Pilots would never fly from Colombo to Heathrow without a detailed, well-researched flight plan. The flight plan helps them figure out how they will get from one airport to another. It is their blueprint for a successful trip.
Your business plan is your version of a flight plan. It is your blueprint for a successful journey. If you want to take control of your business from day one then you have to do first things first. Creating a business plan is the first thing.
Once completed, your business plan will guide you how to start your business and how to face the obstacles you encounter throughout your journey.
Writing Your Business Plan
How detailed should you make your business plan? A simple, more short-term-focused plan (ten pages or so) is adequate if, say, yours is a home-office business and the plan is for your benefit alone. However, if you intend to expand your business, hire employees, or open multiple locations, then your plan should cover the long-term issues more extensively and, thus, be lengthier (say, 20 to 50 pages).
Finally, no matter what size or direction you contemplate for your business, if you intend to use the plan as a tool to look for outside investors or professional lenders, you need to write an even more complete business plan.
Not all business plans need to contain all the parts we are going to describe today and next three weeks. If you plan to give your business plan to outsiders, such as bankers, from whom you’re seeking money or some other commitment, you should cover all the following bases.
However long you decide to make your business plan, keep in mind that you can always add to and/or upgrade it to meet your needs. Later on, after you’ve completed the plan and your business takes off, you’ll have plenty of opportunities to rewrite and update your plan.
Whether you use our format or adapt one of your own choosing, your business plan should address the issues listed here.
Part 1: Business description
This part provides the reader with an overview of the business. After reviewing this part, the reader should understand exactly what business you’re in, what its legal entity is, and how your business intends to differentiate itself from its competitors.
Don’t take this challenge lightly; the reader’s decision to peruse the plan in more depth will depend on his initial reaction to this description.
A. Mission statement - We have studied mission statement in depth last week.
B. Summary of the business - Begin this summary with a one-sentence definition of exactly what your business will do or does. This sentence should be the same to-the-point definition you’ll ultimately use as your one-minute pitch when explaining your business to everyone from bankers to customers to business acquaintances.
The concept of your business doesn’t have to be unique or extraordinary. Electricians, tax consultants, book keepers, and computer consultants will always be in demand. More businesses succeed by being managed efficiently and wisely than by providing a new and unique product or service. If you want your business to really be different, you can put a new twist on a concept that has been around for a while.
Suppose, for example, that you’re a veterinarian who recognizes that more than a few people in your area are too busy to bring their pets to your office for treatment. Thus, you may create a new business - say, “Vet on Wheels.” Or, you also have the option to run your veterinarian business the traditional way (that is, by offering quality services at a competitive price to walk-in customers).
C. Legal description - Is your business a sole proprietorship, partnership, limited liability company, Non-Government Organisation etc.
D. Competitive edge - Answer the following questions to clearly communicate how you intend to differentiate your company from your competitors: (a) Who are your competitors, and what (in your opinion) is currently their competitive edge? Here you want to identify your competitors’ strengths so that you can, in the early stages of your business anyway, avoid competing directly against them. (b) What are your competitors’ weaknesses? By identifying their weaknesses, you open the opportunity to take advantage where they’re the most vulnerable.
(c) What will distinguish your products or services from those of your competitors? This distinction doesn’t have to be something new and unique. Simply doing something better often suffices. (d) Service, quality, or price - which of the three do you intend to emphasize? Remember, you can’t be all things to all people.
(e) Where do you intend to position your product in the marketplace? Do you intend to be the top service and quality provider within your niche, or do you plan to concentrate on the low end of the niche by focusing mainly on price? Remember, it is extremely difficult for most small businesses to be the “low-cost player.” Small businesses should focus on service and quality and leave the low pricing to someone else.
Part 2: Management
The management section is the most important part of your business plan. Intelligent investors recognize that the success or failure of a business hinges on the quality of the management team. Hence, the management section is one of the first places investors look when they pick up your plan. If they aren’t impressed with the management team, you can rest assured that they won’t go any further.
Begin your management section with biographies of the principal members of your business: The Chairman, Directors, CEO or General Manager, sales and marketing managers and so on. Be accurate in outlining their backgrounds and remember that the prudent investor may check references.
As you write the management section, remember that you’re selling your management team to the reader; include what makes them special. Pay the most attention to the bio pertaining to the person who makes the most difference to the business - you!
If you use the business plan only as a road map and not as an inducement for investment, the management summary is less important. However, putting the qualifications and employment histories of the major players on paper may help you better think through whether the players fit well together and will make a synergetic and complementary team.
Part 3: Marketing plan
The marketing part of your business plan provides the reader with an overview of the industry in which your business competes, a description of your business’s potential customers, and an explanation of how you intend to sell, distribute, and promote your product or service.
This part of the plan is often the most difficult for companies to complete. Many competing products and services will fall within your niche. The difficulty, of course, is in differentiating and highlighting your products and services to prospective customers and then convincing them to buy them.
The marketing part of your plan will make or break your success in this aspect of the business. Let us see how to write it.
A. The industry at large - In this section, provide an overview of the industry (within the geographical area you expect your business to cover) by answering the following questions: How competitive is the industry? What are the growth opportunities? Who are the industry leaders? Where are the niches in addition to yours?
You can usually obtain answers to these questions by reviewing websites, talking to customers, and speaking with people at your industry’s trade associations. You can also consult those who are already in specified niches within the industry, such as wholesalers or manufacturers’ reps.
B. Potential customers - If your business sells to consumers rather than to other businesses, consider gender, age, income, geographic location, marital status, number of children, education, housing situation (rent or own), and the reasons why they may want your product or service. Which of these demographics represent your desired customers? Create a profile of how your target market behaves as customers.
Consider what motivates them to buy and how they buy, including whether they rely on recommendations from others: what their product usage-rate tendencies are: when they make their purchases: whether they buy online, on credit, or on impulse.
This target customer profile information will come in handy when you’re ready to select the right media advertising vehicle to use. If you sell to businesses (B2B), you need to understand similar demographic issues that relate to them. What types of businesses will buy your products and services? Who within those businesses will be the ultimate decision- makers, and how can you reach them? What problems of the ultimate decision-makers will you solve with your products or services?
Most of the businesses know exactly how to describe the features of their products or services but do not know how to point out the benefits. Today’s consumers, particularly the more sophisticated ones, are more interested in hearing about the benefits of your gizmo than in hearing about its features. You’re manufacturing a new electrical coconut scraper, do not tell the potential customer about its dimensions and its horsepower; tell her about what it will do for her that the others won’t.
Next week we continue on Business Plan.
(Lionel Wijesiri is a retired company director with over 30 years’ experience in senior business management. Presently he is a freelance newspaper columnist and business writer. He could be contacted on lawije@gmail.com)