Tag Archive | "Small Business"

Business Planning – Your Strategy

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Business Planning – Your Strategy


Too often business plans concentrate on just the numbers, with little explanation on how a business will arrive at a destination .   Just like a road trip, mapping your trip is an important part of the process.

When it’s time for a road trip, how do you plan your route? Do you tend to stick to all the major highways, do you try to save time with a little-known shortcut, or do you end up lost and confused on an unmarked back road?

The business strategy section defines the general direction your business will travel. Typically, strategy is broken into four elements: product, place, price, and promotion, often referred to as “The Four Ps.” Product description and strategy are covered earlier in the plan, so this section should focus on the other three elements. Remember, each decision should contribute to the business’ ability to meet the needs of the target customer.

In the business strategy phase, you will outline a general direction. In the next section, operations, you will expand on this information and address specific steps you will take to achieve your goals.

Place (Location) – Was location important to customers? Have you chosen a business location? Will you need more than one location? What factors are important in your choice of location?

Price – What pricing methods are you using and why? Is the price set by competitors? Is your goal to be highest, lowest, or in the middle, and why?

Promotion- What is your Unique Selling Proposition and how will you promote your product? What types of advertising and marketing will you use? Marketing Expenditures are a significant portion of your total budget, be sure to include a preliminary budget in planning.

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Market Reasearch, An Important Part of Your Plan

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Market Reasearch, An Important Part of Your Plan


When you prepare to vacation in a new city, state, or country, do you set out uninformed about your destination — or do you read a few guidebooks, surf the Internet for advice, or perhaps visit a travel agent? You likely do at least a little bit of homework first so that you know what to expect.

Customers

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?

Product Features and Sensitivities

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?

Customer Sensitivities

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

Competitors

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.

Find this interesting? Sign-up for the Business Plan in 10 Weeks newsletter or purchase “Business Map: A Practical Guide to Business Planning” by Lorraine Ball.

 

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Common Mistakes Business Owners Make

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Common Mistakes Business Owners Make


While every  business is different, business owners share many common traits.  As a result, they often make the same mistakes as they work on their business plan.   Here is a list of the ten most common mistakes :

  1. No Plan – It is easy to put  off writing a business plan until you have no choice because your banker, investor, or potential landlord requires it. Unfortunately, that is the worst time to try and write a plan.
  2. No Clear Audience – Why do you need a plan? Are you writing for the banker in hopes of getting a loan, or a potential investors or simply to guide your business.  While the outline is the same, the amount of detail required in each section varies depending on the audience.
  3. Too Much Detail or the Wrong Type of Detail – Can you boil down the description of your business to a simple message without getting bogged down in the details?  Limit your product description to an overview, focusing on the problem your product solves and its unique features/  Remember to leave out the jargon and industry slang.
  4. Poorly Defined Customer – Everyone is not your customer. With a clear, specific definition of your target customer, it is easier to write a clear, specific plan.
  5. Limited Market Research – Just because you love your product or idea, it does not mean anyone else will.    (By “anyone,” I mean anyone other than your mom, spouse, or best friend.) Who are these people, and what will make them buy?
  6. Underestimating your Competitors – Everyone has a competitor. Even truly innovative products must deal with competing products or services which may or may not solve the same problem, but ultimately will compete for the end customer’s available resources.
  7. No Meaningful Goals and Milestones – What will you accomplish?  Be specific.  How long will it take you and how will you measure your progress along the way?
  8. Activities Not Tied to Goals – Your goals form the basis of other decisions. Use the planning process to eliminate activities which do not move you closer to your goals.
  9. Unsupported Financial Projections – Unrealistic financial projects with a hockey-stick-shaped growth curve, set up a business for failure when owners spend too much too soon without enough cash reserves to help the business through the startup phase. As you develop financial projections, consider two scenarios: a best case and a worst case.
  10. Inadequate Consideration of Pitfalls – Stuff happens! Things go wrong. When the worst happens, will you be prepared? Having an adequate assessment of risks is not being negative — it is being prepared.
  11. Failure to Communicate – I know, I promised a list of the ten most common mistakes, (but don’t you like getting the little extra from time to time? ) While not directly a part of your document, poor communication will have a detrimental affect on your business. As you write your plan, involve others.  Seek advice from people you respect. Talk to employees, family members, business partners, and advisers, such as your accountant and lawyer.

Need help getting your plan started?  You can download a free copy of my business plan outline

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Every Business Needs a Plan

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Every Business Needs a Plan


As you are in the early planning stages of your new venture, now is a good time to ask your self what direction you will take your business.   Your business plan is a road map, making it  easier to arrive, because you have specific directions and a clear map to  your destination.  Whether you  are looking for external funding, or simply want to get your ideas organized, a written business plan will keep you  on track.

WHAT SHOULD YOUR PLAN CONTAIN?

As you write your business plan, keep your audience in mind! If you are hoping to use this plan to solicit funds be sure to include information which will prove the value of your ideas.

  • Demonstrate Market Focus. Can you clearly describe the needs of potential customers, rather than simply being infatuated with an innovative idea.
  • Evidence of Customer Acceptance. Investors like to know that your new product or service is proven. Provide evidence that 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.

Do you need a boost getting started? Download our free business plan outline

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Business Plan Outline

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Business Plan Outline


A business plan helps you  look ahead, allocate resources, focus on key points, and prepare for opportunities and problems. You use it the same way you study a map to plan a route, determine where to turn, and locate key landmarks. A complete plan includes descriptions of the company, product or service, market, forecasts, management team, and financial analysis.  Here is a brief outline of what your plan should contain.

Executive Summary

  • Company description and current status
  • Products/services and market description
  • Company objectives
  • Financial performance and funding plans

History and Position to Date

Here you describe why you started the business, why you believe it will succeed, and how you will define success. It should include:

  • Company background
  • Sales and other achievements
  • Mission, vision, values, and goals
  • Business structure and management team
  • Product/service description

Market Research Includes

  • Description of the target customers
  • Product preferences and purchase influences
  • Market trends
  • Description of the competitors

Business Strategy – Includes all four elements of your business strategy: Product, Price, Place and Promotion.

Operations; This section is not complete without the milestone schedule, a table that captures all the assignments, commitments, and plans that assign timelines and responsibilities.  It should also include your plans for :

  • Sales and sales management
  • Manufacturing/supply
  • Staffing issues
  • Business controls and critical risk

Forecasting and Financials – The plan culminates with the financials. Ultimately, your business plan must boil down to results.

Appendix – What goes into the appendix? Everything else!

Find this interesting? Sign-up for our How to Write a Business Plan in  10 Weeks or purchase my “Business Map: A Practical Guide to Business Planning”

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The 10 Ways Startup Advice Is Flawed

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The 10 Ways Startup Advice Is Flawed


President Barack Obama unveiled initiatives to help small businesses, saying the U.S. has “a long way to go” to ensure that credit flows to an area of the economy hit hard by the recession.
“There is still too little credit flowing to our small businesses. There are still too many entrepreneurs who can’t get the loan they need to open their doors and start hiring,” Obama said in a speech at Landover, Md.-based Metropolitan Archives, a family-owned firm that stores and delivers paper files for large companies. “There are still too many who are struggling to make payroll and stay open. And there are still too many successful small businesses that want to expand further and hire more but just don’t have the capital to do it.”

I read an interesting post on Gigaom.com titled “The 10 Ways Startup Advice is Flawed.”  It focuses on advice given by people perceived as successful start-up entrepreneurs – attacking the premise that someone’s status (i.e. wealth, fame…etc) may not necessarily be related to what they did as a start-up – and that therefore their advice is not sound.  Here is a key excerpt from the post.You can read the whole post here.

1. Maybe the thing they did really didn’t cause them to get rich. A lot of startup stories are after-the-fact rationalizations or outright myths. As they say in Latin (and on the “West Wing”):Post hoc ergo propter hoc. In other words, just because something takes place after something else, doesn’t mean the two have a causal relationship.

2. Maybe they got lucky. After all, as my grandmother used to say, “Even a blind pig eventually finds a truffle.”

3. Maybe they did the thing they said and it was actually a bad idea, but they were in the right place at the right time. A lot of powerful businesses (especially network-effects businesses) are largely resilient to incompetence.

4. Maybe the thing they did worked, but only in conjunction with some other unnamed factor. For example, many visionaries partner with a heads-down, practical type.

5. Maybe the thing they did worked, but it only under certain circumstances. For example, perhaps it worked in their industry and not in yours, or only in certain phases of growth, or for certain kinds of teams.

6. Maybe the thing they did used to work, but it doesn’t anymore. For example, perhaps competitors now know how to counter such a move.

7. Maybe the thing they did worked, but for a different reason than they think. For example, perhaps it was the feedback of their customers, not their grand original idea, that was key to success.

8. Maybe they didn’t really do the thing they said they did. Most of the mythological startup stories are highly misleading. Many of us remember the past the way we wish it had been rather than the way it actually was.

9. Maybe they’re not really rich and/or famous. A lot of startup energy goes into what I call “success theater” –- that is, convincing the world that you and your startup is successful. Next time you’re listening to a guru, ask yourself: How do I really know that they’re successful? What is their definition of success? What’s mine?

10. Maybe they have an agenda. Ask yourself: Does this person stand to benefit if I follow this advice? The VCs I know and trust are honest and very pro-entrepreneur, but I routinely hear others give advice that entrepreneurs should be suspicious of. Fundamentally, their incentives are based on having a portfolio of startups. As an entrepreneur, you have a portfolio of one. Think about that the next time a VC advises you to swing for the fences.

I tend to agree with most of this.  I see a lot of this in the startup world – bad advice from people that really have no business handing out advice.  And I REALLY see a lot of number 9 – “success theater” as they call it.  So many start ups exude a ton of energy, maybe get a little bit of hype, but really have barely any substance or success behind the business.  The point is, be careful who you take advice from and how seriously you take that advice.

What do you think?  Received any bad startup advice lately?

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Starting a Business – A Checklist for Startups

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Starting a Business – A Checklist for Startups


If you are starting a business, there are a number of things you need to consider when you are in start-up mode, beyond what you might normally think of (i.e. the business name, business location, sales and marketing…etc).  From a legal perspective, here are a few things you should carefully consider:

  • What form of business entity should you choose?  There are multiple entries on this blog dealing with the various types of business entity a start-up can choose from.
  • If there will be multiple owners (i.e. shareholders, partners or members), how will control of the business be structured?
  • How much and how often will the business owners be paid?
  • How will business records be maintained?
  • Will the business hire employees, independent contractors, or a mix of the two?
  • What type of  / how much liability insurance will the business need?
  • Will the business enter into a lease for space?  Or will it buy and develop its own real estate?
  • If the business will have employees, will it provide benefits? How will the business handle payroll?
  • What types of banking relationships will be necessary?
  • Will the business need to raise capital?  If so, will it be through debt or private equity?
  • Will any sort of license or permit be required to conduct business?

These are just a few things that should be considered. If you have other things to add to the list, please leave a comment below.

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4 Great Business Plan Tips

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4 Great Business Plan Tips


A friend and colleague of mine, David Castor, wrote a nice, short blog piece on some general guidelines for drafting a good business plan.  His practice is simiar to mine in that we both have quite a few business plans come across our desk – and I completely agree with what he says.  Below is a short bullet point summary of his tips – you can check out the full post here.

1.    Write to the intended audience.  Is the reader the leadership team or potential investors?  If to investors, understand that they have little patience and severe ADD.  The plan should be succinct and to the point.  What does your company do?  What pain are you solving in the market?  How will you do that at a profit?  Think proof of concept, proof of scale, proof of profit.
2.    Focus on math and metrics.  What are your sources and uses?  What are your fixed costs?  What are your variable costs?  What could influence these variables?  Why are the revenue projections correct – they should never be “conservative”.  I hear this all the time, “Our projections are conservative” (note, the investor doesn’t believe you).  If you have done your research, you should know exactly what you expect your projections to be.
3.    Don’t lie, exaggerate or assume.  Actually, exaggerations and undisclosed assumptions are lies – so simply, don’t lie.  My mom taught me this when I was 3.
4.    Know your numbers, your market, and your projections inside out.  There is no reason for guess work in a business plan.  Ask why, when, who, what and how for every line item in the plan.
  1. Write to the intended audience.  Is the reader the leadership team or potential investors?  If to investors, understand that they have little patience and severe ADD.  The plan should be succinct and to the point.  What does your company do?  What pain are you solving in the market?  How will you do that at a profit?  Think proof of concept, proof of scale, proof of profit.
  2. Focus on math and metrics.  What are your sources and uses?  What are your fixed costs?  What are your variable costs?  What could influence these variables?  Why are the revenue projections correct – they should never be “conservative”.  I hear this all the time, “Our projections are conservative” (note, the investor doesn’t believe you).  If you have done your research, you should know exactly what you expect your projections to be.
  3. Don’t lie, exaggerate or assume.  Actually, exaggerations and undisclosed assumptions are lies – so simply, don’t lie.  My mom taught me this when I was 3.
  4. Know your numbers, your market, and your projections inside out.  There is no reason for guess work in a business plan.  Ask why, when, who, what and how for every line item in the plan.
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