There are many articles and resources available on the Internet explaining how to write a business plan, but it’s more than merely following a template or copying someone’s examples.
A business plan can be as simple as a few notes scrawled on a paper napkin, or it can be a 40-page document with multiple sections and subsections describing every minute detail of a company’s operations, products and finances. Writing an effective business plan is easier if you take the time to conduct your research and gather the information you will need before starting the writing process.
Business owners of startups or established companies can benefit from thinking through and researching such success-determining issues as:
- Marketing Strategies
- Regulatory Environment
- Capitalization Requirements
- Financing Opportunities
- Organization Risks
My suggestion from experience is to do the following before you write your business plan.
1. Competitor Analysis
At the completion of your competitor analysis, you should be able to:
- Identify your primary competition within your industry and marketplace.
- Know the company profile of your competitors.
- Identify the geographic location in which competitors operate.
- Identify competitor’s market share and profitability.
- Know and understand your competition’s strategies and objectives.
- Identify benefits, such as increased customer awareness, derived from your competitors’ marketing.
- Identify and understand competitor strategies that are successful and those that are not.
- Anticipate your competition’s response to implementation of your strategies and plans.
- Learn how to turn your competition’s anticipated response to your benefit.
The following steps will guide you through your competitor analysis:
- Create a list of your current and future competitors.
- Gather data and information about your competitors, their products, and their marketing and pricing strategies.
- Review and analyze the data.
- Create a list of your competitors’ strengths and weaknesses.
- Create strategies to take advantage of competitors’ weaknesses while minimizing threats posed by their strengths.
2. Product Feature Comparison
A product feature comparison allows you to compare your company’s product with products produced by competitors. Unlike a competitor analysis that allows you to determine how your business measures up to competing businesses, product feature comparisons limit their focus to the products themselves.
When used as part of the process of creating an easy business plan, product features comparison data can provide information that is critical to making marketing decisions.
You can perform a product features comparison using the following four steps:
- Identify products that compete directly with products sold by your company.
- Conduct research on the product.
- Create tables to compare each of the products.
- Identify steps needed to improve your product’s ability to compete.
3. Market Research
Market research provides businesses with information about their customers and the markets in which they do business. By analyzing the data that it collects, business owners offer products that consumers want at prices that are competitive with other sellers.
For the new entrepreneur who is learning how to start a business, market research performed prior to the preparation of a business plan can help in formulating strategies to reduce risks, recognize marketplace and industry trends, and identify opportunities to increase sales.
The data collected through market research should give a business owner the answers to the following questions:
- Who are the company’s target market for its product or service?
- What factors influence consumers to purchase the product or service?
- What improvements or changes in current products would encourage customers to purchase more of them?
- What price range will cause customers to switch to other competing products?
- What features of a competitor’s product do customers like or dislike?
- What other uses of the product exist that can be introduced into new markets?
Marketing research also allows you to compile a profile of your current or potential customers to provide answers to the following questions:
- How old are they?
- Where do they live?
- What is their highest level of education?
- How large is the customer base?
- What are their favorite leisure time activities?
- What do they do for a living?
- How much do they earn?
- Where are they employed?
- What technology do they use and prefer?
- What are their beliefs, values or opinions?
- Where do they prefer to shop?
- For whom do they shop?
- IASTATE.edu—Conducting Market Research
- SBA.gov—Understand Your Market
- Export.gov—Guide to Market Research
- NYU.edu—Competitor Analysis Guide
- IASTATE.edu—Conducting a Competitive Analysis—Is There Room for Your Business?
- SBA.gov—Competitor and Market Analysis Tool
- Video Introduction to Competitive Analysis
- How to Write a Business Plan