Sample Business Plan - The Market

Sad fact:  this is the most crucial but worst-prepared section of most business plans.

Market Definition

What markets are you competing in? If you make glove-compartment hinges, don't gush about the $80 billion automobile market. You make hinges -- not cars -- for that market, so tell us how many hinges were sold last year. Are there other markets where you sell your products?

For specific information on understanding your market, see How to Hunt, http://www.moneyhunter.com/htm/hunt.htm.

We [expect to compete, are competing] in the [define niche] of the [define industry]. This market was approximately [$x] at [wholesale or retail] last [period available], according to [site resource]. We believe, the major future trend in the industry will be toward [environmentally oriented, miniaturized, high quality, value oriented] product offerings.

Market research [cite source] suggests this market will [grow/shrink] to [$x] by the year [19xx]. We expect the niche in which we compete to [grow,shrink, remain stagnant] during this time. The major forces affecting this change will be [falling cost of computers, explosion of home based businesses, tendency for baby boomers to have less kids- and pamper their pets]. The area of greatest growth within the industry will be [x].

Identify where you got this information, and how up to date it is.

Market Segment

We define our market segment as [the writing and drawing instrument segment of the school/home/office products industry, the low fat dairy products segment of the food industry]. This segment has been [volatile, steady] in the last few years. Industry experts [name them] forecast [x] for the industry in the next few years.

The major market segments [segment a, segment b, segment c]. List, in general, the types of customers you are likely to reach (retailers, electrical contractors, catalog buyers, etc.)] The [a] segment of the market is based on [product type] that retail in the [x to y] price range. Most of the sales in the segment are delivered through the [catalogs, retailers, manufacturers reps, OEM's].

A typical customer for our product is a person who current may use [alternative product or service] for [what purpose]. They are motivated to buy our product because of  [its value, its quality, its usefulness]. We know this from [customer responses, trade show input, ad inquiries] and feel our customers perceive our products as [good value, superior performance, great taste].

Our product, does, however, have the following weaknesses; [higher price point than most other cheeses, weak brand identity in a commodity market]. We are working to position our product as [x] in order to reduce this vulnerability.

Marketing

Our marketing plan is based on the following fundamentals;

We expect to penetrate the [x] segment of the market[s] and achieve this by using the [retail, mail order, multi-level marketing, internet] as our primary distribution channel[s]. In time, we plan to capture [%] share of the market.

Position

We will position our product as [good value for price, top quality, cheap and fun], which is a position not presently being addressed by the competition. One demographic group in particular, the [elderly, hispanic, generationX, techies] has a particular need for this product, and we tailor our positioning accordingly.

Pricing

Our pricing strategy is [describe policy or, at least philosophy]. Is this pricing based on cost? Gross margin objectives? Market?

We arrive at our pricing based on [cost, gross margin objectives, market prices, perceived value].

We review this pricing [monthly, quarterly, annually] to ensure that potential profits are not squandered. Customers seem willing to pay as much as [x] because of [explain reasoning].

Distribution channels

The distribution channels we use for our product are [wholesalers, cataloguers, mass merchant retailers, consolidators]. These make sense for delivering our product to the end user because [customer profile, geography, seasonal swings]. The competition uses the [[wholesalers, cataloguers, mass merchant retailers, consolidators] channel. Our channel will prove more advantageous because [x].

Our major current customers include; [list top five, with one or two sentence descriptions]. The attached chart [see appendix z] demonstrates how our product reaches the customer.

Advertising, promotion, trade shows

Your purpose is to introduce, promote, and support your products in the marketplace. Although considered a cost, a properly designed and executed campaign is an investment.

[Your Company Name] has developed a comprehensive advertising and promotion strategy, which will be implemented by the best possible firm when funded is completed. We expect to have a presence in several national magazines as well as the trade press. We will produce our own ads and be a part of ad campaigns of our JV partners or OEMs. Our publicity plan is to remain in constant contact with editors and writers of the [trade journals that serve our industry] and seek stories and coverage that will [enhance our reputation, introduce us to buyers].

We plan to promote our product through a variety of [on site product sampling, demonstrations at high profile events, give-aways at fund raisers] and other high leverage events. The objective of all our promotions is to [expand the audience, position our product as a premium brand, strengthen our ties to the community].

[Your company name] participates in the following trade shows; [list trade shows, briefly describe organization that sponsors it and who attends, and describe presence there]. We have a regular [20 foot display booth of knock down construction which allows us to display our existing products and introduce new ones, or we prefer to attend trade shows as visitors and walk the show while displaying our wares only to pre-qualified buyers who will come to our nearby hospitality suite]. The following factors are taken into account when considering a trade show; will this event help deliver our message to our target audience? Does the location of the show have significance? Is the time frame convenient? Is it a "must-go show"?

Competition

Tell us about key competitors in regard to product, price, location, promotion, management, and financial position. False or incomplete information here translates as dishonesty and negligence to investors, bankers, etc. Do not delude yourself (or your investors) about your competition.

Look in your telephone book's yellow pages. Look in the industrial directories at your local library. Search on-line databases that provide competitive profiles of other companies. Read industry magazines and look for advertisers.

Money Hunter can help you size up the competition:

http://www.moneyhunter.com/htm/hunt.htm.

We have no direct competition, but there are alternatives to our [product or service] in the marketplace.

or

We compete directly with [name competitor a, b, and c].

Provide a sample of each...[example...Acme Inc. is a $3 million sales manufacturer and marketer of pencils in the Northeast region. Acme Inc. is a division of Acme Corp, a public company with $800 million sales. The division sells pencils, pens, and other writing and drawing instruments. The recent trend for the division has been static, as the parent has not provided working capital to modernize machinery. Acme Inc. is managed by one Vice President who has been there for six months. The previous manager worked there for 11 months.]

The competition [does,doesn't] [use the same means of distribution as the company, advertise in the same trade journals]. If the advertising is regular-it probably works!

Our [product or service] is unique because of [x] and/or we have a competitive advantage because of our [speed to market, established brand name, low cost producer status].

Getting the Money Required to Starting a New Small Business. Now that You have computed your initial capital requirements, where
will you get the money? The first source is your personal savings. Subsequently relatives, friends, or other individuals may be
found who would like to"enterprise" their savings in your business. Before getting too large a share of cash from external
sources, remember you should have personal control of enough to guarantee yourself possession.

Once you can show that you have carefully worked out your fiscal Requirements and can demonstrate expertise and integrity, a
financing institution might be willing to finance a part of your working requirements. This may be done on a short term basis of
from 60 days to up to one year. Any institution which has money to give is mainly concerned with safety. The safety might be a
business asset, but when you are just starting the ideal security is usually your home or some other private asset.

The next thing the lender will want to see is some sort of Business program. If you complete a business strategy - which includes
a cash flow forecast - the lender will observe you have done some serious and realistic thinking about your business and be more
likely to think about your request.

Be familiar with your banker. In picking a banker consider Progressiveness, mindset toward your business, credit services
provided, and the dimensions and direction policies of the lender. Is the bank innovative? The physical appearance of this bank
may give you some indication. When the employees are reasonably young, interested in your problems and active in civic affairs
that the bank is very likely to be innovative. The nature of the bank's advertisements might also be a clue for its
progressiveness.

To be effective the banker Ought to Be interested in Assisting You to Become a better manager, and build a lasting relationship
that will mean rewarding business for you and the lender over time.

Will the bank give you the kind of credit you need? For example, If seasonal accumulations of stock become an issue will the bank
make a loan against public or field warehouse receipts? If your capital is tied up in accounts receivable throughout your heavy
selling year, will the lender accept these receivables as collateral for a loan? Will the bank consider a term loan?

Finally, understand the dimensions and direction policies of the bank. Will Your maximum conditions fall well within the
lender's"legal limit"? If you plan to do some export company, does it have a foreign exchange department? If you or your dealers
sell on installation conditions does the lender have facilities for managing installment paper? How deeply is the bank concerned
with the rise and prosperity of the regional community?

When you deal with your banker, then sell your self. Whether or not you Want a bank loan, make it a practice to visit your banker
at least once a year. Openly discuss your strategies and problems. It's the bank's company not to betray a confidence. If you
require financial assistance carefully organize, in written form, complete information that will present a comprehensive
understanding of your entire proposal. Many business-people or potential business operators destroy their chances of getting
financial aid by failing to present their proposal correctly.

Trade creditor or equipment maker, Firms from which you Purchase equipment or product may also furnish capital to you in the kind
of extended credit. Manufacturers of store fixtures, cash registers, and industrial machines frequently have financing plans under
which you may buy on an installment basis and pay out of future earnings. You need not pay for the merchandise simultaneously. If
goods are for resale, no safety other than repossession rights of these unsold merchandise is involved. However, too long a use of
charge may prove expensive. Usually cash discounts are quoted if a bill is paid in 10, 30, or 60 days. By way of instance, a term
of sale offered as"2-10; net 30 days" signifies that a cash discount of 2 percent will be granted if the bill is paid within 10
days. If not paid in 10 days, the entire amount is due in 30 days. If you do not take advantage of the money discount, you are
paying 2% to use money for 20 days, or 36 percent each year. That can be high interest. Prevent it.

One of the principal causes of failures among businesses is Inadequate funding. If you do enter business, remember it's your
obligation to provide, or obtain from other people, sufficient money to provide a firm foundation for your enterprise.

Sharing Ownership With Others. Now that you have decided what Business to begin and how much capital will be required, you may
find it necessary to join with one or more partners to launch the enterprise.

If you lack certain management or technical skills that are of Major importance to your preferred business a partner with these
skills may prove a most satisfactory means to cover the deficiency. If you're extremely proficient in your special area but lack
management training and abilities, you might look for a partner with a background in management. If you may need more startup
money, then sharing the possession of this company is one way to get it. Fantastic care ought to be taken in deciding upon a
partner. Personality and character, in addition to ability to render financial or technical aid, affect the achievement of a
pa333ship.

A partnership may be a mixed blessing. A partner who places in time Or cash has a right to expect a share in conducting the
business.

In a partnership the accountability for the debts of the firm is Infinite, as it is in one proprietorship. This means the owners
are Personally accountable for the firm's debts, even in excess of the sum that they Have spent in the business. In a business the
accountability of the proprietor is Limited To the amount that they pay for their shares of stock. A partnership, like one
proprietorship, lacks continuity. This means the Company terminates upon the Death of the proprietor or a partner, or on the
withdrawal of a spouse.