What is a business plan?
Why do I need a business plan?
What is a mission statement?
Do I need a mission statement?
Do I need to do any market research?
How do I do market research?
What is a marketing strategy and do I need one?
Do I need a promotional strategy?
Is it necessary to monitor promotional/marketing strategies?
Is it necessary to define my potential customers?
How do I define my potential market and customers?
How do I set my price?
How important is advertising?
How can I learn from my customers?
How do I get customer feedback?
Why is customer service so important?
How do I develop customer loyalty?
How can I get a competitive advantage?
How can I monitor my business?
Is it necessary to update my business plan?
Do I need to constantly montior my business income?
What are some of the reasons so many small businesses fail?
Is it necessary to do a feasibility study before going into business?
Is it necessary to establish a breakeven level?
A business plan is a document that precisely defines your business, it identifies your goals and can be used as a guide to the day-to-day running of the business, or it can be used as a proposal to be given to banks or financial institutions to raise finance. A business plan forces you to put down on paper the goals and objectives you aim for, to analyse these, and to develop strategies for achieving them. Its basic components include a current and pro forma balance sheet, an income statement and cash flow analysis projects. It helps you allocate resources properly, handle unforeseen complications and make the right decisions. Because it provides specific and organised information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan package. Additionally, it can tell your sales personnel, suppliers and others about your operations and goals.
Your local Business Advisory Service can assist you with your business plan, and some Business Advisory Services run Business Planning courses.
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The main benefits of having a formal business plan are:
It is a statement of why you are in business, what you have set out to achieve and where you want to be in 2-10 years time. A good mission statement provides the guiding framework for strategic, tactical and operational decisions.
All businesses should write a mission statement because it assists them in clarifying their mission and to measure their performance against it. Some questions to assess a good mission statement:
Yes, because it is important to know who your customers are, where they are and why they are buying the products or services. By identifying your target market you can pinpoint your customers and aim your marketing strategies directly at them.
Market research can be done in a number of ways, from something as simple as talking to your customers and potential customers to find out what they want, to somewhat more complex steps such as using information available from the Australian Bureau of Statistics or from trade and professional organisations. Many Business Advisory Services have a variety of research tools that can assist you in your planning including:
Eighty20: Complete demographic/geographic profiles for every postcode in Australia on Australian Bureau of Statistics data. This tool allows you to graph and compare data to assist you in targeting your market.
Marketing Pro: A database of businesses categorised by industry codes.
IBIS: Is a market research database that provides up to 30-40 page detailed analysis for over 450 Australian industries, including over 15,000 pages of information and five-year forecasts for each industry.
A marketing strategy is a plan of how you will market you business to your customers. It should include detailed information on who your customers are, why they buy, their price tolerance, a detailed analysis of your competitors, projected growth of the business and a time frame in which to achieve growth. A well thought-out and developed marketing strategy should play an important role in any business. The right type of marketing strategy will bring customers to your business.
Promotion, along with choice of product, pricing and place, is a major marketing task. A promotional strategy is necessary to define what kind of effort and expense will be allocated to promotion of the business in order to increase turnover. A good promotional strategy will create the desired image for the business or the products it sells.
Yes, because without regular evaluation of promotional and marketing strategies you will not know the effectiveness of your efforts in these areas. If you are putting money and effort into a marketing strategy that is not producing the results you want, stop and re-asses the situation to see if your money and efforts could be better channelled in another way. Always compare your target sales with your actual results, as this will give you an indication if you are getting the results you want.
Yes, because if you don’t you will not know who they are, where they are and how to get to them.
The Australian Bureau of Statistics is an excellent source of marketing information, as nearly every economic activity is covered by ABS publications that are generally available from their offices. Some Business Advisory Services have excellent marketing tools such as IBIS, which is market research on the top 2,000 companies and all industry trends; Eighty/20, which is demographic/geographic statistical information to know your market potential; and Marketing Pro, which is a listing of businesses in specific industries.
There are a number of different ways to price a product or service, such as:
When making decisions about advertising it is necessary to ascertain how much money you have to spend and where your advertisement should appear. The point of advertising is to generate sales of your product or service, so you need to determine what type of advertising will best help your business – print, television, radio, signage or direct mail. A successful advertising campaign is usually the result of careful planning and considerable market analysis. It is also important to monitor any advertising you do in order to gauge its success.
Your whole organisation has a responsibility to become involved in the business of understanding customers. Ask your customers how well you are currently serving them. Give them a chance to tell you what they want, where you are failing and where you are succeeding. A good way to do this is by using customer feedback forms. Listen to what your customers tell you, watch how they use the product, allowing your customers to complain and use these complaints to address the causes behind the dissatisfaction. Find out ways you and your staff can look at your product from the customers’ point of view.
Making a special effort to get feedback from customers is an essential part of customer service. Feedback is most effective when we hear both good and bad news, get regular feedback and is focused on what really matters to the customer. A business proprietor can receive feedback from conversations with the customers, asking the customer to fill in evaluation forms rating the level of service and by keeping a list of all complaints and reviewing it regularly to discover causes of dissatisfaction.
Customer service is so important today due to the changing nature of the market. There is significantly more competition in the marketplace, which has given the customer more choice. Customers make their purchase decisions on price, quality and availability, but also on the service they get. Customer service is about meeting the expectations of your customers.
Your relationship with the customer should not end when the sale or transaction is complete. One of the easiest ways to develop customer loyalty is through increasing your level of customer service and follow-up service. This is also a good way to distinguish yourself from the opposition. Some businesses offer rewards, discounts or special deals to existing customers to keep them coming back.
A competitive advantage is what distinguishes your business from other businesses. Perhaps the single most important factor in driving your company towards a competitive advantage is the vision with which you drive your company. It is the philosophy you develop for doing business. Developing your business is the easy part, the hard part is getting everyone in the organisation to share the commitment. You need to communicate your vision constantly, and make sure you demonstrate it in your day-to-day behaviour. Advertise your vision on your cards, letterheads, invoices and packaging. Make sure that everyone in the organisation measures every action against customer needs, expectations and wants. If the action is not adding value for the customer, check to see if you can do the procedure another way so that it does add value for the customer.
Any plan whether it is a marketing plan, profit plan or a business plan needs to be reviewed, evaluated and revised. A good way to monitor the success of the business is by examining your projected outcomes against your actual outcomes. Comparison with your objectives permits you to determine how well your plan compares with your original expectations. It is also necessary to compare your performance with prior performance so that you can detect any trends that may occur. If possible, it is also beneficial to make comparisons with industry averages to help you determine if your business performance is comparable with similar businesses. This can be done by using the FMRC Benchmarks which are produced from surveys of Australian business (this tool is available at all Business Advisory Services).
Nothing remains constant in business; circumstances change, markets change, fashions change, methods change. From time to time, you must check your sources of information and re-assess your business plan. What is relevant when you start is not necessarily relevant in five years time. You may also need to address targets and budgets if external factors such as interest rates vary. It is important to keep your information up to date and to be prepared to change as circumstances demand. A business plan should be thought of as a process not just a document.
Do I need to constantly monitor my business income?
Your business income may be called sales, commissions, fees, cash received, amounts invoiced, or whatever. To monitor the business income, record income totals on a regular basis. Compare business income totals with the previous days, weeks, or months. Calculate the percentage changes, record them on the monitoring schedule and indicate whether the change is an increase or decrease. Compare the percentage change in the business income with that for similar businesses. Attempt to increase the business income by various methods and record the effect on the monitoring schedule. If it is not possible to increase the income, then steps should be taken to decrease the expenses.
Some of the causes of business failure stem from how the business is managed, while other causes can be external, such as economic, political or social changes. A business fails when it stops trading for either of the following reasons:
Most small business failures occur in the first few months or year. It is usually during this time that lack of knowledge, skills, managerial experience, technical proficiency and entrepreneurial drive take their toll on new and struggling small businesses.
It is in your best interest to do a feasibility study and some market research before commencing business. A feasibility study should look at such factors as:
Your local Business Advisory Service can assist you with some of this research.
In planning and managing your business it is important to know what level of sales must be achieved in order to meet the total costs. Every dollar of sales above this amount will contribute to net profits. To calculate the breakeven point you must determine the total costs, ie fixed costs (overheads) plus variable costs, then determine the number of sales you need to make to cover the costs of operating the business.