Last week, we started talking about how to write a good Business Plan. We explained to you that the Business Plan is something like a flight plan. It guides you (pilot) to reach your journey in the best path safely.
In part 1, we described how to write the Business description which included mission statement, summary of the business, legal description, and competitive edge. In part 2, we spoke about management. Part 3 had the marketing plan which included, (A) the industry at large and (b) potential customers.Today, we start from that point.
C.The benefits of your product or service
Too many businesses know exactly how to describe the features of their products or services but don’t 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 product or service than in hearing about its features.
Suppose you’re manufacturing an electric coconut scraper? Don’t tell me about its dimensions and its horsepower; tell me about what it will do for me that the others won’t. Say you’re selling a promotional product? Don’t tell me about where it’s manufactured or how much it weighs; tell me about how it can benefit the growth of my business.
D. Geography
Identify your primary geographic focus - that is, where do you expect your customers to come from? Will your customer focus be within local markets? District wide? Nationwide? Clearly, your advertising and other promotions will be quite different if you’re marketing overseas rather than simply in your hometown.
E. Distribution
Explain how you intend to get your products or services to the marketplace. Describe your role in the industry and your distribution plan. Are you a manufacturer? Service provider? Wholesaler? Retailer? Will you utilize a direct sales force? Manufacturers’ reps? Catalogues? Telemarketing? Direct mail? An e-commerce website? We will talk about the information you need to answer these questions in future instalments.
F. Advertising
Identify how you can best reach your potential customers. Will you do so via newspaper, radio, television, magazines, direct mail, phone, or the Internet? Which advertising methods are the most economically feasible within your budget? Which ones do your desired customers most heavily utilize? What internal programs or external agencies can you use?
Don’t forget to include your social media plan in this section. Do you intend to maintain a Facebook presence? What about Twitter? Linked In?
G. Public relations
Public relations is the art of keeping your name in the public in a positive way other than through paid advertising. Public relations involve such activities as employee, community, industry, and government relations; customer and prospective customer relations; and - the best-known aspect of public relations - publicity.
This section of your business plan should answer the following questions: What public relations techniques will you use? What is your business’s publicity hook, and why will it interest editors, reporters, and those in your target audience? How will you build relationships with those in your target market, as well as with select editorial contacts? How can you tap into your network of friends and business associates to build a positive image of your business and to gain editorial introductions?
Within your community and in other media outlets, you can find many similar and effective public relations resources. Consider participating in a prize giving day at a local school, sponsoring a runner in a charity marathon, or designating a portion of a road to be maintained by your business. And don’t forget the simple press release, alerting the media and community to worthwhile achievements of your company and its people.
H. Pricing
Explain your short-term and long-term pricing. Include information on costs and profit expectations, along with a thorough review of your competitors’ pricing and your perceived price-point position within the industry. Do you intend to be the low-cost provider or the high-end producer? How do you intend to position your product? When pricing your products, always consider the current competitive climate first. Research the pricing of similar services or products in the marketplace and then price your product accordingly.
Don’t make the mistake early on of pricing your products based on some predetermined profit margin that you or your accountant would like to achieve. Instead, price your products based on what your competitive research (primarily talking to customers) determines the market will bear.
Don’t be afraid to sell your services or products at healthy margins when the opportunity presents itself. Rest assured, the opportunity won’t last forever.
I. Sales terms and credit policies
A sale is never complete until you deposit the proceeds safely in your business account. With this in mind, you need to spell out the terms of the sale and the conditions governing the granting of credit and the acceptance of payment before you make your first sale.
Part 4: Operations
This part outlines the nuts and bolts of the operational issues involved in managing your company. The scope of your operations or management plan covers a wide range of functions, from dealing with employees to purchasing from vendors to maintaining your company’s accounting records.
A. Employees
Many small businesses are one-person operations. If you fall into this category, you don’t have to suffer any of the headaches of hiring, motivating,training, and firing employees. The only person you have to worry about is you.
However, if you do plan to have employees, you need to answer the following questions in this section of the business plan: How will you assemble your team - by leasing your employees or by hiring them outright? Where will you find the employees you intend to hire yourself? What benefits will you offer? What motivational incentives will you use? Will you assemble an employee manual? Will you offer a retirement plan? Will there be down-the-road opportunities for ownership for key employees? How will you train your employees?
B. Salaries and wages
Too many small businesses hire their first employees without first devising an overall compensation plan. Such an oversight inevitably leads to a lack of uniformity in compensation. When employees perceive that you’re not compensating them fairly relative to other employees and that you haven’t communicated an objective reason for this discrepancy, a line may begin to form outside your office.
For purposes of the business plan, you need to objectively define the basics of your compensation plan for daily, monthly salaried, and commissioned employees. Don’t forget to include bonus plans and perks.
C. Vendors and outside resources
What vendors and outside resources do you intend to use? How do you plan to kick off your relationship with key vendors? Vendor accessibility is an important issue in many industries. Frequently, the best vendors don’t make their line of products available to every customer, especially the new company just started with no history, no prior connections in the industry, and anweak balance sheet.
You need to have answers to their qualifying questions before you make your first call. Completing this section will provide you with the material you’ll need to respond to their queries.
D. Accounting and/or bookkeeping
Describe who will take care of your accounting and bookkeeping duties. Answer these questions: Will you hire an experienced accountant, or a bookkeeper and an experienced accountant part-time initially? Do you intend to computerize your accounting system? What accounting software package will you use? Do you plan to outsource your bookkeeping or accounting? What outside resource will you use?
This section is particularly important for those businesses that intend to use the business plan as a tool to invite a loan or an investment. The smart lender or investor wants to be sure that the financial responsibilities of running the business are in good hands. This is especially true when the entrepreneur isn’t particularly strong on the financial side of business.
Part 5: Risks
You, as well as potential lenders and investors in your business, should care about the potential risks in your business.
The better you understand them, the better able you’ll be to anticipate them, minimize them,and keep your business rolling. Risks are inherent in every business, and yours will be no exception. Identify those risks in your business plan and be candid and thorough in describing them. Investors and lenders know that every business facerisk, so they’ll be looking for honesty and awareness here, not ambivalence or avoidance. They know how to recognize the difference.
Next week also 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)
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