AB209 Small Business Management

Unit 3 – Planning the Business and its Products or Services

The Planning Process and Defining the Products or Services

 While the vision statement and mission statement provide the “why” of the new business, the description of the firm’s products or services provides “what” the new venture proposes to do within the marketplace. In Unit 3, we will view the entire planning process in general, and specifically the plans for describing the products or services of the new firm. We will see that this planning process directly addresses specific skills that are required by the new business.

The Purposes of a Business Plan

• Primary Functions-To provide a clearly articulated statement of goals and strategies for internal use

-Imposes discipline on the entrepreneur and management team

-To serve as a selling document to be shared with outsiders

-Provides a credible overview for prospective customers, suppliers, and investors

-Helps secure favorable credit terms from suppliers-Opens approaches to lenders and other sources of financing

The Purposes of a Business Plan (Continued)

Questions:

What discipline does the business planning process impose on the entrepreneur?

Is this process as valuable as the resulting plan?

Its Not the Plan - Its the Process!

). Why a Plan?: The construction of a business plan forces every entrepreneur to consider the critical factors that will determine the success or failure of their venture. Each area of the business can be considered as its own plan covering the following broad areas:

Plan Areas

). 1. The Opportunity – How attractive is the industry and the venture’s place within it?

2. Critical required resources:Human assets – The people required.Capital assets – The money required. Hard assets – Equipment, inventory, fixtures, etc. required.

3. Entrepreneurial Team resources

Plan Areas (Continued)

). 4. Financing Structure – How will the new venture be financed? Debt versus equity

5. Contextual elements (Environmental elements) Economic trends, demographics, regulatory environment, barriers to entry, and other things beyond the control of the entrepreneur.

How Much Planning is Needed?

• Factors affecting the extent of a business plan:-Cost in time and money to prepare the plan-Management style and ability-Preferences of the management team-Complexity of the business-Competitive environment-Level of uncertainty

Types of Business Plans• Mini-Plan

-A short form of a business plan that presents only the most important issues and projections.

• Comprehensive Plan-A full business plan that provides an in-depth analysis of the critical factors that will determine a firm’s success or failure, along with all the underlying assumptions.

Types of Business Plans (Continued)Question:

What factors would make you choose one plan form over the other?

Any questions?

The Description of Products or ServicesThere is much more to the Description of Products or Services section than it would appear at first glance!  •Identifying the specific products or services that the business will provide to its customers is essential before a marketing plan can be developed. Many businesses attempt to “be all things to all people” and consequently find that they are “not enough for anyone!” 

•What specific factors can you identify that will give your new venture a competitive edge in this market? •What will be your pricing or fee structure? Why? These are critical questions that must be satisfactorily answered before you can expect others to assume any risk in your new venture and they should be answered to your own satisfaction before investing your own resources!

Unit 4 Marketing

Marketing the Business

Marketing the Business

No matter how great the business idea or product, without adequate marketing the business will not succeed! Effective marketing is about so much more than just advertising or selling. Marketing may be best described as all activities within a business that work together to deliver “bundles of value” for the customer. In Unit 4, we examine the marketing function and how it must be centered on the customer.

Marketing

• Marketing: The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create and maintain relationships that satisfy individual and organizational objectives.

The Goals of a Marketing Plan

Goals for the Marketing Plan should be to:

•Name and describe each market your new business seeks to serve.

•Explain what specific methods you plan to use to reach customers in each of these markets.

•Establish the costs in both time and money to effectively market your new venture’s products or services.

•Integrate your marketing plans with all other areas of your business plan.

Key Initial Marketing Questions

• Is there a consistent demand for my product or service? • Who will I be competing against for the same customers and how strong are

they?  • Can I realistically compete against these on a basis of price?  • Can I realistically compete against these on a basis of quality? • Can I realistically compete against these on a basis of delivery? • Can I do all of the above and still produce my projected profits?

These are key questions that must be satisfactorily answered before proceeding with a venture!

  

Marketing Research

).  •Shows other possible approaches to your market(s)

•Gives meaningful basis for making assumptions about profits •Helps in development of goals

•Helps in organizing the Marketing Plan

•Helps in identifying the limits of profitability within markets.

Two Types of Market ResearchSecondary Research:

•Consists of already reported research, statistics, and projections done by others•Often provided by governmental agencies, state agencies, business trade organizations, universities•Often available as references in public libraries•Some available on Internet•Competitors

Primary Research:

•Specific research conducted by the entrepreneur or by those engaged by the entrepreneur •Is costly and time-consuming•Fills in the gaps not addressed by secondary research

Both secondary and primary market research are required! The goodness of your marketing plans rests on good research!

Qualitative versus Quantitative

). In this class, the quantitative data provided by market research is beyond the time constraints allowed. Our focus on this aspect of Market Research will instead be on understanding the process and the elements that must be addressed in good marketing research within a business plan. You will address market research in depth in a marketing course.

Its All About the Customer! The ultimate goal of your market research is learning about a special group of people – your customers!  •Who are your customers?•Where are your customers located?•What do your customers need or want?•What resources do your customers have?•Is your product or service something needed in their day-to-day lives? •Can your customers afford your products or services at your proposed pricing levels?•Where can you create a demand for your product or service?•What areas within your market are declining or growing?•What is the general economic state and outlook of your product or service market area?

Marketing – Delivering Bundles of Satisfaction!

• Core Product or Service – Fundamental benefit sought in product or service

• Actual Product or Service – The actual product or service that fulfills the fundamental benefits sought.

• Augmented Product or Service – The basic product or service plus any additional perceived benefits that prompt a customer to purchase the product or service.

Market AnalysisCustomer Profile – Created by secondary and primary research carefully describes how your product or service will specifically create perceived value for your target customer.Analysis of Competition – Also created by research seeks to thoroughly identify the strengths and weaknesses of rivals in your potential market. Marketing Strategy – Specific strategies must be created to address each target market segment or group of customers. These will outline how the business will create its marketing mix.

Marketing Mix• Highlights areas that must be addressed by a firm’s

marketing strategy. “4 P’s”• Product – How to transform the product or service into

bundles of customer satisfaction? • Place – How to deliver the product or service to the

customer?• Price – How to set the appropriate pricing levels for the

product or service? • Promotion – How to communicate the necessary

information to the potential customers?

Any questions?