business planning pro tips for beginners

you may ask why do I need a business
plan why can’t I just launched my business and get to market the
importance of a business plan cannot be understated first you have to define
your business and how you’re going to compete you need to understand the
market and where is your business going to occupy its space in that market
versus your competitors you’ll need to clearly define your product and why your
customers should be interested in it once you’ve defined that product have a
good understanding of how you’re going to take it to market after you’ve
decided how you’re going to take a product to market you need to understand
and articulate how you’re going to operate that business and create an
operating plan to support those operations
now that means you’re going to have people and you’ll need a plan for
managing your people and the resources that come along with them
you’ll also need to define the administrative responsibilities and how
you’re going to fulfill them once you’ve got all that down you’ll need to project
your financial results and create a clear financial plan that helps you
understand how should the business perform over time now with all of that
done you’ll need to think through what are some of the major pitfalls that you
could face as you launch your business and make sure you incorporate those into
your plan now depending on the type of business you’re running not all of these
elements will be relevant however these are the major components of the business
plan and why you need to put them in place as you’re writing your business plan
having a clear understanding of the size of the market is going to help you
understand how attractive is the business you’re trying to get into does
the market consist of businesses or is it consumers how many people are in your
addressable market articulate how does the market organize itself is it
organized by product by segment by problem is it organized by geography
spell out some of the common characteristics of the customers in that
market now how big is the addressable portion of the profit pool that profit
pool is the dollars that are available in that market and how much of it can
the problem that you solve address now some ways that you can size the market
are things like looking at market research gathering analyst reports even
looking at what some of your competitors are doing and how they’ve reported the
size of the market a good market sizing will tell you what you need to do to
scale your business it will also help you understand is this an attractive
enough market for me to make a return you’re going to be investing as you
build this business you need to know how much market is out there that you’re
going to be able to capture now obviously bigger markets are exciting
however niche markets can be just as lucrative so as you’re running your
business plan articulate what the market looks like and how much of it you think
you can capture your business plan has to spell out your
revenue model for your product or service this is a huge determinant of
how successful your business is going to be how are you going to make money at
this is it going to be a one-time charge or are there recurring or subscription
charges for your product are there going to be cross-sell or upsell opportunities
are you going to sell add-ons that complement the product or service how
are similar products priced in the market what are your competitors do
what’s their revenue model if you’re looking for ideas also ask what are your
customers willing to pay conduct some pricing market research or look at
competitive offerings and how they’re priced and analyze the value of your
product and a value it creates and price as a portion of that
don’t leave value on the table and your choice of a revenue model is going to
determine how much of that value you’re going to capture so when you articulate
your revenue model make sure you think through what’s the
value you’re delivering and price accordingly your business plan needs to spell out
the major customer and market trends that you’re going to face and more
importantly how you’re going to react to those trends what are the major trends
do they help you or do they hurt you is the market growing is it flat is it
shrinking is the market fragmented or is it consolidated and how are people
behaving in that market are you seeing acquisitions are you seeing divestitures
who makes the buying decisions from a customer standpoint and are those
patterns changing at all think through what other products and services do your
customers want and need are there emerging trends where customers are
asking for new things some of the sources for this information are things
like market research conducting focus groups doing some competitive analysis
for your business plan articulate what the major trends are and the actions
you’re going to take either to offset the negative trends or take advantage of
the positive ones your business plan has to spell out your
go-to-market strategy both in terms of building awareness for your product or
service as well as how you’re going to deliver it how are you going to reach
your customers what are the channels you’re going to use again to market to
them as well as to deliver to them are going to go direct are you going to go
through distribution how are you going to build awareness for your product or
service will it be through partnership or licensing understand the economics of
each of those channels so as you’re writing your business plan make sure you
articulate both types of channels and understand the economics involved in
each one your business plan needs to clearly
spell out the points of differentiation for your product or service compared to
your competitors and those points of differentiation need to be things that
your customer cares about now the differences need to be substantial
relative to competition by saying you’re one to two percent faster than your
competitors that won’t get a customer’s attention 20 percent faster now you have
their attention second they don’t just have to be substantive differences they
have to be meaningful if your customer cares about cost but not at all about
speed it doesn’t matter if you’re twenty percent faster so make sure as you’re
articulating these points of differentiation you look at substantive
differences as well as meaningful ones now knowing how you’re differentiated is
going to help you know where to invest your time and money because this is a
planning exercise and you’re going to focus on those differentiating factors
and where to compete or not compete in the marketplace this is the part of your
business plan that’s going to keep your strategy focused and staying on strategy
is going to make you more effective and more competitive it’ll prevent you from
chasing work you shouldn’t pursue it’ll prevent you from investing in things
that are going to be diluted that your customers won’t care about so as you
articulate your business plan make sure you think through those points of
differentiation that your customers care about and that you have a meaningful
performance advantage on versus your competitors and by spelling those out
clearly you’re going to make sure that you focus on strategy and you have a
more competitive offering your business plan has to lay out your
product development roadmap that roadmap should spell out what the major phases
are in product development as well as the timelines that go along with it
describe what’s in your Minimum Viable Product the first product that you put
in the market what are the features you’re going to release then discuss
what the next level of prototypes are going to be as well as when that final
product is going to be available and released into the market the business
plan should also describe your approach to testing research and development and
what that future product roadmap will be explain the key risks in your product
development lifecycle and how are you going to mitigate or account for those
risks when you layout your product development roadmap lay out those
features and functions at each stage of development and articulate what the
gates are for you to build that next level of functionality the next section of your business plan
needs to lay out product or service delivery how are you going to get your
product in the hands of your customers if it’s a product
who’s going to ship it are you going to ship it the rack through the post office
or UPS or Federal Express are you going to sell your product through retail if
it’s a service are you going to go to the customer or are you going to deliver
your service remotely or you going to have the customer come to you to be
serviced and then once you’ve laid out how you’re going to get that product and
service to them explain the operational hurdles and challenges you’ll face as
well as how you’re going to get over them
make sure you lay out the channels you’re going to use to deliver your
product or service and how you’re going to overcome the challenges you’re going
to face pricing is one of the most
decisions you’re going to have to make and your business plan needs to spell
out your pricing model as clearly as possible you need to understand even a
1% differential on pricing can have a disproportionate impact on your total
profitability let’s assume your business has a 10% profit margin if you raise
prices by just 1% on the top line for revenue you’ve increased your
profitability by 10% that 1% will go from your revenue line all the way to
the bottom and your pricing will drive margin from 10 percent to 11
pricing is huge do not under invest in thinking about it so how do you come up
with your pricing benchmarks some of your competitors look at their pricing
model as well as their price points and use those price points as anchors for
pricing your own service also determine your pricing model and the rationale
behind it are you going to sell on a cost-plus basis are you going to sell on
a value basis is it going to be a one-time fee or ongoing fees or some
combination thereof laying out this model is critical because you’re going
to have to message it to the market as well as build the model into your
ultimate financial model as part of your business plan in the sales section of your business
plan you have to spell out how are you going to sell your product or service
will you use a sales force or will you just go direct consumer maybe from your
website if you’re using a sales force what’s the sales cycle going to look
like how long will it be what’s the conversion rate from prospect to
customer and make sure in the business plan if possible have supporting
evidence for that how are you going to compensate your sales force will it be a
base salary we pay them a commission is it going to be a combination of the two
because that’s going to drive your sales forces behavior and in the sales section
how are you going to conduct contracting will you have long-term contracts will
you have certain payment terms that you’re going to expect what type of
salespeople do you need and how are you going to compensate them and having that
clarity in your business plan is going to make it clearer how those people will
perform as well as how it will show up in the financial performance of your
business another operational area to cover in
your business plan is how are you going to support your product or service
just because you sell it doesn’t mean you’re done what’s it going to take to
deliver aftercare to handle returns to deliver customer service when your
customers have questions how are you going to staff that service are you
going to insource it and have people within your organization who do it are
you going to outsource it to another organization or are you gonna make it
self help what are the expectations that your customers are going to have for
this support how many calls do you expect
how many incidents are you going to handle what’s the return rate on your
product going to be and what expertise is going to be required to handle some
of these issues you need to spell out all of these operational components in
your business plan because if you don’t think about them you’re going to have
operational challenges down the road the lesson here is think about how you’re
going to support your business before you make any operational changes and
this is exactly what you’ll be doing as you write this section of your business
plan you

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