Tips for preparing a business plan

SWOT your business, and your competition

A SWOT analysis is a great way to assess what your business does well, and where you’ll need to improve. It can also help you identify ways you can exploit opportunities, and to identify and prepare for potential threats to your business success. Strengths and weaknesses are typically inside your business — what are you good at, what are you not so good at — while opportunities and threats are external factors. It can be as simple as drawing a large square, and dividing it into four quadrants – one for each element of the SWOT analysis.

Strengths

Think about what you, your team, and your business are good at – all the attributes that will help you achieve your goals, eg what you (and your team) do well, any unique skills or expert knowledge, what you/your business do better than your competitors, good processes and systems, and where your business is most profitable.

Weaknesses

Think about the things that could stop you from achieving your objectives. This might include what costs you time and/or money, the areas you or your company need to improve in, what resources you lack, which parts of the business aren’t profitable, poor brand awareness, disorganised processes, or a poor online presence. Think about what you can do to minimise your weaknesses.

Opportunities

Think about the external conditions that will help you achieve your goals. How can you do more for your existing customers, or reach new markets? Are there related products and services that could provide opportunities for your business, and how could you use technology to enhance your business?

Threats

Consider the external conditions that could damage your business's performance – things like what’s going on in your industry, and in the economy, the obstacles you face, the strengths of your biggest competitors, and things your competitors are doing that you're not. Think about how you could try to minimise or manage the threats. Repeat the exercise for your competition too – it’ll help you identify areas where you can beat them, to fine-tune your niche market, and make sure you’re prepared to address the challenge they pose.

Implementing your business plan

• Keep your business plan as a living document – don’t leave it to gather dust on a shelf.
• Make sure it’s easily accessible and top-of-mind for you and your team.
• Reflect your goals in the day-to-day operations of your business.
• Outline the most practical and cost-effective way to achieve each goal – make a note of any extra resources you’ll need.
• Make it clear these goals are the top priority for the business.

Opportunity

There are four main chapters in a business plan—opportunity, execution, company overview, and financial plan. The opportunity chapter of your business plan is where the real meat of your plan lives—it includes information about the problem that you’re solving, your solution, who you plan to sell to, and how your product or service fits into the existing competitive landscape. You’ll also use this section of your business plan to demonstrate what sets your solution apart from others, and how you plan to expand your offerings in the future. People who read your business plan will already know a little bit about your business because they read your executive summary. But this chapter is still hugely important because it’s where you expand on your initial overview, providing more details and answering additional questions that you won’t cover in the executive summary.

Problem and solution

Start the opportunity chapter by describing the problem that you are solving for your customers. What is the primary pain point for them? How are they solving their problems today? Maybe the existing solutions to your customer’s problem are very expensive or cumbersome. For a business with a physical location, perhaps there aren’t any existing solutions within reasonable driving distance. Defining the problem you are solving for your customers is by far the most critical element of your business plan and crucial for your business success. If you can’t pinpoint a problem that your potential customers have, then you might not have a viable business concept. To ensure that you are solving a real problem for your potential customers, a great step in the business planning process is to get away from your computer and actually go out and talk to potential customers. Validate that they have the problem you assume they have, and then take the next step and pitch your potential solution to their problem. Is it a good fit for them? Once you have described your target market’s problem, the next section of your business plan should describe your solution. Your solution is the product or service that you plan on offering to your customers. What is it and how is it offered? How exactly does it solve the problem that your customers have?

For some products and services, you might want to describe use cases or tell a story about a real user who will benefit from (and be willing to pay for) your solution.

Target market

Now that you have detailed your problem and solution in your business plan, it’s time to turn your focus toward your target market: Who are you selling to?

Depending on the type of business you are starting and the type of plan you are writing, you may not need to go into too much detail here. No matter what, you need to know who your customer is and have a rough estimate of how many of them there are. If there aren’t enough customers for your product or service, that could be a warning sign.

Market analysis and market research

If you are going to do a market analysis, start with some research. First, identify your market segments and determine how big each segment is. A market segment is a group of people (or other businesses) that you could potentially sell to. Don’t fall into the trap, though, of defining the market as “everyone.” A classic example is a shoe company. While it would be tempting for a shoe company to say that their target market is everyone who has feet, realistically they need to target a specific segment of the market in order to be successful. Perhaps they need to target athletes or business people who need formal shoes for work, or perhaps they are targeting children and their families. Learn more about target marketing in this article.

TAM, SAM, and SOM

A good business plan will identify the target market segments and then provide some data to indicate how fast each segment is growing. When identifying target markets, a classic method is to use the TAM, SAM, and SOM breakdown to look at market sizes from a top-down approach as well as a bottom-up approach.

Here are some quick definitions:

TAM: Your Total Available or Addressable Market (everyone you wish to reach with your product)

SAM: Your Segmented Addressable Market or Served Available Market (the portion of TAM you will target)

SOM: Your Share Of the Market (the subset of your SAM that you will realistically reach—particularly in the first few years of your business)

Once you have identified your key market segments, you should discuss the trends for these markets. Are they growing or shrinking? Talk about the market’s evolving needs, tastes, or other upcoming changes to the market.

Your ideal customer

When you have your target market segments defined, it’s time to define your ideal customer for each segment. One way to talk about your ideal customer in your plan is to use your “buyer persona” or “user persona.” A buyer persona is a fictitious representation of your market—they get a name, gender, income level, likes, dislikes, and so on. While this may seem like additional work on top of the market segmentation that you have already done, having a solid buyer persona will be an extremely useful tool to help you identify the marketing and sales tactics you’ll need to use to attract these ideal customers.

Key customers

The final section of your target market chapter should discuss key customers. This section is really only required for enterprise (large) companies that have very few customers. Most small businesses and typical startups can skip this and move on. But if you are selling to other businesses (B2B), you may have a few key customers that are critical to the success of your business, or a handful of important customers that are trend leaders in your space. If so, use this final portion of your target market chapter to provide details about those customers and how they are important to your business’s success.

Competition

Immediately following your target market section, you should describe your competition. Who else is providing solutions to try and solve your customers’ pain points? What are your competitive advantages over the competition? Most business plans include market research and compare their features against their competition using a SWOT analysis. The most important thing to illustrate in this section of your business plan is how your solution is different or better than other offerings that a potential customer might consider. Investors will want to know what advantages you have over the competition and how you plan on differentiating yourself.

One of the biggest mistakes entrepreneurs make in their business plans is stating that they don’t have any competition.

The simple fact is that all businesses have competition. Competitors may not always come in the form of “direct competition,” which is when you have a competitor offering a similar solution to your offering. Oftentimes, you may be dealing with “indirect competition,” which is when consumers solve their problem with an entirely different kind of solution. For example, when Henry Ford was first marketing his cars, there was very little direct competition from other car manufacturers—there weren’t any other cars. Instead, Ford was competing against other modes of transportation—horses, bikes, trains, and walking. On the surface, none of these things look like real direct competition, but they were how people were solving their transportation problems at that time.

Future products and services

All entrepreneurs have a vision of where they want to take the business in the future if they are successful. While it’s tempting to spend a lot of time exploring future opportunities for new products and services, you shouldn’t expand too much on these ideas in your business plan. It’s certainly useful to include a paragraph or two about potential future plans, to show investors where you are headed in the long term, but you don’t want your plan to be dominated by long-range plans that may or may not come to fruition. The focus should be on bringing your first products and services to market.

Courtesy: best financial advisory in Saudi Arabia