The Parts of a Business Plan

13Think about your hand. It has five fingers, right (hopefully)? Or just imagine you have five fingers. In the same way I want you to know that there are five parts to a business plan:

1. The Summary; also called “Executive Summary” or “Introduction”
2. The Marketing Plan
3. Operations Plan
4. Financial Plan

These are the names I have used and it is easy for me to remember them.
What Does Each Name Stand For:

1. The Marketing Plan – “What I Want To Do” – What type of business are you wanting to start? What market do you want to start your business in? Who do you want to cater to?

2. The Operation Plan – “How I Am Going To Do It” – What kind of business structure do I need for this enterprise? Who do I need to network with? Do I need a mentor?

3. The Financial Plan – “What It Will Cost To Do It” – What are the costs of production, cost of sales or monthly expenses? How much profit will the business make in 12 months?

Part 1: Marketing Plan

The marketing plan, when not written correctly, has far reaching consequences:

1. If the marketing plan is wrong, then every other part of the business plan will be wrong. i.e. if you create a product that people do not want, then the way you plan to structure the business (Operations) and what you think it will cost (Financial) will be wrong.
2. If the information you have about who your customers are is wrong then the business will not work.
3. If the information you have about your competitors are wrong then the business will struggle.
4. If the way you have defined your market is wrong then the whole business will collapse like a wobbly stool!

Trust me when I say the Marketing Plan is the most important part of the business plan.

What Is Included In The Marketing Plan?

Industry overview – Past, Present & Future
a. Let’s say you want to start a business selling baby food. Your Industry overview is the information you can find out that relates to the overall food industry. Information such as: what has happened in the past to food consumption, how much does the average household spend on food and what are the projections for the consumption of food? How many babies are born in your area; nationally or internationally? (Don’t worry this information is readily available online and at your Business Libraries; start there.)

b. Industry Overview is important because it exposes you to vital trends that may affect your business. Some businesses are so seasonal that this information can make or break the business.

Sector overview: – Past, Present & Future
a. Using the same Baby food sales business example: Baby Food is a sector within the Food Industry so this business will need to know how much food babies consumed in the past, what they are consuming now and what they are likely to be consuming in the future. You might want to know an estimate of how many children are born per year and what the projections are for the following 10-20 years.

b. Remember most businesses never consider the future. They are too busy trying to deal with the day to day aspect that they are not planning for the future. Do not acquire this mindset. Writing your business plan offers you the opportunity to think and plan ahead and position your business greater than what your competitors do!

III. Competitors: You can bury your head in the sand and convince yourself wrongly that there are no competitors for your business or you can take an active approach to learn from your competitors and use the information to further your business.

Competitors come in 3 shapes and sizes:
a. Direct,
b. Indirect
c. Future Competitors

Let’s break this down: If you are a Hairdresser located on a high street your Direct Competitor are other established Hairdressers in your vicinity 1-2 miles radius. Your Indirect Competitors could be those Mobile Hairdressers or those working from home or even those located 5-10 miles away that your potential customers can drive to. Your Future Competitors are those in schools and colleges studying Hairdressing.

Therefore investigating your competitors has become extremely important. The kind of information you want to know about your competitors include and not exclusively:

S.W.O.T. Analysis – What are the Strengths, Weaknesses, Opportunities and Threats of your competitors?
Manufacturers – Who are they working with?
Relationships with other – What type of business relationships do your competitors have?
Finance – How are they financed? By shares, loans or personal funds?
Suppliers – Who supplies their products? (Hang around outside their shop or business)
Consumers – What type of consumers do your competitors have? – age, sex, etc.
Promotion Strategy – How do they promote themselves?
Geographical Coverage – How far do your competitors operate?
Product Range – How many types of products do they sell or do they offer other attractive services?
Culture – What is their work culture?
Staff – How many? What ages? Sex? Etc.
Size – How big or small is this business in terms of sales or profits?
Cost Structure – How do they charge?
Reputation of the business – What do people say about your competitors both good and bad
Ownership of the business – Who is the owner of the business? Is it a franchise?
Distributors Used – Who are they?
Segment Served – Do they cater to a particular niche?
Motivators Beyond Money- Can you find out?
Management information – Who manages your competitors business? Do they have a Dragon giving them advice?
Industry Opinion – What do experts say about them?!

You might need to do some hard detective work but you are only able to develop your products/service once you know what others are doing. Otherwise you will set up a business that will just be like the rest; struggling businesses!

Where Do You Get This Information?
Visit Local Stores
Shared Customers
Shared Accountants
Lawyers/Solicitors
Suppliers
Reports Exhibitions
Internet
Local Business Libraries
Industry Magazines
Companieshouse.gov.uk (if they are a limited company they need to log their annual accounts here. You can down load it and find useful information about your competitor’s Sales, Finance, Staff, Loans etc. all for £1-£3

IV. Product/Service: Now that you have done the above research you are ahead of most people who have an untested idea and force it on the market only to discover someone else next door has the exact product/service and he is struggling.

Since you know what your competitors are doing, which has given you insight into the market, you know what the experts are saying about your industry and what/how your niche (sector) is doing. You are ready to create a Unique Product/Service.

Even if you have been working in an industry for years and you believe you will be the next Steve Jobs, research is still vital to your success.

Remember that your product must be solving a problem. People do not simply pay for a product; they pay for what the product can do for them! Invariable thinking like this will help you identify your target market when you consider “who has the problems I can solve?”

How to Start a Business Business Plan

Hand draw business sketches over grey background. Business idea conceptMillions of people want to know what is the secret to making money. Most have come to the conclusion that it is to start a business. So how to start a business? The first thing you do to start is business is to create a business plan.

A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

A professional business plan consists of ten parts.

1. Executive Summary

The executive summary is often considered the most important section of a business plan. This section briefly tells your reader where your company is, where you want to take it, and why your business idea will be successful. If you are seeking financing, the executive summary is also your first opportunity to grab a potential investor’s interest.

2. Company Description

This section of your plan provides a high-level review of the different elements of your business. This is akin to an extended elevator pitch and can help readers and potential investors quickly understand the goal of your business and its unique proposition.

3. Market Analysis

The market analysis section of your plan should illustrate your industry and market knowledge as well as any of your research findings and conclusions. This section is usually presented after the company description.

4. Organization and Management

Organization and Management follows the Market Analysis. This section should include: your company’s organizational structure, details about the ownership of your company, profiles of your management team, and the qualifications of your board of directors.

5. Service or Product Line

Once you’ve completed the Organizational and Management section of your plan, the next part of your plan is where you describe your service or product, emphasizing the benefits to potential and current customers. Focus on why your particular product will fill a need for your target customers.

6. Marketing and Sales

Once you’ve completed the Service or Product Line section of your plan, the next part of your plan should focus on your marketing and sales management strategy for your business.

7. Funding Request

If you are seeking funding for your business venture, use this section to outline your requirements.

8. Financial Projections

You should develop the Financial Projections section after you’ve analyzed the market and set clear objectives. That’s when you can allocate resources efficiently. The following is a list of the critical financial statements to include in your business plan packet.

9. Marketing and Sales

Once you’ve completed the Service or Product Line section of your plan, the next part of your business plan should focus on your marketing and sales management strategy for your business.

10. Appendix

The Appendix should be provided to readers on an as-needed basis. In other words, it should not be included with the main body of your business plan. Your plan is your communication tool; as such, it will be seen by a lot of people. Some of the information in the business section you will not want everyone to see, but specific individuals (such as creditors) may want access to this information to make lending decisions. Therefore, it is important to have the appendix within easy reach.

How to make your business plan stand out.

One of the first steps to business planning is determining your target market and why they would want to buy from you.

For example, is the market you serve the best one for your product or service? Are the benefits of dealing with your business clear and are they aligned with customer needs? If you’re unsure about the answers to any of these questions, take a step back and revisit the foundation of your business plan.

The following tips can help you clarify what your business has to offer, identify the right target market for it and build a niche for yourself.

How To Build A Sustainability Business Plan

11The business buzz is about sustainability. Corporate officers and stakeholders are generally accepting-if not totally convinced-that being environmentally friendly will not lower profits and harm competitiveness.

Just a decade ago, business surveys found the opposite to be true. Battles raged pitting corporate executives and politicians against defiant consumer groups and environmental activists. They argued customers are not likely to pay premiums for eco-friendly products. Profits and jobs will be lost. Times are different, but simply tacking on sustainability goals and strategies is not effective. Mapping a sustainability business plan is the only way to achieve objectives.

An investigation of sustainability initiatives among 30 corporations reported in the Harvard Business Review (R. N. Nidumolu, et al., “Why Sustainability Is Now the Driver of Innovation.” September 2009, pp. 57-64) concludes, “Sustainability is the mother lode of organizational and technological innovations,” yielding significant returns throughout the company.

Costs are lower through careful planning and use of resources. Sustainability raises revenues by selling and making better products. Sustainability opens new markets and business opportunities. Sustainability is the “new frontier” of innovation, observe the researchers.

Determining how to build a sustainability business plan begins ensuring compliance with regulations and laws. It must be recognized as an opportunity to grow. The Big Three automakers’ resistance and delays with emission-compliance laws put them two or three design cycles behind foreign competitors.

Proactive companies move forward, reducing consumption of resources and become more efficient. A solid plan measures these effects. Plan managers learn to collaborate with suppliers and find ways throughout the chain to save on raw materials and reduce waste. They do the same with overall operations and in the workplace. Cisco turned an annual $8 million cost to scrap old equipment into a recycling group business unit that became its own profit center. Costs fell by 40 percent, contributing $100 million to the bottom line in 2008.

Designing sustainable goods and services is another significant ingredient to building a sustainability business plan. Procter & Gamble created cold-water washing detergents, after determining consumers switching from hot water washing save 80 billion kilowatt hours of electricity nationwide. Tide Coldwater caught on around the world, changing the washing protocols of homemakers. Clorox began making environmentally safe cleaner Green Works, eventually capturing 40 percent of the $200 million environmentally safe cleaning-products market.

Here are some tips for building a sustainability business plan. Start with a mission statement. Focus on the future, not the present. Examine what the company has done in the past, but goals and objectives must reflect forward thinking. Goals and objectives must address specific corporate functions: the company infrastructure, developing sustainable programs, measurable strategies, and marketing. Marketing sells the company message, builds the brand through company initiatives, and in turn, affects the corporate core values.

Create milestones and determine how they address compliance issues and reporting requirements. Establish in the plan a chain of governance and responsibility. Environmental analytics will provide measures to build on and directions to go. Start small, learn, and address scalability of plans. Learn by doing, but educate and inform everybody in the company, suppliers, and consumers along the way. Risk transparency must be the practical guide to successful collaboration. If a company has neither the staff nor expertise to build a sustainability business plan, contract with outsourcers that offer value-added team professional experience and customized creative technology. Many have global experience.

Develop new business models and platforms for future strategies. Ethics statements are crucial to building a sustainability business plan. Kraft announced in 2015 it is dumping artificial food dye from some of its best-selling products in response to consumer petitions and in the name of safety. Nestlé is removing artificial flavors from chocolate. Some dyes are made from petroleum. Artificial dyes are known to affect children’s behavior, while some food colorings contain carcinogens. They have no nutritional values.

Building a Better Business Plan to Franchise Your Business

10In building a solid franchise strategy, I first recommend “packaging” the business, maybe first in your mind, then of course on paper, with technology, processes and documentation, but first, decide what is this model that the franchisee will be replicating? Many times an entrepreneur handles more aspects in the corporate business than what a franchisee will be tasked to do upon opening which can be a good thing – keeping things simple in franchising has never been proven to be a bad thing. Franchisees like, appreciate and typically thrive in simple, structured environments with fewer variables left open. Maybe you decide to shorten the menu… possibly decrease the amount of services offered or it could be that the franchisee won’t be operating a production facility, only the retail portion of your business. Regardless, the franchise business plan should define this model clearly and accurately in order to understand the product being sold as the franchise program takes shape.

The next stages of franchise strategic planning should revolve around research. This research should be strategic in nature and focus on the franchise market, not the consumer market. We aren’t interested in the product or service provided to your customer as much as we are the franchise comparison to similar franchise brands. Who offers a similar franchise model based in your industry? What success stories have their been in your industry throughout the franchise market? In most cases, there are examples of good, bad and ugly ways to approach the franchise market, we typically suggest replicating the good and avoiding the other two options. By coordinating FDD’s from competing brands, interviewing people in the industry, even visiting some competing franchise brand locations if possible, you will be able to formulate your strategic mission and understand the best path to success. Every franchise has a value proposition, it is important that you understand what your brand brings to the market and how you will effectively attract, sign and retain franchisees for your system.

As your franchise concept takes shape, you now should begin to lay the framework for the financials, fees and other relevant numbers to the expansion plan. Franchise fees should be determined by reviewing the costs associated with training, support, sales and marketing related to franchise management. A validated franchise fee should be able to be explained to a buyer and easily understood. You will fail if the impression is given that you picked numbers because you thought they sounded good, you approached the market with confidence and an understanding for what each franchisee gets out of the relationship and why the numbers add up to a strong value proposition.

Royalties, the primary profit center for most franchise systems are absolutely critical to the success or failure of any franchise system, understand what the ongoing percentages mean to both the franchisee and franchisor in your model and confirm that the fee structure lends itself to a profitable and meaningful relationship between both entities. Advertising requirements should encompass national, regional, local and cooperative strategies and each need to be managed delicately in order to provide franchisees with a meaningful benchmark to spend on building the brand in their market. Because franchising is a business of scale, the magnitude of every decision you make related to your business, your model and your brand is increased significantly, one wrong move up front replicated many times through franchisees could be disastrous for your brand and business.

Then it’s time to begin to understand markets. The franchise business plan should delineate which markets make the most sense for your company. Understand your consumer demographics. Know your territory analytics and have a good plan in place for how to position your franchised units. Territory disputes lead the list in categories for disgruntled franchise relations. Spend the time and make the investment necessary to fully grasp how and where to place your franchisees in order to avoid cannibalization and under utilization of markets.

A Franchise business plan should lead the way for a franchise expansion model. The vision, mission, competitive landscape and clear directives related to how to accomplish your growth goals should be explained, documented and most importantly validated as to why they are attainable and how you have come to these conclusions.

5 Stages of Successful Business Planning

Multi-Ethnic Group of People Planning IdeasI believe that successfully developing a business involves five stages of business planning and development.

Stage 1:  Situation Analysis – Where are we now?

In this first stage of business planning and development, you determine where the business is currently in terms of finance and general positioning.  So, you’ll need to analyze not only the financial position, but also who the business is marketing their services or products to.  Are they addressing a market that has a lot of disposable income or no?  It gives you an idea of the general position of the business.

Stage 2:  Business Objectives – Where do we want to go?

Secondly, you have to consider where the business wants to go.  These are the objectives, or the goals of the business.  This is difficult, because most people will say they don’t know when asked where they see their business in three years time!  When you work out whether or not the business owner expects to triple their business or establish one that is ten times as big as they are currently, you can then start identifying the next steps the business will have to take.

Stage 3:  Strategic Analysis – How will we get there?

There is never a single path to get where you want to go.  In the third stage of business planning and development, you will want to consider a number of different strategies you could adopt in order to achieve the goals of the business.  I’ve determined that the strategies you can choose fall within one of five categories:

    • Product development – you can develop more products for your existing market
    • Market development – use existing products and move into new markets
    • Diversification – develop new products for new markets and take your business into a whole new       area
    • Market penetration – spend money to win customers from your competitors
    • Acquisition – buying additional businesses to grow your business (mergers)

I would say that market penetration is by far the most common path.  To grow a business, though, it’s important to analyze all of the options of product and market development, as well as diversification and acquisitions.

Stage 4:  Cost Analysis – How much will it cost?

Regardless of which strategy you choose, the costs will be predictable.  There are a number of government agencies that can help analyze those costs, and financial forecast programs that allow you to consider the expected revenue compared with the expected expenses to see whether or not the business can afford to take on that particular business development.

Stage 5:  Fund Analysis – Where will the money come from?

I believe there are really only four places where a business can get funding to develop, and they include:

    • Business shareholders
    • Bank financing
    • Government grants

Technicality of business plan writing and the professional expertise

9Business planning of all the other planning tasks before starting a business is an activity that was a very underappreciated in the older days but is being understood about its importance in the recent times. A business plan is a write up that is made for the purpose of summarizing the business plan on a few pages that describe the current position of the business venture and the expected outcomes that the business venture promises its investors and stake holders with. Appropriate description about the products and/or services of the business and how it will be supplying those is mentioned in a good business plan.

A comprehensive business plan also includes the financial description of the business. There are basically two things in this regard that the business does, first is that it gives the financial regulations that are the corporate laws of the organization. This can include whether or not does the organization takes loans from lending agencies or should it run solely on equity basis to save money on interest. The second part of the financial description details the accounting done by the financial advisory of business consultancy for the business that tells about the budgeting issues and the future prospect of the business.

Marketing and supply chain description is amongst the most important things in an organization because without the effort of this department, there is no sale made and hence no revenue is generated for the financial people to analyze. A good business plan details exactly how the product or service produced get delivered to the customers and how will the money matters i.e. the recoveries from consumers be made. This tells about the extent to which the business planners have thought through to the end of the business. Absence of a marketing and distribution plan illustrates that the business initiators are unaware of the tasks that they would have in hand in the future when it comes to marketing and supplying.

Better to use an expert:

Business plan experts recommend that the person who writes the business plan does so with great care as this document not only has a marketing value for the people who it is meant to attract but also holds a great legal value as the people who consider themselves double crossed may refer to the document where they have been misguided. Therefore, it is advisable to seek professional help from the plan writers so that such mistakes and blunders can be avoided. There can be found several tier 1 entrepreneur guidance in the market but few are actually capable of seeing the things through to the end and making sure that their clients do not witness legal or financial issues later in their venture’s progression because of poorly conceived business plan documents. Additionally, the professional business plan writers are aware of the norms associated with the process of establishing the document.

Why Should You Go for Expert Business Plan Writing Help?

8Writing a proper business plan is quite a difficult task regardless of whether it is attempted by a professional entrepreneur or a student. The reason for this is mainly because when writing a business plan one has to take into consideration multitudes of facts and let’s not forget the ridiculously huge amount of research involved. However nowadays with the availability of online business plan writing help services creating a proper business plan has become much easier.

The key to creating an outstanding business plan that assists individuals ranging from shareholders, banks, investors as well as college, MBA students is flexibility, time and top notch skill. Unfortunately when an individual as mentioned before regardless of whether it is an entrepreneur or a student gathering enough time to properly research as well as have a top notch understanding of current marketing strategies and techniques is extremely tough and to top it all off there is the hurdle of managing both your core start up business or in the case of students its core studies.

Although this sounds ominous in reality it’s not as with expert business plan writing help one can easily get properly drafted case studies that can not only boost one’s business scenarios but at the same time give that extra edge to students who require effective MBA marks in their semesters.  These professional firms assist in creating effective business plans by properly synthesising the characteristics and strong suites of the business and its subject matter. Thus facilitating proper answers to the critical questions which eventually generate a rock solid business plan, and as if this was not enough to help students who are facing trouble with research and homework these service providers offer effective business plan homework as well.

Now if you are still wondering about what are the reasons behind someone hiring professional business plan writing help services then, so that you can clear your doubts here are some of the reasons as follows-

  • In case you’re in a B2B environment, the bigger clients will only take you seriously if you are able to display a well-written business plan and provide valuable insights into why it should be you and not someone else they should listen to. This fact can be the thing that separates you from your competitors.
  • Raising money regardless of whether it’s with private investors or a bank will require a lot of convincing. Convincing which will be much easier especially if you deliver a high quality business plan which fortunately you can easily get via business plan writing services.
  • As a business owner an effective business plan will help you to properly stay on track as well as manage your business effectively.
  • Sometimes thinking outside of the box is the key to creating a proper business plan but one has to be exceptionally affluent with current market trends and strategies to make that happen. That is if he or she does not employ a business plan writing services.

There you have it, folks, the bottom-line is these service providers will definitely provide proper business plan writing help so all you need to do is go online and find a suitable one.

Factors affecting the US dollar

There are many models and theories that attempt to predict exchange rates based on relative interest rates, the price level, and so on. Possible changes in exchange rates are forecasted in forex market analysis.

Although the US dollar is certainly influenced by its key role in world trade (trading counterparties should buy or sell dollars to do business), the dollar is also highly dependent on the economic performance. Indicators that make the US economy looks stronger, may be positive for the dollar increase, and vice versa, because some indicators of inflation expectations may contain (a slight increase – well, too big growth – it is dangerous). Therefore, traders should pay close attention to the upcoming releases of economic indicators such as GDP, trade balance, inflation and so on. This kind of information out regularly, and traders can find not only the data, but also their expected performance.

In 2011, the US dollar even more than ever determined by concerns about the solvency of the United States and the apparent inability of the government to solve the problem of permanent deficits and growing debt. It seems that congress is serious about the need to balance the budget and reduce the debt, but the vast expenditure and policy of global military operations, as well as domestic economic incentives are increasingly weaken the US dollar and the impact on the bull market in gold. The US dollar is also extremely affected by global events, both good and bad.

Of course, the unique position of the US dollar as the reserve currency of the world can not be ignored. US dollar’s status allows efficient use of the low interest rate on its debt and relieve the country of some of the consequences of their own decisions, thereby offloading the responsibility to its people. However, with the increasing popularity of alternative reserve currency, the United States increases the risk of higher inflation and rising interest rates, as well as the weakening of the dollar.

The US dollar also occupies a significant position among many other financial instruments. While trade between the countries can be made in any currency, namely the US dollar is the basic tool for the calculation of the gold, oil and many other commodities. Financial market size in the United States plays an important role: while the stock market, commodity market, bond market, options outside the US are growing, transparency, size, liquidity and ease the US markets make them attractive to traders all over the world, and increasingly enhance the role of the dollar in financial transactions. However, investors, speculators and traders should be aware that the dollar’s value depends on its intrinsic value, and that the idea of ​​the hegemony of the US dollar will also affect its value in addition to economic factors. To stay up to date, you need to read news about forex trading.

Pitching Your Business vs. Planning Your Business

I feel like recently, as the Lean Startup movement gains more and more traction (I love the Lean Startup principles) and there are more incubators, accelerators, innovation centers, etc. helping startups get off the ground, that I’m hearing more and more this idea:

“you don’t need a business plan, you need a great pitch”

While I absolutely agree that a great pitch is critical for any high growth startup thinking of pitching Angel Investors or Venture Capital firms, I am puzzled by this idea that you need a pitch but not a plan. When I talk to people who run incubators and accelerators, they all give me the same song and dance. Full disclosure: as the CEO of Palo Alto Software, the developers behind LivePlan, a Software as a Service online planning solution, it is in my benefit to have every small business and every startup write a business plan.

But nonetheless, I run this business because I truly do believe in the tools that we produce and truly feel that planning will make startups and small businesses more successful. So, back to this idea of a plan vs. a pitch and what a startup really needs to be successful in today’s landscape. Let’s make the assumption that you don’t need a plan. That what you need is a fantastic pitch. A pitch where you presumably need to talk about:

  • Your special sauce. Why your product or service is what this world needs.
  • Your team. Why you are the ones to make this happen.
  • The competitive landscape.
  • The market, and how you will reach it.
  • How much you will sell, (i.e. your forecast) over the next 12 months, and then the next few years.
  • How much it will cost you to sell (i.e., your Expenses).
  • Your implementation plan/timeline to implement.
  • How you will use the investment you are asking for (most likely it will match a Profit & Loss you have done).
  • What investors will get for giving you their money.

My question to all those people who say you don’t need a business plan, and Venture Capitalists don’t read business plans (believe me, if they invest, they will want you to do some planning), and plans are a waste of time, is how in the world can you pitch, and how in the world can you know what to pitch, if you don’t do all the research involved in a plan? Everything you need to include in a pitch deck comes from the research and financials you would do if you were writing a plan.

Now, does anyone need to write a 30-page plan? Absolutely NOT. No one will ever read that. But every startup needs to know the critical points I outlined above. And you can’t know that information without going through a business-planning exercise.

The cool thing about actually going through the steps to research and jot down the critical information required for your pitch is that, if you keep it in a place that you can go back to and review it, you can keep on top of changing assumptions. Anyone who has started a business understands that what you THINK is going to happen rarely ever plays out exactly in the same way. But being able to return to a plan, and a forecast and a budget, and compare the difference between what you said and what actually happened helps you understand critical metrics for your business. Some examples:

  1. You may think that you can get paid promptly, every 30 days. When you implement, it turns out that your payment terms as a new startup need to be every 45 days. Knowing this information, and comparing the actual to your planned, will highlight a potential cash flow issue before it becomes a crisis. Your “planning” (not your plan), has paid off.
  2. You may have estimated your cost of goods sold (COGS) to be $20. It turns out your volume is better than expected and you brought your COGS down to $18. Knowing this allows you to either understand why you are more profitable or allocate the extra money to marketing and sales to sell even more. Your “planning” (not your plan) has paid off.
  3. You may have estimated your vendors would accept payment from you in 30 days (your Accounts Receivable). But, because you are so new, your vendors end up negotiating 15 days, or even worse Cash On Delivery (COD). Knowing this information and comparing it to your plan will alert you to yet another potential cash flow crisis. You will need to make sure you can pay more quickly than you thought, which may mean getting more funding or using your funding faster than you had planned.

I could go on, but I think you get the picture. I completely agree that old fashioned 30-50 page business plans are relics of the past. But I think that sometimes, when people have this idea that they are only pitching and not planning, they are really just changing the vocabulary.
Planning should be nimble. Planning should focus on just the information you need to run your business, and planning should be an ongoing process to help you understand where you are doing well, and where you may be headed into trouble– before it happens. The more information you can gather and understand about your business and how it relates to your market, competition, pricing, bottom line, and cash, the more successful you are likely to be.

So go ahead, pitch. Don’t send a business plan to anyone. But you better have done your homework and have all the research somewhere, so that when that Venture Capitalist asks you a pointed question about why your forecast is realistic, you can launch into an intelligent response that covers your market, the size, the competition, and your pricing, which will show that Venture Capitalist you actually do know what you are talking about, and could potentially implement this business.

How to Develop Your Business Strategy

strategy

The essence of strategy is choosing what not to do – Michael Porter

I love the Michael Porter here because it’s so true, and more so the more you dig down into the front lines of real business, such as small business and startups.

Strategy is what you’re not doing. My favorite metaphor is the sculptor with a block of marble—the art is what he chips off the block, not what he leaves in. Michelangelo started with a big chunk of marble and chipped pieces off of it until it was his David.

Strategy is focus

At the real-world level—my favorite—strategy is like driving and sex: we all think we’re pretty good at it. But simplifying, doing today what will seem obvious tomorrow, is genius. I say the best strategies seem obvious as soon as you understand them. Furthermore, it seems to me that if they don’t seem obvious after the fact, they didn’t work.

Strategy has to be easy to define. I like my simple “IMO method,” which I explain here. But aside from IMO I’ve also worked in depth, during my consulting years, with several competing strategy frameworks, and every one of them works well if it’s applied correctly and executed. And furthermore, I say you can also define strategy with a story, or a small collection of stories, which I’ll also explain here.

The IMO simple strategy method

The acronym IMO stands for Identity, Market, and Offering (product or service).

Think of it as the heart of the business, like the heart of the artichoke. It’s a group of three core concepts that can’t be separated: identity, market, and business offering. Don’t pull them apart. It’s the interrelationship between them that drives your business. Each affects the other two.

Business identity

The IMO Strategy MethodEvery business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence?  What are your goals? What makes you different?

As an example, imagine the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like cycling as a family activity.

The first one will probably stock and sell expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.

I hope the example illustrates how the owners’ identity affects strategy in strengths and weaknesses, knowledge and focus, and choice of product and target market.

Part of your identity is what you want from your business. Some businesses are about your lifestyle, or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are happy to work with investors as owners. Others want to own their own business, even if it has to grow more slowly for lack of working capital. What’s your case? If you’re committed to a second income in a home office, incorporate that into your identity. Don’t look for generalized formulae; let your business be unique.

The market

Your identity influences your choice of target market. The bike racer focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The couple focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.

Keep your business focused on specific target markets. That bike racer shop owner has to know his products are too expensive for the families, and the families bother the high-end enthusiasts. The family bike shop can’t scare away its target market with very expensive racing bikes.

  • What Is Target Marketing?

Offering

Your business offering is your product or service. You can already see with the bike shop example how one shop needs one kind of inventory and the other needs a different kind. That’s strategy at work. Your identity influences your choice of market, which influences your choice of product. Your choice of product influences your choice of market. They have to work together.

Understand that you can’t do everything. The bike shop that caters to families and racers is likely to fail. You can’t credibly offer high-end bicycles at bargain prices in a family-friendly atmosphere.  If you say you do, nobody believes you anyhow. So you have to focus. Make this focus intertwine and mesh with your choice of key target customer and your own business identity. All three concepts have to work together.

Seth Godin’s book “The Dip” is about being the best at one thing. That’s the point of your focus. Since you can’t do everything and even if you could, your customers wouldn’t believe you, then you need to focus on something that you do well, that people want. Be the cheap and practical bars of soap that sell in volume in the big chain stores, or be a finely-packaged, expensive and sweet-smelling soap that sells in boutiques. Don’t try to be both.

  • How to Create a Unique Value Proposition

Roll them up together

These three things are your business strategy. Don’t pull them apart. Don’t take them one at a time. Don’t ever stop thinking about them. Remember, in planning as well as in all of business, things change. Keep watching for change.

Your story as strategy

All human beings have an innate need to hear and tell stories and to have a story to live by. – Harvey Cox

Stories are the oldest and probably the best way to communicate ideas, truth, and beliefs. Stories are powerful.

Think of the key stories that are foundational in the great religions. Or think about the stories behind the phrases “sour grapes,” “the fox in the henhouse,” and “the emperor’s new clothes.” They all have power because they communicate. They resonate. We recognize their truths.

Business stories

Stories are a great way to define and communicate business strategy. A strategy that can’t be told as a story is doomed. And a strategy could be laid out as a story that includes the IMO factors, for example. And it could be as simple as a story defining the problem your customers have, the solution your business offers, and the factors that make your business especially suited to offer the solution. In this method the problem is also called need, or want, or, if you like jargon, the so-called “why to buy.” That’s slightly different from IMO, but that difference is not important. Strategy should be flexible. And a lot of successful presentations start with the problem and its solution.

Your essential business story

Strategy starts with an essential business story. Imagine a moment of purchase. Somebody is buying what you sell. It happens with every business. For example:

  • A group walks into your restaurant.
  • A web browser subscribes to your membership site.
  • A customer in your store picks up one or more products, puts them into a basket, and walks to the checkout counter.
  • A potential client decides to take on your management consulting or social media marketing.

In every case, there is a story. Think it through. Who is this person? How did he or she find you, your store, your restaurant, or your website? Was it by answering an email, looking at an ad, talking to a friend, or maybe searching in a Yelp app on a mobile device?

Every transaction is a solution to somebody’s problem. Understand what problem—need, want, or why-to-buy—you’re solving. Consider this famous quote:

“People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.”– Theodore Levitt

So you don’t invite somebody to a sushi restaurant just because you’re both hungry. You want an interesting meal; you want to sit down together for a while and talk. It’s an event, an activity, with hunger satisfaction far from the top of the list.

You also need to understand what business you’re in. The restaurant business is often about occasions, not meals. The drive-through fast food business is about convenience. Starbucks is about affordable luxury, not just coffee; and in some cases, a place to meet, or a place to work.

So the solution has to match the problem, but it should demonstrate what’s different about one company when compared to all its competitors.

For example, to make a restaurant story based on fine food credible, you need to add in how this restaurant’s owners and team can credibly deliver fine food. And in the software company example, there must be a sense of this company being qualified to deliver useful content in this topic area. That takes us back to the identity component of the IMO framework; but it could also be called simply the secret sauce, or why we’re different, and presumably better.

  • Culture Eats Strategy for Breakfast

A business pitch as strategy summary

One way to build out your strategy is as simple and straightforward as developing a pitch for your business.

There’s no need for long-winded strategy explanations, and the pitch defines the problem worth solving and your offering that solves the problem, plus the market, competitive positioning, and key points for product and marketing, plus your identity. I’ve used the pitch format for clients. That’s a pitch in the illustration here, and you can click on it for more detail.

Conclusion: The best strategies seem obvious

So please, keep it simple. The best strategies seem obvious after they’ve been executed successfully. Look at businesses you like and deal with often and I’ll bet you’ll see not subtle or sophisticated strategy, but a good combination of matching identity, target, and offering. Or a simple, obvious story about somebody needing or wanting something. If it works, you know it.