This is a guest post by Jessica Oman of Write Ahead. I invited her here because her expertise is business plans — something we need to be talking about more on The Word Chef blog. Please give her a warm welcome.
Did you hear the one about the entrepreneur who hired bikini-clad models to market a delicious organic barbecue sauce to moms with young kids?
…Didn’t think so.
This is a typical example of what I’m calling (because I just made it up) — the “tactic trap.” Sometimes entrepreneurs waste a lot of time trying out different tactics because they have no strategy to tell them what kind of marketing will most likely work.
Our clients fall into this trap a lot. Luckily, we can get them out of it.
When we think about marketing, we ought to think about reaching out to our ideal customers. What are they reading? How do we advertise to them? Where do they hang out? How much will they pay for my stuff?
But all the other aspects of your business — your staff (or contractors), your costs of business, your competitors — can affect not only your marketing plan, but your ability to implement it successfully. That’s why people still write business plans. Whether they’re one page or thirty pages (but no more, please), business plans can be amazing tools that guide companies to wild success.
If you write a great marketing plan, it will become part of a great business plan — one that connects your marketing strategy to all the other parts of your business so you can view it as a whole, and make better decisions. Here are four essential topics your business plan needs to cover if a) you might use it to secure financing and b) you want it to be a useful guide to refer to as you launch and grow your company.
1. The People
It’s often said that people are the most important asset of a business; yet few entrepreneurs take enough time to define their own roles. So what are you really, really good at? And what should you outsource? Make sure you create an organizational chart — even if you’re the only person working in the company right now. Create all the positions you think you’ll need three years in the future, and fill them as your business grows.
2. The Customers
Customers are obviously essential, but spread the net too wide and you’ll be lucky to catch even a few of your ideal buyers. The key to defining the customer is to demonstrate not how far you’ll reach, but how you’ll create a funnel that literally pulls customers to your doorstep. You can only do that if you’ve defined your ideal buyer — the one person who is such a raving fan of your products and services that you just wish you could clone them, over and over and over.
3. The Market
Even if you opt out of doing a full market analysis, you need to know a lot about two things: market size and competition. Once you’ve defined your ideal buyer, you need to determine how many consumers are out there who fit that profile. This exercise will give you a sense of how big your business could get — assuming that you can get every one of those profiled customers to buy from you. Of course, you won’t capture 100% of them, because you have competitors. So the second key part of a market analysis is to look at your competition.
Who else is out there selling products like yours? Who is reaching out to customers like yours, to fulfill the same needs? You must keep track of who you’re competing with, so you’ll always keep your Unique Selling Proposition. For many of us with online businesses, our content is relatively easy to copy — so you have to keep winning over customers with your delivery, your price point or some other added value. Because people will try to copy you. Sometimes you can stop them, and sometimes you can’t; but if you know they’re out there, you can make sure you stay different.
From this information you can start to create an efficient and actionable marketing plan with laser focus on your target buyers.
4. The Money
What’s the price of your product? What does it cost to make it? The difference between those two numbers is called your Gross Margin. But all technical terms aside, you simply have to know that the gap between your cost to make a product, and the price you sell it at, is big enough to cover all the rest of the costs of running a business, like your rent, utilities, phone, marketing, professional fees, and more.
If you expect it will cost money to start your business — perhaps you need some equipment or even just a web site — you also need to know where that money will come from. The decision of whether to look for an investment or a loan (or some other funding source) is a really important one. Just like marketing to potential customers, marketing to potential funders won’t work with a shotgun approach. You can’t just reach out to everyone with money and hope that one of them gives it to you. It takes research, diligence, and a great pitch to get funding, and the business plan is one important piece of that.
Putting the Plan Together
When you’re ready to launch your business, you should have a good idea of your strengths and your ability to market and sell your own products. You will know who your ideal customer is and how many of them exist. You’ll know who you’re competing with. And you’ll know how much money you need, and where it could come from. Compile all of these elements into a business plan and a really basic outline might look something like this:
1. Executive Summary – a compelling 1-page summary of your plan (write it last!)
2. Business Overview – what you do and why you do it (may include a Vision and Mission)
3. Market Analysis – who you sell to, customer profile and competitors
4. Operations – how you make it and how you sell it (aka your Marketing Plan)
5. Financial Forecasts – how much of it you can sell, at what cost, with how much money up front
There may be more to it — such as a Risk Analysis or Exit Strategy — but pulling these basic pieces together into a business plan will help you sell more stuff. It will also help prevent you from spending money you don’t have in places you don’t need to — because who likes wasting money?
We all have lean start-ups these days — which makes having a plan more important than ever. Have you written yours?