It starts with a carefully prepared plan that sets out the direction that the business must take in order to achieve the owner’s desired results. The plan identifies ideal customers and how the business will promote itself to these customers and meet their needs. It also identifies the competition and any competitive advantages that the business enjoys.
Since business is a commercial activity based on selling something for the purpose of generating a profit, the plan will also include details of how the goods and services will be priced. The plan will address such financial considerations as projected cash flow and income statements.
As an important direction-setting document, the business plan will become a regular reference resource.
Why Plan?
If you enjoy the challenge of discovering new territories without any kind of assistance, you will love the seat-of-your-pants approach to running a business. This spontaneous and free-spending style scorns planning and its main components, direction, and control. Free-spirited individuals claim to enjoy the flexibility of responding to opportunities as they arise and going wherever the market takes them. Without the restraints of predetermined goals and objectives, they can capitalize on whatever possibilities that lady luck may bring their way. In practice, this method resembles a pinball working its way through a maze of obstacles, shooting from place to place with no reasonable certainty of where it will ultimately land.
Success in any venture starts with planning. For example, successfully reaching your destination on a motor trip starts with determining your ultimate destination. Where do you want to be at the end of the trip? How are you proposing to get there? You are unlikely to head into unknown territory without a road map. By using a road map, you can minimize the risks of getting lost and increase the likelihood of achieving your destination.
As well as providing you with a requisite sense of direction, a well-prepared business plan will assist you in your dealings with your bank and other sources of financing. These alternate sources of financing are discussed in the next chapter. If you do plan to pursue third party financing, use the business plan format requested by the third party. By doing this you will be certain of providing the information that the third party requires, in the format that it desires. This will increase the likelihood of obtaining the financing.
Building Block
By using a business plan, you can minimize the risks of losing time and money often associated with new business ventures. Unlike uniform road maps, which are readily avail-able from a wide variety of sources, business plans are neither uniform nor readily available. You must pre-pare your own plan, reflecting your unique characteristics and those of your business.
Hot Tip
Use the planning approach that works best for you. If you need to know many details before you make a decision, make sure that your business plan is detailed enough to be useful to you. If you are capable of moving from broad generalities to developing and implementing more detailed strategies on the fly, make sure that your business plan defines your sense of direction while allow-ing you the flexibility that you need.
Creating Your Plan
There are as many approaches to business planning as there are experts to discuss the topic. Some people emphasize the importance of thorough analysis based on extensive research. The danger to this approach is that the planning process takes on a life and sense of importance far greater than its purpose, which is to set a direction for the business. At the other extreme are those people who honestly believe that less is better and prepare a business plan that is little more than a point-form to-do list.
Regardless of approach, there are certain basic elements that are common to all business plans. It is possible that there are issues relevant to your business that are not addressed in the following material. If this is the case, make sure that you consider these issues while developing your plan.
What Results Do You Hope to Achieve?
This section will describe in detail what you will sell. It might also reflect the image that you want to project to your customers and discuss the market (or niche market) in which you plan to specialize, as well as the type of customers you plan to serve. In finished form, your desired results should read like a well-prepared 30-second radio or television commercial: clear, concise, and complete. The following questions will help you clarify your desired results.
What goods or services do you provide?
To whom do you provide these products or services?
If you provide goods, what volume, measured by units and sales value, do you propose to provide during the first year? If you provide more than one type of product, estimate a volume for each line of goods.
If you provide a service, what volume of service, measured by units of time, by dollar value, and by number of clients, do you propose to provide during the first year?
If you provide more than one service, determine goals for each area of service.
What profit do you project for the first year?
Who Will Your Customers Be?
Chapter 13 details how to identify what your customers need and want from you. Once you have identified who your customers will be, what they want from you, and how you will serve them, summarize this information and include it in your business plan.
Chapter 17 outlines different strategies to promote your business. Once you have selected strategies, include the basic information in your plan.
Who Are Your Competitors?
We live in a very competitive world. If you think that virtually every organization, whether from the public, private, or not-for-profit sector is after your money, you are probably right. As a result of our governments’ deficit-fighting activities, publicly funded organizations such as charities and educational institutions are conducting aggressive fundraising campaigns to balance their budgets.
This competition takes place on two levels. First, there is the overall competition for disposable income of your existing and potential customers. Obviously, money that is donated to charities and not-for-profit organizations represents money that customers do not have available to spend on your goods and services.
Second, in order to raise funds, organizations have become very creative, frequently going beyond simple appeals for donations and offering goods and services for sale. Money that well-meaning neighbors spend on a high school–sponsored chocolate bar drive represents money that is not available to buy chocolate bars from the mom-and-pop variety store around the corner.
Business organizations of all types and sizes compete aggressively for customers’ dollars. Let’s assume, for example, that you have an upcoming family event that you would like to celebrate. You have a virtually limitless choice of how you can celebrate. Depending on your budget, you can do anything from preparing a fancy meal to taking the entire family on an extended round-the-world cruise. Or you can buy anything from accessories for the things you already have to zoo passes.
But you don’t need to worry about everyone who can supply your product or service. Just identify your direct competitors.
There are several questions you can ask yourself to help you to identify and analyze your competitors.
- How will your business compare to the competition? This will allow you to think about how you can do better than the competition. Having identified your competitive advantage, you can then incorporate it into your marketing communications (discussed in Chapter 17).
- Are there any new business opportunities? These opportunities could be providing new goods or services that your competitors currently do not offer. Or they could mean providing goods and services to clients not yet being served by you or your competitors.
- What do the customers in your market need and want? Make sure that what your customers need and want match what you plan to offer.
- How do your competitors market their product or service? Do your competitors change pricing and promotional strategies at different points in the year? If so, what do these changes suggest? To what extent do your competitors make use of new technology? What does this tell you about your market?
- How well is the market currently being served?
This will help you assess your future as a participant in the segment. If, as a result of your analysis, you learn that the market is saturated with capable competitors, what, if anything, can you do to distinguish yourself? Perhaps a better option might be to pursue other opportunities. On the other hand, if the market is not well served, what can you do to dominate it?
The table on the next page lists information that you should gather about each direct competitor. It is often difficult to obtain reliable information about your competitors, especially if they are small businesses. You will probably have to gather your information by watching what your competitors do and listening to what people say about them. Specific techniques for obtaining this information include the following:
If possible, visit your competitors’ locations and observe how employees interact with clients and each other, what the premises look like, and how products are dis-played and priced.
Listen to what customers and suppliers say about your competitors.
Analyze your competitors’ advertising to find out what it says about their products and services and how they serve their clients.
Attend competitors’ speeches or other presentations to hear what they say about themselves and how they serve their market.
Check out your competitors’ trade show exhibits.
| Item | Why It’s Important |
| Summary of competitor’s products or services, including quality, staff, promotional strategies, and customer service | To identify similarities and differences between what you and your competitor offers |
| Competitor’s strengths and weakness | To identify what your competitor does better than you and what you do better than the competitor |
| Competitor’s apparent strategies | To help predict competitor’s future activities |
| Strength of market to be shared by you and your competitor | To help plan your marketing activities |
Once you have gathered your information, you will have to interpret what it means for your marketing effort. Located on the next page is a chart that you can reproduce and complete for each competitor. When carrying out your competitive analysis it’s a good idea to establish separate files for each competitor. This will enable you to continue to gather information such as marketing literature or suppliers’ and customers’ comments. You will be able to continue to monitor your competitors’ activities and update your analyzes as needed.
Here is an example of a competitive analysis for Geoff Baker, the technical writer mentioned in the previous Story Time box. Geoff will not be the only technical writer in his market. He has identified at least eight other people who provide services comparable to his. He asks his sister to call each competitor to make an appointment to discuss a possible writing assignment. Geoff has asked her to obtain the following specific items from each competitor:
A sample of the writer’s work that will be returned after viewing; References from clients;
Copies of advertising brochures and any other promotional material the writer uses.
After reviewing all of the material, Geoff then prepares an analysis for each competitor using the competitive analysis chart. The analysis that Geoff prepared for TW Services is shown on page 74.
In completing similar analyses for other competitors, Geoff realizes that he is one of the few local technical writers with formal academic training in technical writing. Most of the others, like TW Services, expanded their existing businesses into technical writing.
| Competitive Analysis | ||
| Name of Competitor ___________________________________ Years in Business ______ | ||
| Mine | Theirs | |
| Strengths | ||
| Weaknesses | ||
| My competitive advantage(s) over them are ____________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ | ||
| Competitive Analysis | ||
| Name of Competitor ___________________________________ Years in Business _____ | ||
| Mine | Theirs | |
| Strengths | Broader range of services Academic training in technical writing Experience in producing Experience with a broad range of projects Good people skills Well-established family | Well-established business Well connected for referrals Extensive client base Satisfied clients |
| Weaknesses | Limited experience in running a business Limited existing client base Low personal profile in the community | Limited experience with computer graphics Weak people skills Limited use of new technology |
| My competitive advantage(s) over them are + more skilled at technical writing + better interpersonal skills | ||
How Much Will You Charge?
There are two major ways to price your goods and services: one is the easy way and the other the hard way. The easy way involves simply charging the market or going rate for comparable services. Using this approach, you determine what the competition is charging for similar goods and services and, assuming that your quality is at least as good as the competition’s, use comparable pricing.
The hard way involves calculating your cost in producing specific goods or delivering specific services, building in an appropriate profit for your efforts and coming up with your selling price. In order to compete, your prices are going to have to be competitive so why waste your time crunching numbers. In the final analysis, your prices will be the market or going rate.
Hot Tip
Since most customers equate price with value, it might not be prudent to offer significantly lower prices to gain a competitive advantage. This might suggest to potential customers that your quality is not as good as that of your competitors. However, in order to attract new business you can offer promotional discounts to encourage potential clients to try your work. You can also offer frequent-user discounts or other special allowances.
On the Financial Side
Chapter 9 outlines financial statements, including funding, forecasting, and cash flow. Once the statements are in their final form, incorporate copies into your business plan.
What Else Do You Need?
This section of the business plan identifies the licences, permits, and resources that you will require to begin and maintain your business operations. The following items are included in these requirements:
Details of compliance with federal, provincial or state, and municipal government regulations;
Outline of qualifications needed to obtain the necessary permits and licences to carry on your specific business;
Registration for the collection of GST and provincial or territorial sales tax;
Skills required to provide services to customers, and source and cost of acquiring these skills.
Entrepreneur Beware
Failure to obtain necessary permits, licences, and government approvals can cause you major problems, ranging from minor inconveniences to major legal difficulties. Fulfill these legal requirements as soon as you can.Use Your Plan— Don’t Archive It!
Once prepared, your business plan should not be consigned to your business archives. Just as you use a road map to monitor your progress toward your destination, you should use your plan to monitor progress toward where you want your business to be. If your business is developing as planned, you can proceed confident in the knowledge that if you stay the course you will achieve your overall goals. Conversely, if things are not developing as planned, you can make mid-course corrections to modify your destination so that it more accurately reflects your operating experience. Your business plan can and will serve as an effective road map for you; you must, however, consult it regularly. It will be of little use stored in the bottom drawer of your desk.
The Least You Need to Know
A well-prepared business plan will help you get to where you want to go.
Your plan should describe your customers and what you do for them, and your competition and your competitive advantage over them.
Your plan will also include financial considerations, such as how much you will charge for what you sell and your projected cash low and income.
For your plan to be useful, you must use it!
