April 2011 Archives

April 30, 2011

The Market Analysis, Business Plan Part Two

Continued from Writing an Effective Business Plan: Part One.

Market Analysis: A market analysis should be conducted before starting any new business venture whether or not one feels compelled to draft a business plan. Having a marketable product or service is fundamental to any San Diego business' success, and the market analysis is probably the most important part of the business plan. A sound market analysis requires the identification of the target market, analysis of the market's geographical and financial limitations, analysis of the barriers to entry into the market, development of plans to capture a share of the market and a competitive analysis that includes assessing the strengths and weaknesses of your business and those of your competitors. The market analysis is your opportunity to impart your knowledge of the industry to the reader. However, it shouldn't be based on your general knowledge and anecdotal evidence alone although this can be helpful. Where possible, your market analysis should be supported by actual market research and the underlying data. This can be accomplished with the help of a marketing research company or at the public library by analyzing existing market surveys, research and data. Begin your market analysis with an overview of the market and follow with a more detailed analysis.

1228347_architectural.jpgAs you describe the target market, remember that "target" is the key. Focused business plans that describe a succinct segment of the population as a customer base are more appealing to others and more importantly have a greater chance of success. Trying to target the entire population (being everything to everyone) dilutes potential. Identify the characteristics of the targeted market. What are its demographics? What are the actual needs of the potential customers? How are those needs being currently met? Are there cyclical or seasonal variations? What is the current size of the market and what is its potential for growth? What are the market trends and is there or will there be a secondary market to exploit? What media has influence over the market? Once clear on the market definition, describe how the business will capture its share of the market either via price points, discounts, volume or other means. If market tests have been conducted, what were the results?

The competitive analysis portion of this section should identify all competitors and describe their share of the existing market including what specific products and services they offer. If there is a window of opportunity to capture a share of that market, how long will it be open before other competitors take advantage? Identify competitors' specific strengths and weaknesses and describe how your business stacks up. Include factors such as customer service, ability to meet customer needs, reputation and goodwill, capital resources, key personnel and longevity. Finally, be sure to identify barriers to entry into the market and address how the business will overcome these barriers. Typical barriers include high initial investment, necessary delays in starting up, rapidly changing technology making it difficult to keep up with competitors, brand loyalty, difficulty in obtaining quality key personnel and intellectual property rights such as patents, trademarks and copyrights held by competitors.

The market analysis should also include a summary of any regulatory restrictions including necessary licenses and permits.

Continued in Describing the Company: Business Plan Part Three.

April 27, 2011

Writing an Effective Business Plan, Part One

Writing an effective business plan requires more than just summarizing good ideas.  An effective business plan details your strategy for success.  It starts with the formation of the company and ends with an exit strategy.  A well drafted business plan prepares you for the task ahead, informs prospective investors and lenders and is probably the most important step any young San Diego entrepreneur takes on the road to success.  New business ventures are of course risky and time consuming, and there can be little doubt that planning is fundamental.  Yet, young business owners often overlook the significance of the written plan and neglect to consult with experienced professionals.  While a detailed analysis is beyond the scope of this article, an examination of key business plan elements is instructive.

922920___bulb__.jpgUltimately, the development of a business plan should be accomplished only after significant due diligence and where possible with the assistance of others specializing in marketing analysis.  The information in a business plan tends to interrelate requiring thoughtful attention to each section.  The goal is to highlight common themes without being repetitive.  Consider consulting with trusted advisors such as a San Diego business attorney, accountant, banker and insurance agent.  These folks will help frame some of the financial and legal boundaries important to the company.  The typical business plan includes the following sections: Executive Summary; Market Analysis; Company Description; Organization & Management; Marketing; Service or Product Line; Funding; Financials; and Appendix.
 
The Executive Summary:  The executive summary is a concise summary of your business plan's highlights.  It typically consists of the name and location of the business, the date it was begun, the names of the founders and their respective functions, the number of employees, a description of its products or services and the company's facilities, information regarding existing investors and lenders, a mission statement (sometimes as short as a two word slogan, but always enough to leave the reader with a clear picture of the company's vision), a summary of company growth (for existing businesses) and a summary of the company's future plans.  This information is set forth in more detail later in the business plan.  The executive summary should be short and concise and the information may be set out in bulleted fashion except for the mission statement which should head the section.  For new businesses, it's a good idea to include information about the target market including identifying potential problems, and summarize how you intend to take a share of the target market.  The executive summary is the first thing the reader sees.  It is your first bite at convincing prospective investors and/or lenders of the business' viability.  

Table of Contents:  Include a Table of Contents after the Executive Summary to allow the reader to easily locate specific sections.

Continued in The Market Analysis: Business Plan Part Two