The Market Analysis provides the reader with an understanding of how well the business knows and understands its market and if it is big enough to support the business objectives. This section provides an overview of the industry that the business will participate in. As this section is narrowed down to the ideal customer based on the business strategy, the plan will define the target market. A detailed description and sizing of the target market will help the reader understand the market value the business is pursuing (the number of potential customers multiplied by the average revenue for the product or service).
In defining the target market, the plan will identify key elements such as geographic location, demographics, buyer characteristics, the target market’s needs, and how market needs are currently being met. If there are any direct competitors, explain how the company’s service compares to the competitors in terms of solving the consumers’ problems.
This section may also include a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis as necessary, to better assess the business’ position against the competition.
Depending on the type of business, the following sections may or may not be necessary. Only include what is the need and remove everything else.
- Industry type: Begin with the broader descriptions of the market opportunity. For instance, if the intended business is a home-based travel agency, the industry type would be a service industry. In this particular market, global revenues are projected to exceed $183 billion, but the local agency will have a much smaller market. Identify the potential clientele in the company’s local geography that might fit into the target demographic group. This section will also identify any industry regulations and evaluate trends in market growth and stability.
- Market segmentation: This section defines the main market segments and those the business is targeting now. A market segment is a group of people (or other businesses) within the industry, identify smaller segments, such as luxury travel or exotic cruisers. The market can also be segmented by criteria such as quality, price, range of products, geography, demographics, and others. A few other elements to consider answer questions such as: Is the segment growing, shrinking, or will it be flat for the next few years? What percentage of the market will be reachable? What share of the market is anticipated within the next 2-3 years? Graphics are best used in a section like this to either show growth (line graph) or percentages of markets or groups (pie chart).
- Competition: All businesses compete in one way or another. It may be with specific, direct competitors or it may be with the way customers have been doing things for a long time. When identifying the competition, identify who else is providing services to solve the same problem the business seeks to address. What are the business’ advantages over these competitors? How will the company’s voice be heard over the noise of competitors? Sometimes a business plan includes a matrix of features and compares how each business offers or does not offer those features. This section reflects how the company’s solution is different and better suited for the identified target market compared to the competition.
- SWOT analysis: A SWOT analysis may be included by completing the boxes below to assess the business’ current environment’s strengths and weaknesses (internal) and opportunities and threats (external). This is a good exercise to go through on an annual basis. After completing the analysis, provide thoughts on: how the business’ strengths can help maximize opportunities and minimize threats; how its weaknesses can slow the company’s ability to capitalize on the opportunities; and how the business’ weaknesses could expose it to threats.
Additionally, it is necessary to outline how the company currently and will continue to develop and maintain a loyal customer base. This section includes management responsibilities with dates and budgets and making sure results can be tracked. What are the envisioned phases for future growth and the capabilities that need to be in place to realize growth?
The operating plan describes how the business works. Depending on the type of business, important elements of this plan should include how the company will bring services to market and how it will support customers. It is the logistics, technology, and basic blocking for tackling the business.
Depending on the type of business, the following sections may or may not be necessary. Only include what is needed and remove everything else. Remember: try to keep the business plan as short as possible. Excessive detail in this section could easily make the plan too long.
- Order fulfilment: Describe the company’s procedures for delivering services to its customers. As a service company, determine how to keep track of the customer base, form of communications, and how best to manage sales and data.
- Payment: Describe the standard payment terms and the payment methods accepted. Describe the pricing plans (one-time service fees, hourly-based fees, markups, and any other fees) and any impact on cash flow.
- Technology: If technology is critical to the business, whether it is part of the service offering or is fundamental to delivering a service, describe the key technologies used that are proprietary. If the business data (company or customer) is at risk, describe the data security plan in place, as well as any backup or recovery in the case of a disaster or outage.
- Key customers: Identify any customers that are important to the success of the business due to a partnership, volume, or pathway to a new market. Also, identify any customers who bring in more than 10% of the company’s revenues.
- Key employees and organizations: describe unique skills or experiences that are required of the current team. If necessary, describe any proprietary recruiting or training processes in place. List key employees that are necessary for success. Include an organization chart to support this section.
- Facilities: As a home-based business, be educated on legalities and tax filings for such business types.
Promoting the business, whether through generating leads or traffic to a website or store, is one of the most important functions of any business. In this section of the plan, provide details of the intended marketing of the business. Describe the key messages and channels used for generating leads and promoting the business. This section should also describe any sales strategy. Depending on the type of business, the following sections may or may not be necessary. Only include what is needed and remove everything else.
- Key messages: Describe the key messages that will elevate services in the target customers’ eyes. If there is sample collateral or graphical images of some messages, include them.
- Marketing activities: Which of the following promotion options provide the company with the best chance of product recognition, qualified leads, store traffic, or appointments?
- Media advertising (newspaper, magazine, television, radio)
- Direct mail
- Telephone solicitation
- Seminars or business conferences
- Joint advertising with other companies
- Word of mouth or fixed signage
- Digital marketing such as social media, email marketing, or SEO
- Sales strategy: If needed, what will be the sales approach? Will there be full-time commissioned salespeople, contract sales, or another approach?
Creating a financial plan is where all of the business planning comes together. Up to this point, the target market, target customers, and pricing have all been identified. These items, along with assumptions, will help estimate the company’s sales forecast. The other side of the business will be what expenses are expected. This is important on an ongoing basis to see when the business is profitable. It is also important to know what expenses will need to be funded before customer sales, or the cash they generate, is received.
At a minimum, this section should include estimated start-up costs and projected profit and loss, along with a summary of the assumptions being made with these projections. Assumptions should include initial and ongoing sales, along with the timing of these inflows.
- Projected start-up costs: The table below shows a sample of ongoing and one-time cost items that the business might need in order to open. Many businesses are paid on credit over time and do not have cash coming in immediately. It is necessary to make assumptions about how many months of recurring items, in addition to one-time expenses, to estimate when cash will begin to flow into the company. To begin with, the company will have to fund out of savings or initial investment.