Components of a Business Plan

• What primary and secondary research have you done?
  
  • You must show evidence of having done proper research, both primary and secondary. If you make a statement of fact, you must back it up with properly referenced supporting evidence. If you indicate a claim is based on your own assumptions, you must back this up with a description as to how you came to the conclusion.
    
• Somewhere in your plan have you done an effective analysis of the economic environment relevant to your business?
  
  • It is a given that you must provide some assessment of the economic situation as it relates to your business. For example, you might conclude that the current economic crisis will reduce the potential to export your product and it may make it more difficult to acquire credit with which to operate your business. Of course, conclusions such as these should be matched with your assessment as to how your business will make the necessary adjustments to ensure it will thrive despite these challenges, or how it will take advantage of any opportunities your assessment uncovers.
    
• Somewhere in your plan have you done an effective assessment of the industry within which your venture will operate?
  
  • You must provide an assessment of the industry coupled with descriptions of how your venture will prosper in those circumstances. A common approach used to assess the industry is to apply Porter's (1985) five forces model.
    
  • If you apply the five forces model be certain to do so in the way in which it was meant to be used to avoid significantly reducing its usefulness while also harming the viability of your industry analysis. This model is meant to be used to consider the entire industry – not a subcomponent of it (and it usually cannot be used to analyze a single organization).
    
  • Your competitor analysis might fit within your assessment of the industry, or it might be best as a section within your marketing plan. Usually a fairly detailed description of your competitors is required, including an analysis of their strengths and weaknesses. In some cases your business may have direct and indirect competitors to consider. Be certain to maintain credibility by demonstrating that you fully understand the competitive environment.
    
  • Assessments of the economic conditions and the state of the industry appear incomplete without accompanying appraisals outlining the strategies the organization can/should employ to take advantage of these economic and industry situations. So, depending upon how you have organized your work, it is usually important to couple your appraisal of the economic and industry conditions with accompanying strategies for your venture. This shows the reader that you not only understand the operating environment, but that you have figured out how best to operate your business within that situation. 
• Have you done an effective analysis of your venture (see Organizational Analysis section below)?
  

Completing the marketing plan further adds to the overall business plan.

Primary and secondary data further add to the strength of the business plan.

Providing marketing strategies to capitalize on market information is a winning formula.

Market Analysis

• The market analysis section usually contains customer profiles, constructed through primary and secondary research, for each market targeted. It also contains detailed information on the major product benefits you will deliver to the markets targeted.
  
• describe the methodology used and the relevant results from the primary market research done
  
• if there was little primary research completed, justify why it is acceptable to have done little of this kind of research and/or indicate what will be done and by when
  
• include a complete description of the secondary research conducted and the conclusions reached
  
• Who are your customers going to be?
  
  • Be sure to define your target market in terms of identifiable entities sharing common characteristics. For example, it is not meaningful to indicate you are targeting Canadian universities. It is, however, useful to define your target market as Canadian university students between the ages of 18 and 25 ... or as information technology managers at Canadian universities ... or as student leaders at Canadian universities. Your targeted customer should generally be able to make or significantly influence the buying decision.
    
  • You must usually define your target market prior to describing your marketing mix, including your proposed product line. Sometimes the product descriptions in business plans seem to be at odds with the described target market characteristics. Ensure your defined target market aligns completely with your marketing mix (including product/service description, distribution channels, promotional methods, and pricing). For example, if the target market is defined as Canadian university students between the ages of 18 and 25, the product component of the marketing mix should clearly be something that appeals to this target market.
    
  • Carefully choose how you will target potential customers. Should you target them based on their demographic characteristics, psychographic characteristics, or geographic location?
    
• Do you understand how your targeted customers make their buying decisions? You will need to access research to answer this question. Based on what you discover, you will need to figure out the optimum mix of pricing, distribution, promotions, and product decisions to best appeal to how your targeted customers make their buying decisions.
  

Competition

• The competition section usually fully describes the nature of your competitors. This information might fit instead under the market analysis section.
  
• Describe all your direct competitors
  
• Describe all your indirect competitors
  
• If you can, include a competitor positioning map to show where your product will be positioned relative to competitors' products? Insure that the x-axis and y-axis are meaningful. Often times competitor maps include quality and price as axes. Unless you can clearly articulate the distinction between high quality and low quality, it may be more valuable to have more meaningful axes or describe your value proposition relative to your competitors in the absence of a positioning map.

Figure 6 – Competitor Positioning Map

• What is your competitive advantage? What distinguishes your business from that of your competitors in a way that will ensure your sales forecasts will be met? What is your venture's value proposition?
  
  • You must clearly communicate the answers to these questions in your business plan in order to attract the needed support for your business. One caution is that it may sound appealing to claim you will provide a superior service to the existing competitors, but the only meaningful judge of your success in this regard will be customers. Although it is possible some of your competitors might be complacent in their current way of doing things, it is very unlikely that all your competitors provide an inferior service to that which you will be able to provide.
    

Demonstrating a competitive advantage makes the business plan stronger.

A competitor positioning map provides context as to where your venture fits in the competitive landscape.

Marketing Strategy

• The marketing strategy section is very important as this covers all aspects of the marketing mix including the promotional decisions you have made, product decisions, distribution decisions related to how you will deliver your product to the markets targeted, and pricing decisions.
  
• How do you plan to influence your targeted customers to buy from you (what is the optimum marketing mix, and why is this one better than the alternatives)?
  

Organizational Analysis

• This section might be positioned as a lead-in to your marketing strategy or it might be positioned elsewhere depending upon how your business plan is best structured.
  
• A common approach to analyzing an organization is to apply a SWOT analysis, but ALWAYS ensure this analysis results in more than a simple list of internal strengths and weaknesses and external opportunities and threats. A SWOT analysis should always prove to the reader that there are organizational strategies in place to address each of the weaknesses and threats identified and to leverage each of the strengths and opportunities identified.
  
• An effective way to ensure an effective outcome to your SWOT analysis is to apply a TOWS Matrix approach to develop strategies to take advantage of the identified strengths and opportunities while mitigating the weaknesses and threats. A TOWS Matrix is a tool to help with this. It evaluates each of the identified threats along with each of the weaknesses and then each of the strengths. It does the same with each of the identified opportunities. In this way strategies are developed by considering pairs of factors
  
• The TOWS Matrix is a framework with which to help you organize your thoughts into strategies. Most often you would not label a section of your business plan as a TOWS Matrix. This would not normally add value for the reader. Instead, you should describe the resultant strategies – perhaps while indicating how they were derived from your assessment of the strengths, weaknesses, opportunities, and threats. For example, you could indicate that certain strategies were developed by considering how internal strengths could be employed toward mitigating external threats faced by the business.
  

Product Strategy

• What is your product/service? Why will this particular product/service appeal to your targeted customers better than the alternatives?
  
• If your product or service is standardized, you will need to compete on the basis of something else – like a more appealing price, having a superior location, better branding, or improved service. If you can differentiate your product or service you might be able to compete on the basis of better quality, more features, appealing style, or something else. When describing your product, you should demonstrate that you understand this.
  

Pricing Strategy

• What are your pricing strategies? What makes these strategies better than the alternatives?
  
• If you intend to accept payment by credit card (which is probably a necessity for most companies), you should be aware of the fee you are charged as a percentage of the value of each transaction. If you don't account for this you risk overstating your actual revenues by perhaps one percent or more.
  
• What are your sales forecasts? Why are these realistic?
  
• Sales forecasts must be done on at least a monthly basis if you are using a projected cash flow statement. These must be accompanied by explanations designed to establish their credibility for readers of your business plan. Remember that many readers will initially assume your planned time frames are too long, your revenues are overstated, and you have underestimated your expenses. Well crafted explanations for all of these numbers will help establish credibility.
  

Distribution Strategy

• What are your distribution strategies? What makes these strategies better than the alternatives?
  
• If you plan to use e-commerce, you should include all the costs associated with maintaining a website and accepting payments over the Internet.

Promotions Strategy

• As a new entrant into the market, must you attract your customers away from your competitors they currently buy from or will you be creating new customers for your product or service (i.e. not attracting customers away from your competitors)?
  
  • If you are attracting customers away from competitors, how will these rivals respond to the threat you pose to them?
    
  • If you intend to create new customers, how will you convince them to reallocate their dollars toward your product or service (and away from other things they want to purchase)?
    
• Anticipate the responses competitors will have to your entrance into the market, especially if your success depends upon these businesses losing customers to you. If your entry into the market will not be a threat to direct competitors, it is likely you must convince potential customers to spend their money with you rather than on what they had previously earmarked those dollars toward. In your business plan you must demonstrate an awareness of these issues.
  
• In what ways will you communicate with your targeted customers? When will you communicate with them? What specific messages do you plan to convey to them? How much will this promotions plan cost?
  
• You should consider mapping out your promotional expenditures according to method used and time frame. Consider listing the promotional methods in rows on a spreadsheet with the columns representing weeks or months over probably about 18 months from the time of your first promotional expenditure. This can end up being a schedule that feeds the costs into your projected cash flow statement and from there into your projected income statements.
  
• If you phone or visit newspapers, radio stations, or television stations seeking advertising costs, you must go only after you have figured out details like on which days you would like to advertise, at what times on those days, whether you want your print advertisements in color, and what size of print advertisements you want.
  
• Carefully consider which promotional methods you will use. While using a medium like television may initially sound appealing, it is very expensive unless your ad runs during the non-prime times. If you think this type of medium might work for you, do a serious cost-benefit analysis to be sure.
  
• Some promotional plans are developed around newspaper ads, promotional pamphlets, printing business cards, and other more obvious mediums of promotion. Be certain to, include the costs of advertising in telephone directories, sponsoring a little league soccer team, producing personalized pens and other promotional client give-always, donating items to charity auctions, printing and mailing client Christmas cards, and doing the many things businesses find they do on-the-fly. Many businesses find it to be useful to join the local chamber of commerce and relevant trade organizations with which to network. Some find that setting a booth up at a trade fair helps launch their business.
  
• If you are concerned you might have missed some of these promotional expenses, or if you want to have a buffer in place in case you feel some of these opportunities are worthwhile when they arise, you should add some discretionary money to your promotional budget. A problem some companies get into is planning out their promotions in advance only to reallocate some of their newspaper advertisement money, for example, toward some of these other surprise purposes resulting in less newspaper advertising than had been intended.