Three Fs for Writing a Business Plan
Writing a real business plan comes innately only to a few. And that too after much skill. Those few may have chosen it as a career. Sometimes people in the academe write them for firms to earn a living. While the task is a chore to many for beginners it is a complete riddle. Start-ups find themselves compelled to write one for various reasons. The most common reason among them is to raise funds. People also write such plans for private investors. The aim then to get them to invest money in the firm. Another motive is to raise the stake in the firm. Also, entrepreneurs write them while seeking for new business. Even to sell the firm. Not knowing how to write one can be a nightmare. Here we give you a practical approach. We hope it can serve as a basic guideline.
Writing a real business plan comes innately only to a few. And that too after much skill. Those few may have chosen it as a career. Sometimes people in the academe write them for firms to earn a living. Even to sell the firm. Here we give you a practical approach.
Many people fail in their attempts to sit down and write a business plan. Because they face starting problems. An outline can help in overcoming the problem. Outlining involves jotting down what to write. Bear in mind the purpose of drafting the plan. Write as if you are talking to the target reader. In addition, think about who would be reading it. And draft an outline of what kind of info or data to include in it. Start writing the business plan section by section. This way provides a unified and logical flow to the rest of the content. It then becomes easier to arrange facts. Then start compiling them in a clear manner. Such a framework would appeal to the right audience.
Many people fail in their attempts to sit down and write a business plan. Because they face starting problems. An outline can help in overcoming the problem.
This stage is known as mapping scheme because it involves forming the exact order of sections. Delve deeper and write each area concisely for greater clarity. Planning stage is the muscles and flesh. It makes the content rich. Well, the target reader should find solid evidence of the business plan here. It would also enforce the standing of the plan. A few writing skills are needed here to make the concepts and ideas compelling.
This stage is known as mapping scheme because it involves forming the exact order of sections. Also called planning stage. Planning stage is the muscles and flesh. It makes the content rich. Well, the target reader should find solid evidence of the business plan here.
The draft is still rough at this stage as it needs some final touches. The next step is to edit it from top to bottom. Editing gives coherence and a smooth flow to the arguments expressed in the business plan. People write business plans to make a case. Hence it needs winning power. Repeat the main points throughout the document. For more emphasis furnish it with facts and figures. Make sure to use logic. Reasoning backed by information that was stated earlier in the plan can make arguments clearer. Edit the business plan further by paying attention to the smallest details. Fine-tuning the business plan in a detail oriented manner increases the readability of the document. If possible, let a third person review it for further refinement.
People write business plans to make a case. Hence it needs winning power.
A universally accepted and a regular business plan template is as follows:
- Executive Summary: Executive summary is the most important part of a business plan. Ideally it highlights the strengths of the company. This part briefs the reader the competitive advantage of the business. Briefly summarize why you have the best business idea. It is a snapshot statement of the program of activities as a whole. It touches on the company profile and typically runs from 3 to 4 pages in length.
- Company Overview: It should start by providing a brief history of the group ownership. It then goes on to describe the organization of the enterprise. A timeline as to when the business was founded is equally important. Information such as locations and facilities should also be included. Add the names of the key members of the management team. Profiling their backgrounds is an indicator of a well-thought-out business plan too.
- Industry Analysis: This section requires substantial research. It gives an understanding of the external factors of the playing field and how the company responds to them. Explain what the cyclical changes are, profit opportunities, and how the company fits into the industry.
- Market Analysis: The objective of market analysis is to provide a quantitative and qualitative assessment of the market. Such facts as demographics, segmentation, and market need are highly sought out by savvy investors. Market value, size, and regulation shows the investors that the business is lucrative enough.
- Competitive Analysis: Identify the competitors’ strengths and weaknesses. A distinct advantage of the firm over the competition is a prerequisite for a business plan. The unique competitive strategies will set the company apart from others. Discuss here, if any, any barriers to entry and exit into the market.
- Customer Analysis: This is a critical section that defines the characteristics of the target customer. Usually the characteristics are explained through their buying criteria and how the product typically satisfies their needs. Include also an in-depth analysis of the growth of the customer base, their average revenues, and service delivery model.
- Marketing Agenda: Emphasize the unique selling proposition of the business in this section. Along with that the pricing and positioning strategy and distribution plan should also be included. A marketing plan that outlines the steps taken to retain existing customers or gain new customers will add credibility.
- Strategy and Implementation: Insert in this segment a detailed plan of the marketing strategy and its implementation. It typically articulates how the company’s management intends to reach the products to the market. It includes the sales strategy, personnel hire, promotions and advertisement, distribution outlets, pricing, service delivery, guarantee policies and the like. Emphasis would be on past sales and a sales forecast.
- Organization and Management: Highlight who does what and their added value to the company. It is a simple but effective way to portray an organizational chart with a narrative. This section would reassure the investor that the people onboard are more than names on the organizational diagram.
- Financial Plan: Most investors are visuals. So, set up a spreadsheet with the past sales, sales forecast, and expense budget. It is also a good idea to incorporate a cash flow statement, assets, and liabilities. Some investors may require a breakeven analysis and the cost of doing business. A business planning software can be an invaluable help here.
- Appendix: In general, this section holds the entire supporting documents. All that information that was too large to be included in the main body should go in here. Any figures, statistics, charts, graphs and illustrations that augment the main points in the body must be in this section.
3F plan provides a systematic and practical approach to preparing a business plan. It has been proven to bring success to budding entrepreneurs. Bear in mind to also study the target readers. And finally tweak the plan. Stress those areas that would appeal to them. Good luck!
Title Photo Credit: Helloquence
The Best Sales Promotion, Before, During and After
The objective of the best sales promotion is to increase sales for a particular product through stimulating additional demand for the product. The end goal is to generate revenue over and above the standard. And the intent is almost always a short-term gain, unlike some marketing strategies that are designed to create customer loyalty, brand awareness and long-term return on investment. Successful promotions are the ones that have struck a chord with the intended audience and have met the desired results of increased business. Companies replace the non-performing promotional activities with performing ones to maximize the benefit.
What is it that makes some campaigns successful and others not? Here we dissect the variables involved pre-promotion, during and after the promotion. Usually, a particular successful promotional campaign may not have had all the factors described here, but a majority of them have. A careful analysis of such ingredients can help companies replicate the successful promotions and roll them out in another market or on a wider scale in the same market. On the other hand, the strategies that worked in the past may not necessarily work out in the future. So, it is recommended to exercise caution.
The primary variables involved in all promotional activities are the product, the market, the channel, the competition, and the budget. We examine the dynamics of each of these before the promotion, during and after the promotion.
- Product: A promotional activity narrowly targets a small subset of the larger target market. The campaign should take into consideration what benefit of the product would appeal to the audience. The promotion should highlight that feature that closely corresponds to that interest.
- Market: Understand the dynamics of the target audience and the stage in the product lifecycle. For example, how often does this market use the product? Conduct a preliminary research on the demographics and behavioral patterns of the market. Learn the cultural nuances of the area.
- Channel: Depending on the target market decide on the mode of delivery that would most appeal to the target market. Then consider a variety of channels that would help meet the promotional goals. For example, retail outlets, malls, media, community centers, event venues, etc.
- Competition: Find out if a direct or an indirect competitor has done a similar sales promotion. If so, what was the outcome? If the promotional activity has produced disappointing results, then there is no point in replicating it in the same market. It would end up in a waste of resources.
- Budget: Work out every element of the promotion that would incur a direct and variable cost. It would be ideal if some partners can bear some costs or if other stakeholders involved could share them in return for a benefit. Agree upon the cost-sharing model in advance with all concerned.
During the Promotion
- Product: Start a conversation with the customer through different media outlets before the promotional deal and communicate with them about the product’s features and benefits. Asking for personal references can work for high ticket items. Social media campaigns are very effective ways to hold a prominent position in people’s minds.
- Market: Rather than a mass approach, acknowledge and re-engage with old customers as well as encourage new customers to try the product by offering free samples and demonstrations. Direct marketing in certain markets and products is a highly efficient way to reach out to high net worth individuals.
- Channel: Help the customers make purchase decisions by making the product available as and when they require it using various channels. Motivate them to buy it by bringing the product to their doorstep. Try personal selling if appropriate when the customer appreciates a direct interaction on a one to one basis.
- Competition: Differentiate the product from the rest. Provide technical information to the prospects on why the product is different. Emphasize on those qualities and advantages that allow the customers to ask relevant questions rather than giving a sales pitch. If possible, distribute special coupons with expiration dates.
- Budget: For budget-constrained clients who show a serious interest in the product offer friendly payment terms in liaison with the local financial institutions. Create and foster brand loyalty by giving them various options on how they can conveniently get hold of the product. Offering them special deals is also a good way to seal deals faster.
- Product: Conduct a post-promotion analysis on what worked and did not work within the targeted audience. Consider what other benefits of the product were appealing. Fine-tune and replicate the ones that worked and discard the ones that did not.
- Market: Make a note of the receptiveness and rejection of the customers to the product features. Create a qualified database of the old customers as well as the new ones in the market. Tweak the product if necessary and possible to adapt to the cultural sensitivity.
- Channel: During the next promotion consider using only those modes of delivery and the channels that were beneficial and that brought the greatest return on investment. Do a survey directly with the first-time purchasers and regular purchases on the preferred usage of a channel.
- Competition: Do a competitive analysis on other companies who are selling similar or augmented products. Rather than competing headlong, work out strategic partnerships to leverage the sales. Some tactical alliances with local partners can even bring the production cost down for both parties.
- Budget: Calculate the cost incurred to carry out the promotion. Compare that to the incremental sales revenue obtained purely by carrying out the campaign. Work out the benefits and risks of the cost-sharing model. Post-promotion phase is a good time to evaluate the mode of payment most preferred by the target market.
The following matrix can help while doing a post-promotion analysis. The information filled out can be useful in designing an improvised promotion the next time.
Photo Credit: Roman Kraft
Your Job is to Hurdle the Top 3 Sales Objections
Sales objections are the bane of existence for many salespeople. Here are a few tips to leap the hurdles and tackle the top 3 sales objections.
Sales Objection #1: Your price is too high
- Which means?
- Compared to what?
- How much did you think it would cost?
- It is high compared to what some companies charge. However, we sell over 800 units a month. Why do you think that is? Do you think that these 800 businesspeople would buy from us if they didn’t see the superior quality and the value they receive?
- It costs only about 48 cents per hour of operation. That’s less than a can of Coke out of a vending machine. You can afford that, can’t you?
- What neighborhood do you live in? That’s a nice neighborhood. You are obviously a person who appreciates the finer things in life. Why are you denying yourself top quality now? Does that make sense?
- Why do you think our competitors are cheaper? Where do you think that they cut the corners? Did they use cheaper materials? Poorly trained craftsmen? Did they cut back on quality control? Why worry about where they cut corners? Why not buy the best and sleep well at night!
Sales Objection #2: I’m too busy; talk to our Purchasing Manager first.
- (Prospect’s name), suppose you receive a letter marked “Personal and Confidential.” Would you allow your Purchasing Manager to open it? (Wait for a reply.) The proposal I have was intended for your eyes only. What I have to say is too important to be shared with anyone outside the executive suite. Can we talk now?
- I appreciate how busy you are. However, the opportunity I have to share with you will have a significant impact upon the future of your company. All I ask for is a brief moment to explain the dollar consequences of this important proposal. Isn’t this worth a few minutes of your time?
- Does he have the authority to approve a $_______ purchase? (If the prospect says yes:) Thank you, I’ll be sure to remind him/her and I’ll see him/her right now. (If the prospect says no:) Well, then, why should I talk with him/her?
- Our proposal is really very significant. It requires detailed information from top management. Is ____ privy to all details and operating plans known to top management? If not, we should set aside five minutes to cover the key parts of this opportunity together. After that, if you want me, I will be happy to talk with ____
- Are you too busy to save money?
- If this opportunity save your company, $____, who do you want to be the hero, you or the Purchasing Manager?
- We almost never deal with Purchasing Managers. This is an executive-level decision. I need to talk with you.
- I am sure your Purchasing Manager is very competent. However, I can assure you, this information is beyond his/her realm of expertise. This information is for the person who is in charge of the total bottom-line profitability of the company.
- I cannot talk with Purchasing Managers. It is company policy. I will either talk with you, or no one in your company will learn of this opportunity. Can we talk?
- You want me to talk with your Purchasing Manager? I know what you are really saying is that you don’t think this opportunity is worthy of your attention. May I have two minutes to explain to you why it is?
- You want me to talk with someone else? Why do you think I called you? It wasn’t by chance! The information I have is for you only! After you have heard it, if you want me to talk with ____, I will be happy to. But, I am confident it won’t be necessary.
- How do you feel when you call someone and they ask you to speak with someone else? Well, that’s the way I fell now! What would you do if you were in my position?
- Thank you for your suggestion. The news I have is very important. Why don’t you give him/her my name and number, and have him/her call me? I don’t normally talk with Purchasing Managers. I’d really prefer to talk with you. May I have a few minutes of your time?
- I have already talked with your Purchasing Manager. He said it was very important that you and I talk directly.
- By handing me over to your Purchasing Manager, what you are really telling me is that you don’t know how critical this matter really is. Would you like to learn why?
Sales Objection #3: I want to work with a more established company
- You impress me as a very smart businessperson. I know you haven’t invited me here to chat about the weather. You don’t want to put all your eggs in one basket, do you?
- I understand how safe you feel about a relationship that goes back 15 years. And yet, I saw your eyes light up when you looked at our products. I can see that you’re giving serious consideration to diversity. Just out of curiosity, could we compare the pros and cons of the two choices? Let’s take a piece of paper and list the reasons for and buying from us. The first reason against us is that we haven’t worked with you for the past 15 years. What would be the reasons for giving us a chance to prove ourselves?
- Is there anything about me that prevents you from doing business with our company?
- I can say good things about my competitor and if I were you, I would go with them – unless, of course, you want a better product at a better price.
- I do respect your loyalty to your present vendor. Loyalty is a virtue. While we’re on the subject, how about your loyalty to your company’s long-term profits? Isn’t that kind of loyalty just as important as loyalty to an outside vendor? If I could show you a way of improving your company’s profits, would you take a serious look at our products?
(Adapted from the book “Sales Scripts That Close Every Deal” by Gerhard Gschwandtner, Founder and Publisher of Selling Power)
Photo: Alberto Guimaraes
Warning Signs in Sales
The cavemen used signs as communication tools when there were no other means to pass on messages. As time went by, signs have lost its significance and now we use languages instead. With the evolution of language, people have lost the ability to read signals even when signs convey rich meaning. Tribal people who have stubbornly refused to integrate into the civilized world still use signs to communicate to others.
To a caveman, signals may be a powerful means of communication. But in today’s sales parlance it is a cue that conveys information that is unobservable from a sender to recipient. Sales management is all about signaling that ultimately leads to increased revenue. Managers design campaigns through the filter of signaling, a process of sending messages with the objective of influencing purchasing behaviors. Done correctly, this can lead to the desired amount of transactional sales. On the downside, market perception may turn out to be unfavorable.
A signal can mean different things to different users (Spence, 1974). When sales executives use signaling, test the waters by experimenting it with a smaller subset of the market. This will enable them to contain rapidly any undesirable consequences and thus manage it appropriately.
When not to use signaling
However, at times, there are costs involved in marketing signaling. It may result in product line cannibalization whereby customers wait for the signaled action and delay purchasing the existing product. Or circumstances beyond the sender’s control may affect the timely delivery of preannounced product or features of it as promised. Similarly, a price cut could be the result of excess inventory or product elimination. So, it would be in the best interest of all to not engage in price war that would dilute profit.
Sign language used by companies
Price signaling raised turbine generator profit/sales ratios in the 1950s. In 1992 Ford announced a 6% price increase to signal not to start a costly war for market share.
Firms that sell intangible products may indicate their high value through prestigious addresses, fancy club memberships, office décor, etc. Some companies hint to the customers their willingness to work around customer needs. They do it through differential pricing, increasing staff count for peak times and by providing complimentary services.
Airlines are notorious for undercutting fares on those routes that are lucrative to their competitors in a bid to undermine the best efforts of their rivals. In such cases, if the undercutting of fares is done to put a spanner in the works then the rates are brought up to the normal level as soon as the objective has been achieved even before some of the travel agents have found out.
Firms pay dividends to its shareholders as a sign of strength signaling to the market that there is no need to hoard cash. Some investors look for a company’s Corporate Social Responsibility initiatives to gauge the health of the enterprise. Such companies use CSR to signal the appropriate messages.
Restaurants open up in an up-market locale with high rents to signal to the patrons of its five-star status as well as to advertise its good food. Warranties and guarantees are other examples marketers use to show the credibility of the quality of the product. They offer insurance against faulty products to potential buyers. Longer the warranty, higher the quality.
Marketing signaling is also messages sent to other companies within the industry either to convey to or to gain information from competitors. Companies selectively leak information to manipulate the opponent’s choice of actions. Employees find press announcements to be more credible than internal communications.
Types of signaling
Kirmani and Rao (2000) distinguishes between two types of signaling based on the financial consequences. They are:
- Default-independent signals, where companies incur financial loss, such as heavy advertising costs or fixed upfront costs, whether the signals default on their claims or not.
- Default-contingent signals where companies suffer monetary loss only when the signals default on their claims, for instance, when a high price signal matches with equally high quality.
Keys to signaling success
Maintaining a consistency throughout the organization as to the meaning of the signals is crucial to the success of signaling marketing. Once a signaling strategy has been decided by the company executives the information must be passed on to every employee from top to bottom. Failure to do so may not only cause inconsistency in the quality level but also mar the reputation and integrity of the brand. Equally important is how the rival companies interpret the meaning of signaling.
Also, as responsible marketers, it is rather important to examine your conscience before indulging in signal marketing as using it to promote transactional sales at the detriment of brand integrity is unethical and immoral. In light of this, signaling management has become a tricky task of business leaders. The correct interpretation of sales signals enable the executives to brace themselves to avoid any potential threat or to position them to take advantage of the opportunity.
Having said that, with signaling marketing it is still hard to predict the response of the target audience. Neither is it easy to gauge the perception in the minds of the recipients. Moreover, the way one party perceives the meaning of signals may not be the way another party views them. And that is why it is advisable and a prudent strategy to test the signal response on a smaller scale in an area that closely resembles the target market.
Photo Credit: Bart Anestin
Kickstart Your Start-up by Capitalizing on Weaknesses of Multinationals
Start-ups become fat by converting the weaknesses of multinationals into their strengths
Big firms seem to have it all. Audacious business plans that seem to span a lifetime. Intimidating logos that have withstood the test of time. And brand strategy that tells stories like fairy tales. Moreover, they have been in the business for decades. This has enabled them to amass the expertise necessary to withstand any political upheavals, economic uncertainties, and social changes. These pioneers have managed to go through the experience curve.
However, in recent years, entrepreneurial firms have also sprung up like mushrooms despite some setbacks. More often they set their wheels in motion without much planning or strategy. Although market forces have compelled them to do so for future sustenance. They did not have the political, economic or social clout that the giant behemoths claim. They still managed to become successful companies in their earnest desire to satisfy a market need in their respective fields. How did they do it?
What are the competitive advantages of big firms?
Many large corporations and multinational conglomerates consolidate their production processes to cut costs and to centralize their decision-making structure. The economic and trade policies of several governments make it easier for those companies to do so. It gives them a huge advantage. They are able to cut costs. They are able to borrow from the expertise and resources of the geographical area where they base their production activities. For instance, they take advantage of the cheap labor or tax systems, and sometimes even the weather conditions for certain products. They win the favor of labor unions and local communities in which they reside since they create jobs and stimulate the economy. And they seem to have very cozy and symbiotic relationships with peripheral businesses within the industry.
Another advantage multinational companies have is deep pockets that enable them to produce flashy television advertisements during high-profile international events such as Olympics and in popular venues backed by celebrities. Such marketing gimmicks are unrivaled and smaller firms cannot match them because of the high price advertisers demand. Such advertisements have a wider appeal, and at the end of the day, it’s a numbers game.
The social and business network that large consumer packaged goods (CPG) companies have gained due to being in the business market for a very extended period gives them access for prominent placements on shelves. In the cases of large service firms, this gives them the enviable position to gain access to huge conglomerates through providing consultancy support. If nothing, public perception favors big company brands.
What are the weaknesses of start-ups?
Start-ups on the other hand, by them being in the infancy stage, unfortunately, do not have many of the power and privileges that big businesses have. Mostly people who have either failed in the job market or out of stark economic necessity found a company which implies less financial resources. Often they are at the disposal of friends, families or fools to lend them money to scale their business operations. Although venture capitalists and angel investors have risen in recent years, the brutal bureaucratic procedures involved in getting to pitch in front of such capitalists deter many start-up entrepreneurs to abandon their efforts at a very early stage of the process.
What is then left for them to do, is to start from the grassroots level that entails knocking on the doors of prospective customers. It takes an enormous amount of motivation, ambition, and drive which are rare commodities in this age of instant gratification because the efforts take a long time to yield results, if at all. Sometimes the lukewarm response from the market can take a toll on the individual and can sap the energy level. It can lead to frustration, disenchantment and a lack of self-worth.
Hope – yes we can!
Hope is at hand. Think about the risks involved in consolidated manufacturing enjoyed by many multinational companies. In most cases, the companies have a stake in the real estate of the production system – land, factories, and capital-intensive machinery. They are vulnerable to single currency swings as well as the economic chaos that may ensue after that. Start-up companies who are smart enough outsource their production of goods and services. Any pitfalls then will be borne by the companies who own the production infrastructure. In other words, start-ups get to make hay while the sun shines and can quickly withdraw when times are rough.
Thanks to the time we live in, the Internet has made it possible for start-ups to reach out to an equal number of people using social media and digital marketing in the comfort of their dens or basements that they use to start their businesses. Hence they do not have to resort to the flashy television advertisements.
Online distribution network companies such as Amazon works as a perfect substitute to prominent shelf placement for start-up companies. It has enormous potential for entrepreneurial firms for secure delivery as well as to scale their operations to the magnitude of that of multinationals if done right.
Take a piggy-back ride
Outsourcing the production processes as well as online marketing and distribution can all be done with a fraction of the cost sometimes even free of charge. For example, the success of content marketing relies predominantly on the quality of the content. If one looks around one can find hundreds of tools and tactics that is being made possible in this day and age for a start-up company to grow and make money. So the moral of the story is to take a piggy-back ride on the times we are!
Additionally, in most industries barriers to entry are falling making it irresistible for an entrepreneur. The Internet gives us real-time information about the market thereby making start-ups more attuned to the needs of the market. What all these factors do for a start-up is give them much-needed agility, dexterity, and nimbleness in the decision-making.
Photo: Verne Ho