Make it easy for the reader to realize at first glance both your needs and capabilities. The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities.
You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate. This is important if you're seeking funding; the investor will want to know just how dependable your information is, and won't risk money on assumptions or conjecture.
When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i. Also state whether the business is new or already established.
In addition to structure, legal form should be reiterated once again. Detail whether the business is a sole proprietorship, partnership or corporation, who its principals are, and what they will bring to the business. You should also mention who you will sell to, how the product will be distributed, and the business's support systems. Support may come in the form of advertising, promotions and customer service. Once you've described the business, you need to describe the products or services you intend to market.
The product description statement should be complete enough to give the reader a clear idea of your intentions. You may want to emphasize any unique features or variations from concepts that can typically be found in the industry. Be specific in showing how you will give your business a competitive edge. For example, your business will be better because you will supply a full line of products; competitor A doesn't have a full line.
You're going to provide service after the sale; competitor B doesn't support anything he sells. Your merchandise will be of higher quality. You'll give a money-back guarantee. Competitor C has the reputation for selling the best French fries in town; you're going to sell the best Thousand Island dressing.
Now you must be a classic capitalist and ask yourself, "How can I turn a buck? And why do I think I can make a profit that way? You don't have to write 25 pages on why your business will be profitable. Just explain the factors you think will make it successful, like the following: it's a well-organized business, it will have state-of-the-art equipment, its location is exceptional, the market is ready for it, and it's a dynamite product at a fair price. If you're using your business plan as a document for financial purposes, explain why the added equity or debt money is going to make your business more profitable.
Show why your business is going to be profitable. A potential lender is going to want to know how successful you're going to be in this particular business. Factors that support your claims for success can be mentioned briefly; they will be detailed later. Give the reader an idea of the experience of the other key people in the business. They'll want to know what suppliers or experts you've spoken to about your business and their response to your idea.
They may even ask you to clarify your choice of location or reasons for selling this particular product. The business description can be a few paragraphs in length to a few pages, depending on the complexity of your plan.
If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in three or four paragraphs that will end the statement.
While you may need to have a lengthy business description in some cases, it's our opinion that a short statement conveys the required information in a much more effective manner. It doesn't attempt to hold the reader's attention for an extended period of time, and this is important if you're presenting to a potential investor who will have other plans he or she will need to read as well.
If the business description is long and drawn-out, you'll lose the reader's attention, and possibly any chance of receiving the necessary funding for the project. Market strategies are the result of a meticulous market analysis.
A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.
A market analysis also enables the entrepreneur to establish pricing, distribution and promotional strategies that will allow the company to become profitable within a competitive environment. In addition, it provides an indication of the growth potential within the industry, and this will allow you to develop your own estimates for the future of your business.
Begin your market analysis by defining the market in terms of size, structure, growth prospects, trends and sales potential. The total aggregate sales of your competitors will provide you with a fairly accurate estimate of the total potential market.
Once the size of the market has been determined, the next step is to define the target market. The target market narrows down the total market by concentrating on segmentation factors that will determine the total addressable market--the total number of users within the sphere of the business's influence.
The segmentation factors can be geographic, customer attributes or product-oriented. For instance, if the distribution of your product is confined to a specific geographic area, then you want to further define the target market to reflect the number of users or sales of that product within that geographic segment. Once the target market has been detailed, it needs to be further defined to determine the total feasible market. This can be done in several ways, but most professional planners will delineate the feasible market by concentrating on product segmentation factors that may produce gaps within the market.
In the case of a microbrewery that plans to brew a premium lager beer, the total feasible market could be defined by determining how many drinkers of premium pilsner beers there are in the target market. It's important to understand that the total feasible market is the portion of the market that can be captured provided every condition within the environment is perfect and there is very little competition.
In most industries this is simply not the case. There are other factors that will affect the share of the feasible market a business can reasonably obtain. These factors are usually tied to the structure of the industry, the impact of competition, strategies for market penetration and continued growth, and the amount of capital the business is willing to spend in order to increase its market share.
Arriving at a projection of the market share for a business plan is very much a subjective estimate. It's based on not only an analysis of the market but on highly targeted and competitive distribution, pricing and promotional strategies.
For instance, even though there may be a sizable number of premium pilsner drinkers to form the total feasible market, you need to be able to reach them through your distribution network at a price point that's competitive, and then you have to let them know it's available and where they can buy it. How effectively you can achieve your distribution, pricing and promotional goals determines the extent to which you will be able to garner market share.
For a business plan, you must be able to estimate market share for the time period the plan will cover. In order to project market share over the time frame of the business plan, you'll need to consider two factors:. Defining the market is but one step in your analysis.
With the information you've gained through market research, you need to develop strategies that will allow you to fulfill your objectives.
When discussing market strategy, it's inevitable that positioning will be brought up. A company's positioning strategy is affected by a number of variables that are closely tied to the motivations and requirements of target customers within as well as the actions of primary competitors.
Once you've answered your strategic questions based on research of the market, you can then begin to develop your positioning strategy and illustrate that in your business plan. A positioning statement for a business plan doesn't have to be long or elaborate. It should merely point out exactly how you want your product perceived by both customers and the competition. How you price your product is important because it will have a direct effect on the success of your business.
Though pricing strategy and computations can be complex, the basic rules of pricing are straightforward:. Distribution includes the entire process of moving the product from the factory to the end user. The type of distribution network you choose will depend upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, then decide whether to use the same type of channel or an alternative that may provide you with a strategic advantage.
As we've mentioned already, the distribution strategy you choose for your product will be based on several factors that include the channels being used by your competition, your pricing strategy and your own internal resources. With a distribution strategy formed, you must develop a promotion plan.
The promotion strategy in its most basic form is the controlled distribution of communication designed to sell your product or service. In order to accomplish this, the promotion strategy encompasses every marketing tool utilized in the communication effort.
This includes:. Once the market has been researched and analyzed, conclusions need to be developed that will supply a quantitative outlook concerning the potential of the business.
Your basic business concept. This is where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success. Your strategy and the specific actions you plan to take to implement it. What goals do you have for your business? When and how will you reach your goals? Your products and services and their competitive advantages. Here's your chance to dazzle the readers with good, solid information about your products or services and why customers will want to purchase your products and services and not those of your competitors.
Now you have to lay out your marketing plan. Who will your customers be? What is your demographic audience? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience?
What sets your business apart from the competition? The background of your management team and key employees. Having information about key personnel is an important but often misrepresented portion of a business plan. Your financing needs. Concisely describe what your business does and what market need it solves. In this section, give a profile of your company. Answer questions such as where you are located, when you were formed, and what is your legal entity form.
In the Industry Analysis section, you will detail the market in which you are competing, how large it is, and what trends are affecting it. Here you will identify who your target customers are and their needs.
Get as specific as you can with regards to the demographic and psychographic make-up of your customers. Importantly, identify your competitive advantages, that is, why you can be more successful than the others. Importantly, you will also detail your promotions plan, which is how you will get customers to know about your company e.
Your operations plan should detail the key operational processes your organization needs to accomplish on a daily basis to achieve success. In addition, it should identify the milestones you need to accomplish over the next years in order to achieve success. Business Essentials Guide to Mergers and Acquisitions. Business Business Essentials. Table of Contents Expand.
What Is a Business Plan? Understanding Business Plans. Special Considerations. Key Takeaways A business plan is a written document describing a company's core business activities, objectives, and how it plans to achieve its goals.
Startup companies use business plans to get off the ground and attract outside investors. Businesses may come up with a lengthier traditional business plan or a shorter lean startup business plan. Good business plans should include an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms Marketing Plan A marketing plan is an operational document that demonstrates how an organization is planning to use advertising and outreach to target a specific market. Considering a New Venture? Consider a Feasibility Study A feasibility study analyzes all relevant factors of a project to determine the possibility and probability of completing it successfully.
Scope Scope is a project management term for the objectives necessary to complete a project, allowing managers to estimate costs and time required. What Is a Startup? A startup is a company in the first stage of its operations, often being financed by its entrepreneurial founders during the initial starting period. What Is a Business?
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