Planning is a process of choosing among those many options. If we do not choose to plan, then we choose to have others plan for us. —Richard I Winwood
Last week I explained the importance of having a clear goal and a good value proposition if you want to develop an effective business plan.
A goal is important because it gives purpose to your business.
Imagine Dynamos and Highlanders playing a football match in a field with no goal posts. Would players put in any effort when there can be no winner or loser?
Or would supporters pay to watch a purposeless game?
A value proposition is equally important as it makes your offering stand out among hundreds of others from your competitors. You will not get far ahead with a me-too type of business, sharing the same cake with an ever-increasing number of contenders.
This article now looks at the other three components: a solution to a real problem; a defined market; and a competitive business strategy.
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What problem will your business solve?
Every successful business solves a problem that affects people. A grinding mill owner saves villagers the trouble of having to ground out grain using the torturous wooden mortar and pestle.
He gets paid for saving people hard labour. Since he can only serve so many people his business will remain small and local. If he decides to get into large-scale milling, then he solves the problem of many people and makes more money.
Facebook has over a billion members worldwide. What problem does it solve? The people’s social need to communicate. Humans are social creatures; if they don’t communicate with others, they suffer emotionally and physically as a result of loneliness.
Besides, people don’t want to miss out on what their friends are doing. So instead of having to visit, call or text your friends physically, you can just get on Facebook and problem solved!
However, the real problem solved by Facebook — the one which presented it with a business opportunity worth its US$16 listing price — applies to marketers. Mass advertising is becoming less effective as more and more media channels appear.
However, social media platforms like Facebook provide a finely targeted audience to marketers at lower cost than traditional media. Above all, it reaches nearly every country in the world. So, the bigger the problem and the more people it affects, the more profitable the business opportunity.
Do you have a well-defined market segment?
Obviously, not everyone is going to want or need your product, so you need to define a specific segment of the market that you will target. Your market must be defined by demographics, that is, it should group people according to age-range, economic and financial status, social status, habits, likes and such things that define a person.
For example, if you are selling top-of-the-line men suits, you could define your ideal customer as male, holding a mid to high- level management job or running his own business with an income above US$1 000 per month, plays golf, lives in the medium to low density residential area.
You will get a more accurate description of your ideal client by conducting market research. You can start by taking down the demographic details of people who actually buy your product. Ask them the relevant questions that will give you a clear description of their demographic pattern.
You will then know who to target and who not to target in your marketing.
Without a clearly defined market segment, you will likely waste your marketing budget advertising to the wrong people. You can also locate your store in the wrong area, where the most traffic consists of people with no interest or financial ability to buy your product.
Put in place a competitive business strategy
A successful business is one with the capabilities to deliver products or services to customers seamlessly. A good product will fail if customers have any kind of problem getting it and using it. So the first thing you need in your plan is a people strategy. Do you have competent people for the type of product your want to produce and the service you want to offer?
If not, make a plan of how you will get the skills you need. Sometimes you will need to recruit new people, other times you will need to provide training to your existing or less skilled personnel.
The right machinery, equipment and premises are needed as well for the production process. Finally, the physical delivery of a product to customers has to be efficient and cost-effective. To complete your business plan, you need to put financial values to all the five components.
Add the figures up so as to come up with the financial requirement to make your business plan work. Then you can proceed or make changes where necessary.
So, now is the time to work on your business plan for 2015. I hope you will find these tips useful. Please let me have your feedback; and don’t forget that there are more resources at my website http://smebusinesslink.com.
Phillip Chichoni is a consultant who helps SMEs and entrepreneurs start and build sustainable businesses. You may contact him via email: email@example.com. You can also visit: http://smebusinesslink.com