A Marketing Plan or a Business Plan?

In Chapter 2 I looked briefly at the concept of the Business Plan and the Marketing Plan. This Chapter 3 is devoted to both these areas again. You might ask why we are bothering to plan or market our business before we have even chosen what sort of business opportunity to pursue? The reason is that “Planning” is the single most powerful tool that you will ever utilise if you are to become successful at business.

Even those people who seem to be successful in business who operate by the “seat of their pants” will plan their business strategy. A (very) few (extremely) lucky people can do this in their heads – I am assuming that my readers, like myself, are like the vast majority and will need to formally plan their business activities.

The simple difference between a marketing plan and a formal “business plan” is simply the first one focuses on answering the question “how are you going to make sales” whereas the latter is a comprehensive study of the business, and how it will grow and succeed.

A framework for the business opportunity

Planning tools are essential to provide a framework for the business.  It allows you to paint a picture of the sort of business that you feel would give you the satisfaction you seek – then allows you to analyse it fully, to find any flaws or any hidden opportunities to exploit. Areas that are absolutely necessary to consider within the planning process are:

Quality and motivation of the persons involved

If you are a plumber setting up a plumbing business, there is an obvious reason why you might want to set up such a business. However, if you are a plumber wishing to set up an accountancy business you will want to examine the reasons why you want to do this which are not so obvious. Another example might be the the bank employee, sick of working at the same counter every day facing irate customers. This person might year for the flexibility of working at home – and for that reason wants to turn a long term passion for writing into a business that is flexible in hours and can be run from a home based office or study.

Setting up a home based business usually indicates somebody wanting to quit their day job and to work for themselves. In this case the business plan must ask and find answers for the following questions:

Q: Is the business opportunity chosen a whim or what is the motivation behind choosing such a business?

Q: Do you have the requisite skills for running such a business?

Q: Do you have the motivation and drive to work for yourself, unsupervised?

Q: If there are any skills or attributes lacking – can these be acquired cost effectively?

It is possible that some elements of the business can be subcontracted – you might even be planning to take on staff.  In this case the availability of such resouces and standards or experience required must be examined. It would be no use setting up a business that required daily interaction with several bookkeeping staff if you lived ten miles out in the countryside. However, if a key resource was somebody to maintain a web site on a daily basis then this could be done by an outworker living anywhere in the world!

The size of the market you will be operating within

You will need to do some market research as part of your business planning. Even if you are a plumber planning to set up your own business just because you know that plenty of work comes in to your existing employers, you need to understand the size of the market you wish to tap into.

Market research involves surfing the web, reading available literature and speaking to potential clients. It also means researching the competition!

Your competition is going to be the best guide to the market you are looking to enter. If there are countless of businesses operating in the same way as you intend doing – do not be put off. This indicates that the market is big enough for a new player to take a small slice – and you will need to find ways of being better than your competitors.

If the competition is low – this might mean that you have a relatively untapped market – or it might mean that the market is depressed or the interest is low. These questions need answering by your market research.

On very good way of carrying out market research within your chosen business opportunity area is by carrying out a test run. Testing the market can be carried out for a number of businesses but is not always suitable for some. One very large area with a lot of potential for a home based business is selling items over the Internet – either through an online auction site or through your own shopping site (or both). It is very easy, and a very low risk activity, to buy a few samples of your chosen product and set up some test sales. Forget about the administration of the business, all you are looking to do is see what interest there is in a certain product and what prices are paid. At worst – you will likely get your money back eventually. At best you will gain the information you need to allow a moderate investment in the stock you need – or you might be able to sell as agent thus involving much less capital outlay.

Price and volume

Two very important statistics that may need some guesswork on your part are the price of the product or service that you are going to sell and the amount that you will sell over a period of time. For example, you might plan to charge your plumbing time at $40 per hour and expect to work 1,200 hours every year. This would allow you to envisage a gross income of $48,000 per year. However, a number of finer details would need to be quantified if your business was to be a success:

Q: Does the number of hours planned allow for travel to the client – you might not be able to charge this and if you live in an area of low poipulation – most of your time might be spent travelling!

Q: Does the number of hours worked represent a smooth working pattern i.e. 100 hours a month or 25 hours a week? What if all your work is in the winter months?

Q: Can you charge more for weekends or emergency call-outs? Can you offer a discount in periods of low work?

Q: Have you allowed time for holidays, sickness, further training?

Q: Do you need time to train and supervise staff?

Projected finances

Preparing a few spreadsheets that describe the first months and years of your business may seem like something the bank would ask yor for if you wanted to borrow money for your new income opportunity. This is true but even if you are not seeking a loan the excercise of preparing projections is an essential part of business planning, and an essential part of the process that tells you if you have a viavble business or not. It also provides an invaluable measure against which you can measure the business over time.

At the very least you should prepare a simple cash flow projection for the first two years of the business. This should be prepared on a monthly basis and you should be very clear about your understanding of the meaning of “cash flow”.

Cash comes in – only when it has been received into the bank and is available for paying out or spending in some way.

Cash goes out – immediately you have decided that the money is to be spent.

In this way you can only spend what you have got – and simply because ypou have made some sales does not mean that the money has come in and is available for use!

Strengths of the business opportunity

You should analyse your business for any strengths it may have. These will give you the edge when attempting to carve out a share of an existing market. If you can’t think of any strengths relative to your competitors then you know that your business development will struggle.

Weaknesses that might let you down

Additional Business Opportunities

Are there threats to your business

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Filed under: A Free Business Start Up Guide

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