What is business planning all about? Do you need a plan before you start a business? How do you prepare yourself to enter a marketplace and compete? I will show you the importance of planning your start-up strategy and how to prepare it effectively. Once you have a reliable plan you can execute your start-up strategy with confidence.

Planning is necessary to achieve success, regardless of what you do in life. You want your decisions to be calculated…they should only be made after performing proper due-diligence to know exactly what you are getting into ahead of time. You must avoid being blind-sided by the unexpected.

Risk, hazards, and many pitfalls exist on the path to business ownership. To better understand these difficulties…what they are and how to conquer them, read the article Business Ownership – Cons Before Pros. It guides you through the difficult road of entrepreneurship.

What does plan really mean? It is defined as a scheme or method of acting, doing, proceeding, making, etc., developed in advance. If you are a military General, will you go to battle without a plan? Of course not! So why would you go into business without one? The marketplace is quite a battle-field out there with many foes who are ready to fight (compete) with you.

Knowledge and experience are your weapons, and if they are sharp, you will compete well. The problem is strategy. Knowing where to start and how to proceed. Eight-out-of-ten businesses fail after 18 months, statistically. The primary reason for failure by the intelligent entrepreneurs is lack of proper planning.

Pre-plan-preparation

Fully educate yourself regarding your industry, your target audience (demographics), your competition and the economic conditions. Anticipate how your customer base will react to your idea, and how your competition will make their moves when you enter the market.

Document the weaknesses of your competitors and target them. The knowledge you gain from this research will be used to form an effective tactical plan which will allow you to anticipate outcomes and to be prepared for pitfalls.

All of this preparation will be used to define your business model...the purpose and process of your new venture. Your business model will also include customer base definition and distribution-channel identification…how you will receive goods and how you will deliver products to your customers.

Industry study

Who are the suppliers and vendors you will use and what kind of bargaining power can you bring to the table? You always need to keep costs as low as possible to improve profit margin, so arm yourself with an understanding of how well you can negotiate deals.

How competitive is your industry? Analyze what makes the successful businesses tick and understand exactly what the poor performers are doing wrong. Really dive into expected profit margins in your market since tough competition tends to drive those margins down. Learn how profitable your competition really is.

What is the market structure of your industry? Determine the number of firms that exist in your industry and how large they are. The market entry conditions must be fully understood. That is where and how companies typically do business (meet and connect) with their customers.

Determine the product or service differentiation in your field. Know how many types of products or services there are and what kind of differences exist. Understanding and defining your market structure will prepare you to operate tactfully in your industry.

For more on performing an industry study, read Business Development – Extensive Guide

Challenge the status quo…the existing state of affairs. Maybe you can come up with a new way to do business in your industry that will trip-up your competition. Please read Game Changer – Challenging the Status Quo for an in-depth look at how to do this.

Your target audience

What are the demographics…what makes them tick? To start, the SBA (Small Business Administration) provides many such market research tools. Local economic indicators are available for your geographic area of interest which includes income and employment statistics along with others.

Visit the Bureau of Economic Analysis to find a barrage of economic indicators that will provide key data about the region you wish to do business in. Or you can use this to find a good target region. There is a wealth of other tools and resources there including business training, financial support, and a broad network of affiliates ready to help.

You will need to know how your target audience reacts to your idea. Perform Qualitative research using focus groups and Quantitative research using surveys and questionnaires to perform effective market studies. Be objective in your approach to interpreting this data. You need to avoid statistical bias as you proceed.

For an in-depth explanation showing how to perform all of this market research, please read Effective Marketing Strategies. There is much more to this...a deep understanding of marketing will really make the difference.

Your competition

Investigate them. Discover who and how loyal their customers are. Determine the yearly sales volumes of your competitors. Detail their strategies. Read customer feedback and gain insight from resources like Better Business Bureau about your competition. Study indicators like longevity so you can determine how long each competitor has been in business. Review their history to understand what changes they have undergone over the years and why.

That was quite a list! Knowing who your competitors are and what makes them tick will allow you to survive as you compete with them.

Compare your competitors to sharks. If you dive with sharks, you need to have a properly designed cage to ensure they can’t bite through it. Also, you need to understand sharks and fear them without being afraid, if you wish to swim with them not using a cage. Same with business. You can swim with your competition if you understand and have a healthy fear of what they are capable of. A nice thought may be…we are much smarter than sharks!

I will soon publish a blog post detailing how to Identify and evaluate your competition, so stay tuned, there is more to come! For a short but informative post that will help with this topic right now, read: Competitive Analysis from Entrepreneur.

Differentiation

How are your products or services different from the competition? What makes them better? If you plan to enter the market with another version of an existing product, there needs to be an advantage to yours. Quality, functionality, price, or appearance, just to name a few factors that can vary.

First you need to identify the existing differentiation among what is already in the market. Then you need to perform a good comparative analysis to provide confidence there is ample differences or advantages.

Put the strategies into your plan

Now you are ready to start creating your winning plan. Having performed all of the due-diligence you should now be an expert in your industry. An effective tactical strategy to start a business will be vital to the success of your start-up. Do this part correctly, and you will ensure your position in the 20% club!

Creating a formal business plan, which is also important, will not be the focus here. That is an important process in itself and will be covered soon in another post. It is the strategy in the plan, the meat and potatoes of the plan, that I will be covering here. The actual action you will take to start a business, laid out informally, as a guide for you to follow as you execute.

Product positioning

Establish the positioning statement about your product or service. This statement is of the utmost importance and should shed light on the unique value your product or service offers. What benefits will you bring your customers? Also, it will define the target demographic which will focus the advertising specifically on them.

There is one key difference between a positioning statement and a tagline. Taglines are outward facing. They are simple, compelling statements viewed by the customer.

The positioning statement is internal, and will be used to define all advertising and even internal operations. You can use the position statement to test all new ideas, to ensure they match up with what you are really going for. A fun example is from Harley Davidson:

The only motorcycle manufacturer that makes big, loud motorcycles for macho guys (and “macho wannabes”) mostly in the United States who want to join a gang of cowboys in an era of decreasing personal freedom.

That is a clearly defined identity for sure!

Their tagline:

American by birth. Rebel by choice.

This fits well and sounds compelling to their target demographic, right?

Here is a simple template you can use to set up your own positioning statement:

1. For (target customer)
2. Who (statement of need or opportunity)
3. (Product name) is a (product category)
4. That (statement of key benefit)
5. Unlike (competing alternative)
6. (Product name)(statement of primary differentiation)

Once you have this statement completed, allow it to fully sink in, so it becomes instinct. That way, you’ll always be able to answer correctly when you question any idea, to see whether it seems to fit into the identity of your company or product line.

Build a winning brand

Having a consistent company theme throughout your organization causes customers to become accustomed to the environment that is conveyed to them from all of the points of contact at your company. This called cross-channel customer experience. Familiarity can be achieved from your customers and that is very powerful. It will heavily contribute to brand recognition and appreciation.

Keep your staff excited about your products and services. Be a motivational speaker for your company! Your staff will be more responsive to you and your customers. When your customer gets the feeling that you and your staff are excited about what your company has to offer, that excitement can spill over…especially when it’s consistent across all points of contact with your company.

Brand building is the process of creating deep connections and forming an emotional relationship with your customers. This is not easy and it takes much time. Read Gaining Customer Loyalty for an in-depth dive into what it really takes to make customers stick with you.

Targeting demographics

Never target the general population, that is a recipe for failure. Narrow your focus on who will actually pay for your products or services…your target audience. You already identified them in the pre-plan-prep, so now put this into your plan of action.

Who is your target audience? To aim for the younger crowd, it must be hip. For academics, style and class are key. Regional culture considerations must also go into this. The form, fit, function, and presentation must all be focused on your demographics in an appealing way.

Advertising

There is no need to discuss all of the many, many forms of advertising out there. You see it all around you, on the streets, on television, online, and you hear it on the radio. The forms of advertising you chose will be based on your industry and what you can afford.

One defining factor used to determine your advertising budget is the cost of customer acquisition. This number is derived from a simple equation: Money spent to bring them in divided by the number of customers you receive. The equation gets more complex when you add customer loyalty and repeat business, but those factors lower the cost of customer acquisition.

Good statistics must be kept with every ad design iteration and then compared to the previous version. This is a very involved process but will allow you to tailor your advertisements for your target audience to maximize their appeal.

The first time they see an ad from your company, they will probably disregard it. They don’t know who you are. But after seeing an ad from you multiple times, if they have an interest in your product, their confidence will begin to build and they may finally inquire about your product.

So be patient. Repeat your ad campaign many times until you really start seeing results. After that, like magic, your phone may really start ringing off-the-hook, or your in-box will start to fill with inquiries.

Plan your market entry

Now that you fully understand your target audience, your negotiating power with suppliers and vendors, your competition, and you are an industry expert based on your research, put a plan together for how you will enter the marketplace. Detail all of this out, and thoughtfully plan how you will execute in each area.

This thought process is of the most important, now that you have a differentiated product that is ready for market. Document it well and commit it to memory. You don’t want to be caught off-guard.

Customer service strategy

To the customer, your company will only be as good as the last time they had contact with you. Small businesses, not having universal brand recognition, must provide stellar customer service along with a stellar product in order to stay on top of the customers mind. Good memories don’t stick in the mind of your customers as well as bad ones do. This provides an on-going challenge…keep the good memories flowing to your customers!

There is a strong bond that can be achieved with your customers when you provide them with repeated good memories…customer loyalty. Customer confidence comes from the trust you establish with them, but customer loyalty is the bond that keeps them coming back. Use the examples below to provide the kind of customer service that demands loyalty from every customer.

For a great level of detail on how to provide the best customer experience, and what type of actions to avoid to prevent those bad memories, read Gaining Customer Loyalty.

Market evolution

Monitor changes in your market in a on-going way…customer needs, new competitors, and new technology. This process should never stop. Changes occur often in every industry so stay on top of them and make adjustments to stay competitive. Anticipate changes before they occur and you will be able to change course on a dime, out-witting your competition.

From industry publications and internet content like blogs, stay on top of it. Also, monitor social media to look for trends. The object is to get out there ahead of your competition with every iteration of your product or service.

Sell before you open

Get your products out to your market ahead of time to allow for feedback and testimonials ahead of time. You can use this in your advertising when you open your business. One way to do this is to provide free samples of your products in a creative, promotional way. Another idea would be to set up a booth in a public place or event to more easily get it out there in small quantities to start the momentum.

Set new trends

Following trends in your industry may be a safe way to stay competitive, but strategically setting new market trends will truly make you stand out. Put your vision to the test with this one!

Manage your start-up plan like a project. Time-frame management, milestones, commitments and good communication and understanding. Use good resource allocation so key players get their piece of the project and assign key deliverables. Project management is key to successful execution of a business start-up plan. Be calculating and tactical every step of the way.

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Thank you for reading The Quintessential Business Startup Strategy by Greg Hixon at GravyGrowth.com :)