You’re in the home stretch of building your business plan!! Hooray! As a recap, by now you’ve identified the problem/need, you’ve described your solution, your target audience has been defined and how to reach them has been planned and you know how much revenue you need to generate to meet your expenses. You’re ready for the final pieces of the puzzle.
This may seem like the easy part but it requires some soul searching and honesty on your part. In this part you really need to describe in detail what sets you apart from other businesses offering similar solutions. What makes your business the purple cow in a field of jersey cows? Using our artisan bread business example, perhaps your uniqueness derives from using organic ingredients, small batch baking, using family recipes, etc. For the coffee roaster business it might look like using fair trade beans, freshly roasted coffee using a proprietary roasting formula, signature roast blends that are available nowhere else.
This is your opportunity to expound on the virtues of your business. Take some liberty with your description so long as it has a basis in fact.
What Are Your Super Powers?
In this section you want to set down if your product is not easily replicated by other people. If you’re the baker, this would be covered by your using family recipes. The coffee roaster satisfies this part by it’s unique blend of beans using a proprietary roasting process.
Do you have any unfair advantages over the competition? These advantages might look like your best friend is the purchasing manager at the food market chain and she can get your product on the shelves. Perhaps you have a benefactor who has generously offered to “bankroll” your operation for the first six months. Maybe you have decades of experience in the field that your competitors will find difficult to match. Describe these “super powers” in as much detail as possible.
How Is The Fit?
For this final part, it requires you to project into the future a bit. Looking down the road in this business, where do you see yourself? Will you tire of this or does it energize you to dream about it? Can you see yourself putting in the kind of time and attention that the business will demand? Is this the kind of lifestyle and responsibility that you want? Does the business feel like and extension of you?
Basically, at the end of the day, if everything goes as planned … will you be happy and content giving life to this business? After all, what’s the use of success if it doesn’t bring you some happiness or sense of worth?
A business plan is not intended to be a “once and done” document. You should periodically refer back to it to see how your business is doing. Were your assumptions correct? Do you need to make some adjustments? Are things going better than planned? If so, should you hire more people or expand your business?
I wish you the very best in your endeavors.
Well, here we are. We have finally arrived at that point in the business plan where we get the opportunity to do some math! Wooo Hooo! What? Crunching a few numbers doesn’t float your boat? That rapid heartbeat isn’t from excitement? That lightheaded feeling isn’t based on that adrenalin rush? You’d rather have root canal? Come on … it won’t be that bad. Trust me.
Let’s start with your anticipated monthly expenses. Begin with those expenses that are common for all types of businesses and then add in those special items that are particular to your business model. Your business needs a place to conduct business so what is the going rent in your area for the size space you need? Check online or in the local paper for commercial space and use that as a guide. Now move on to your utilities – electric, heat, water, phone, internet, etc. If you’re not sure, you can use your household expenditures on these items as a baseline and adjust accordingly. Will your business be needing any special equipment – ovens, mixers, computers? If so, add in the monthly payment for these. How about general office expenses such as pens, paper, marketing, insurance, salaries, etc.? Once you’re finished with this you’ll have a good idea of how much money you’ll need to generate on a monthly basis to keep your business humming. Please note that this does NOT include one-time, up front expenditures that you’ll need just to open the doors (e.g. equipment purchases, security deposits, etc.) Bottom line here: keep it lean and mean! Don’t bloat your overhead and your stress level will be low!
Here’s a sample:
Now we take a look at the revenue side! Take a good long look at your product or service. What will you be selling to your customers? If there are similar products or services in your area, how much do their services or products cost? This is not meant as a limitation on your products or services but merely as a guide for what your competition is charging. Using the homebaker model we’ve used before, you may want to charge your customers $8 per loaf of fresh bread. You can anticipate that some customers will ask themselves “Do I really want to spend that much on bread when I can go to the local market and pay $4?” That’s ok because your product is different and unique and some people (not all people) will be willing to pay more for that uniqueness. (We’ll get into the “selling” of your uniqueness in the next installment.) The only advice in pricing your product or service is this: don’t base your price just on the costs to produce your goods; rather, try to price your goods on what they are worth to others. In other words, what is the value your product’s or service’s bring to others.
Once you’ve settled on a price per unit you can now determine how many loaves of bread you need to sell on a monthly basis. If your monthly overhead is $5,000, simply divide that number by the price per unit to determine that you’ll need to sell 625 loaves of bread per month. Now you can go back and make some adjustments to your monthly costs or product pricing as you see fit. You can trim some costs and boost your pricing to make yourself more comfortable with the numbers.
Keep your numbers as realistic as possible and as lean as practical. Your stress level will be lower and your excitement level will be at it’s highest. You’ll be able to focus on doing what you love to do rather than worrying about keeping the lights on!
This is the third installment in the series on business plans and the information that goes into them.
So far, we’ve identified the need/problem and your timely solution to that problem. Now let’s turn our attention to your customers – who are they, how do you reach them and how do they find you?
Who Are Your Customers
Pinpointing your audience is essential to marketing your business which in turn is key to increasing sales. This part of the process calls on you as the business owner to focus on the type of persons who are likely to use your services or purchase your products. It is tempting, no doubt, to say to yourself that everyone is your customer. It is not enough to generalize your answer. Why? Because it is not true – everyone is NOT your potential customer.
While some people may be keenly interested in knitting supplies and in your knitting instruction class, I, for one, have no interest in knitting. Therefore, I will never respond to any advertising, emails, direct mail or any other solicitation that involves knitting. So, for you to spend money and time (both very valuable resources in scarce supply) in trying to solicit my business would be highly inefficient and wasteful.
So, determine the type of person who would be interested or see value in your products and services. If you bake artisan breads and cakes, your customers might be people who appreciate wholesome, home-baked goods but don’t have the time or skill to do it themselves. If you sell fresh roasted coffee, for example. your target audience might be coffee lovers who value a great cup of coffee and are willing to spend a little more to enjoy that. If your business provides free food for the needy, your consumers are those families struggling to make ends meet.
How to Connect
If you’ve been able to describe your target customer the you should have a little insight into what makes them tick and a few ideas on how to communicate with them. For example, you’ve identified your audience as artistic and craft-oriented for your knitting business. A good place to connect with like minded people might be to teach a class at the community college or establish a strategic alliance at the local craft supply store and offer a class at their facility. You shouldn’t set up a booth for your knitting class at a sports memorabilia expo. Wrong audience, wrong location.
The artisan baker and the coffee roaster might set up a stall at local farmers’ markets, street fairs and festivals. From there, they could further develop those customer connections by creating a direct sales program via home delivery or by mail.
The company that offers consulting services to small business might see some advantage to writing business advice articles for the local newspaper or business magazine. Perhaps they would enhance their market share by networking with other professionals at local civic organizations or trades. Maybe even offer a free seminar or discussion on current business topics at a local restaurant.
Keep in mind that sometimes the best way to find out what your potential customers are like is to look at yourself. After all, you are passionate about the problem and your solution. So what is it that drives you and excites you? What methods of communication and advertising are most effective with you? Chances are, you customers will feel the same way.
If you know yourself, you’ll know your audience and you’ll have a pretty good ides on how to connect with them.
We continue our discussion of what constitutes a good business plan. If you missed the first installment in this series you can find it here: http://pgentile.com/?p=47 . It is suggested that to get the most out of this series, you should read these short episodes in the order in which they were written. That way you’ll get a real feel for the flow of a business plan and, for an added bonus, the later installments will make more sense; each installment builds on the articles that came before it.
We’ve already discussed the first step – what is the problem or need you have identified? Hopefully you have been able to articulate not only what the problem is but also able to back up your statement with some evidence. Remember, “articulate” or “back up” means “put it in writing”. All of these steps call for the business owner and executive director to write out their response to each of these prompts during the business plan process. The writing process forces you, the owner, to describe the problem you see as well as your solution to that problem; the process is a tremendous asset to you in crystallizing the core of your business. Like the spokes on a bicycle wheel, every other aspect of the business plan will flow from these two core points (the hubs): what is the problem and what is your solution? Without those hubs your business wheel will likely collapse with the slightest pressure.
What is the Solution?
Up until now we’ve been focusing on the problems, needs and gaps in our society that need fixing. That’s key because if people don’t see a problem, need or gap they are unlikely to buy your product or services on a sustainable basis. Now that you’ve identified the problem and educated others that the problem exists and needs fixing, it is time to present them with your “fix” to the problem.
At this point you as the entrepreneur and world-changer have your opportunity to explain your solution to the problem previously identified. The floor is yours and the spotlight is on; how does your idea, your product or your service solve the problem? Be specific.
Let’s look at some examples. Suppose the need you’ve identified is a lack of artisan breads in your community and the surrounding area. People like good, homemade, fresh-baked bread and there isn’t a baker filling that need in your area. You already enjoy baking fresh bread for your family and a few friends and you’ve gotten rave reviews. So you think … maybe I can make a living doing this? Your solution is to bake breads and other home-cooked delicacies and sell them at farmers markets, festivals and through word of mouth.
Here are two other examples of problems identified and the proposed solutions. Everyone knows about the climate change and environmental problems facing our planet. However, there is also an ever-increasing demand for energy. How can we create a sustainable, reliable energy source while helping to reduce our carbon footprint? Two different solutions are presented for the same problem. First, one company decides to open a used vegetable oil cleaning and processing business. The company would take used vegetable oil from restaurants, that would otherwise end up in a landfill, and process it to be used as a biofuel. The biofuel could be used in lieu of diesel fuel for cars and trucks among other things.
Second, another company opts to take leftover organic waste (e.g. food scraps) from restaurants and grocery stores that are headed for landfills and use it instead at their facility; at the facility, the organic material is mixed with bacteria which eats the material producing methane gas (which is used to fuel electric generation plants) and the solid leftovers are used as agricultural fertilizer.
The solution does not have to be elaborate or technology driven; the simpler the better. The solution just has to be your answer for the problem you’re addressing.
Let’s talk about business plans.
I know, I know; that’s about as exciting as watching paint dry. While that may seem to be true perhaps what is really driving that reaction is fear. When we don’t understand something we tend to be afraid of it and when we are afraid of something we avoid it like the plague. Right? The idea of writing a business plan might be so uncomfortable due in large part because when we think “business plan” we think of a 30-page document filled with charts, spreadsheets, accountants, lawyers and costing lots of money. But it doesn’t have to be that way. So let’s begin to demystify “business plans”; over the next few weeks I’ll be breaking down the info that goes into a business plan. Perhaps then it won’t seem so daunting a task and you’ll see the benefits of putting your plan down on paper.
What Is It?
When you get right down to it, a business plan is nothing more than answering a few questions in some key areas. Once you answer those questions then you can flesh out your answers and provide some backup to your assumptions. You can find spreadsheets for the number crunching at a variety of places on the web. The length and detail of your plan will depend on who is going to see it – a bank, family, or for your eyes only. During the next few weeks we will just be discussing a basic template to get you started. What we will be discussing applies equally to a for profit and a non-profit business! All businesses need a plan!
Anyone who is in business already or who is considering launching their business needs a business plan. If they don’t, they either won’t be in business for very long or they won’t reach their full potential in business. Basically, a business plan is a critical tool for the business owner because it demands that the owner ask herself some poignant questions about her business and rationally assess the answers to those questions. Without such a process the business will wander aimlessly and likely crash and burn leaving the business owner not only demoralized but also likely owing banks, friends or family significant amounts of money. You’re not launching a business or a non-profit in order to fail. You want to succeed and succeed in a big way! So let’s give yourself the best chance at success by doing a little bit of planning in the beginning. Let’s begin.
What’s The Problem?
Today we start with the most basic question – what is the problem you are trying to solve? You’ve spent time in and around your neighborhood and have noticed a few things that are lacking. There isn’t a decent coffee shop anywhere close to you. There is no place to get a decent sandwich at a reasonable price. There’s no place to have some family fun. Where is one to get a decent cigar in town?
Perhaps you’ve been searching in the markets for a particular item to meet a particular need but have not been able to find it. You hear your friends talking about a particular problem but there isn’t anything that exists to solve the situation. You need a gizmo to make life a little bit easier.
Whatever the problem you see, whatever the desire that is not being satisfied, whatever the need that is not being met – there is an opportunity for you to provide the solution. If there is no problem, then perhaps it is best to categorize your “business” idea as a “hobby”. Don’t misunderstand me, there is nothing wrong with hobbies but hobbies generally satisfy your own needs and not the needs, desires or problems of others around you.
So, the first part of any business plan begins with articulating a problem that needs solving or a need that requires a solution. Take some time to put down on paper the problem as you see it. Give it as much detail as possible. You should be able to delineate the issue within two or three paragraphs. Once you are able to describe in detail the problem then, and only then, can you articulate your unique solution.
On the last Saturday of every month (Mar. 28th and Apr. 25th are the next nights) The Red Thread Cafe, an art, music and coffee venue of Hopesprings Community of Faith, opens its doors to local artists. The community is invited to attend and be a part of a growing movement of local artists, writers, poets and sculptures who let their inner artist thrive in a supportive, creative atmosphere. Bring out the artist in you and both inspire others and be inspired by others. Through the collaborative atmosphere of The Red Thread Cafe, artists of all types get together and allow their creative spirits to soar. As Vincent Van Gogh once said, “Great things are done by a series of small things brought together.” No matter what type of art you practice – poetry, painting, sculpture, writing, drawing – no matter what your skill level may be – experienced, novice or just curious – there is a place for you at Art Night! What’s that you say? You don’t have a creative bone in your body? No problem!! Come and try your hand at it or be the encouragement for others by just hanging out.
Bring your own supplies and projects and/or make a small donation (about $8) and supplies will be provided for you. It starts at 7 p.m. and ends at 10 p.m. and will be held at 301 Market Street, Bangor, PA. Snack donations would be most appreciated by those attending. For more information please call 855-INFO-HOPE or email firstname.lastname@example.org
“Art enables us to find ourselves and lose ourselves at the same time”. ~Thomas Merton.
Thanks so much for visiting my site. I will periodically post items that I find interesting, useful and informative. I hope you will enjoy them as much as I do.