WOMENSNET BUSINESS DEVELOPMENT REPORTS
WomensNet has made a decision to expand its support efforts for women business owners. WomensNet is introducing free business development reports to be emailed with each newsletter subscription beginning in June. These reports will explore a variety of critical topics for women-owned businesses including:
Report #1: Writing a Killer Business Plan
Starting Your Women Owned Business:
Your Business Plan
Crucial to getting a women’s business grant, or other funding for a women owned business, is creating a detailed business plan.
In the next few pages, you’re going to discover the secrets to writing a killer business plan. As a women entrepreneur, that should stir some excitement in you. And a few important questions:
Does writing a business plan add to my bottom line?
Is it something that I should do even if I already have my business up and running?
Is anyone going read it besides me?
Yes, yes, and yes. A solid business plan will help you become efficient… profitable… and poised for growth.
And making your business more successful is what it’s all about. So here are the critical elements that you should include in your Business Plan.
Create an Executive Summary.
This is your “elevator speech” – your short story. Talk about what you’re planning to do, and what you want. Your summary should be about a half page in length – one page at most. It should provide a concise overview of your business and include these elements:
- The name of your business. A wise person once said that a good name is better than riches. Names are powerful. And depending on your product or service, you may consider practical names like “The East Main Street Floral Shoppe” or something more creative like “KinderCare.”
Ensure that your name is not already in use by checking online (Go Daddy is a good place to check URL’s), consulting your county or parish business directory and checking with the US Patent and Trademark Office at www.uspto.gov .
- Indicate how the business is structured. Is it a sole proprietorship or a partnership? Is it a Limited Liability Corporation? Are there shareholders? It also doesn’t hurt to mention that you’re a women owned business
- An overview of your business and your Unique Selling Proposition (USP). This section should clearly present your product or service; define your target market; and point out your “competitive advantage” (another way to say USP).
- Make a few brief financial points. For example, yearly revenue projections; profit margins; and return on investment.
- Clearly state how much money you’re looking for and how it will be used. Be very specific about how you will utilize funds. For example, don’t say $7,500 for office and computer equipment. Rather, itemize each item in a mini-expense report and be conservative about costs. Investors, banks, or organizations who give grants to women business owners will be looking at the details of how you plan to spend their money.
- List any significant benchmarks or unique achievements. These could be anything from awards and public recognition you’ve received to patents that may be pending. This section should merely do something to excite your readers and pique their interest so that they want to keep reading.
Craft an Honest Business Description
Your business description informs the reader about the marketplace – and the of your role business in that space. It should start with a very brief overview of your service or industry. So speak to the present state of your business arena as well as to the 3-5 year outlook. Use a broad brush stroke view – realism in watercolor.
At the same time, it’s important to be realistic in this section. You can accomplish this by discussing your market and any trends that could help or hinder your business. Do your best to use reliable market data from respected sources and make sure to site your sources. This act alone will give you credibility. The last thing a potential investor wants to read is a bunch of stuff that you made up.
Marketing guru Seth Godin puts it this way in his book, All Marketers are Liars:
“What’s your story?”
“Will the people who need to hear this story believe it?”
“Is it true?”
Briefly describe your business using these vital components:
Indicate the legal form of your business. Is your business a sole proprietorship, partnership, or corporation? Make sure to list who the main players are in your business. Using business jargon – Who are the principals?
For a succinct description of the various ways that you can structure your business see (I almost can’t believe that I’m suggesting this) the IRS website at: http://www.irs.gov/businesses/small/article/0,,id=98359,00.html
The IRS actually provides a very good description of several business forms and structures including Sole Proprietorships, Partnerships, Corporations, S Corporations, and the Limited Liability Company (LLC).
Get a Lawyer. Get an Accountant.
If you haven’t already, please solicit the services of a highly recommended lawyer and accountant. The time and money you’ll save by getting sound advice as you begin your business can be huge. Ask a few trusted friends for referrals.
Here’s a rule of thumb: Take the time and money you think it will cost you if you fail to set things up properly at the start — and triple it. A strike out at this stage of the game can cost you your business in the short-run.
- List the members of your Leadership/Management Team and any advisors. Provide brief biographies that highlight the skill sets and experience of these people. Keep in mind that investors and folks who give money to women businesses owners are keenly interested in the expertise of the Management Team. For many investors, their confidence in the team is what makes or breaks their decision to invest.
- Describe the type of operation. Are you creating a retail, wholesale, manufacturing, or service business? You should also mention who your customers will be; how your product or service will be distributed or sold; and the business's support systems. Support may come in the form of your website, social media marketing, traditional advertising, and promotions.
- Outline the products or services that you plan to market. As you provide a brief but complete product description, keep in mind that you should highlight your competitive advantage – what it is that sets you and your products apart from all the rest. Talk about unique features. Quality. Expertise. Guarantees and warranties. Customer Service.
- Discuss Profitability – Your ability to make a buck.
Here you need to be realistic and capitalistic. You started your business to fill a need and make a few bucks, right? So simply explain the factors you think will make your business successful. Talk about more than your processes, organization, and equipment. Get down to nuts and bolts and clearly state how and why your business will create consistent positive margins leading to month-to-month and year-to-year profit. You may want to include a few more statistics to demonstrate market readiness.
- If your objective is to get a women business grant or raise capital beyond your own, it is imperative to explain the benefit of additional equity or loan money with respect to profitability. Indicate how this infusion of funds will make your business more profitable. Show how you plan to expand your business or be able to create a value added component using that money.
Provide a Market Analysis
If you’re a woman planning a business, you’re planning to sell a product or service. And you’re planning to make some money.
Defining your market is not an option. If you were an archer, this exercise would ensure that you located your target and determined your proper aim and trajectory. You want to be taking your shot with your eyes open and the lights on. Same for your business.
Performing a thorough market analysis forces you to become familiar with all aspects of your market so that the “target market” can be defined – and your company can be positioned in order to capture your share of sales.
A market analysis aids in the establishment of:
- Pricing
- Distribution
- Promotional strategies
- Growth potential
Analyzing these variables will give you a serious head start and help position your company to turn a profit as you face your competition. 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.
To begin your market analysis you need to define the market in terms of size, structure, growth prospects, trends and sales potential. This is like making a good sketch of how things currently stand. Think about it like designing a garden. How big is the space? How is it laid out? Which plants are going to grow how high and wide? How fast will the plants grow? Simple but necessary stuff if you’re looking for a business loan or woman business grant.
So how do you find information like this about your market? You can use a variety of business tools on the internet, information available from your local Small Business Association, and any number of free industry specific resources. You may need to dig a little and you don’t usually need to pay for reports.
Here are some guidelines:
- Determine the “total aggregate sales” of your competitors to get an accurate estimate of your total potential market. Report this number in both units and dollars per year if possible.
- Define the target market. The target market narrows down the total market by specifying the part of the market that you want to carve out as yours. Factors (usually referred to as segmentation factors) that will determine your total addressable market include:
· The total number of users within your business's center of influence. The segmentation factors can be product-oriented, geographic, or rely on customer attributes depending on the nature of your product or service.
- Narrow your target market. A conservative approach is always best. It helps you refrain from biting off more than you can chew. And it gives your potential investors comfort knowing that you don’t plan to become Walmart within a year. 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 your product within that geographic segment.
Once your target market has been determined and narrowed, it needs to be further defined to determine the total feasible market. This can be done in several ways. Most seasoned market planners will define the “feasible market” by focusing on factors that may produce gaps within the market.
It is usually helpful to ask yourself, “What’s missing?” For example, in the case of a cottage industry that makes cotton baby diapers from reclaimed materials, the total feasible market could be defined by determining how many babies are born each month (or year) within certain geographical regions. Further, you may want to compare disposable diaper sales to birthrate in a manner that indicates a gap. You may also look into laundering services in the area to determine a baseline usage level for the region.
It's important to understand that the total feasible market is the part of the market that can be captured – given that conditions within the environment are favorable, and there is very little competition. Let’s be clear, in most cases this is simply not the case. There are other factors that will affect the share of the feasible market your women owned business can reasonably obtain. These factors are usually linked to the structure of the industry, the level of competition, your strategies for market penetration and continued growth, and – quite frankly – the amount of capital you’re willing to spend in order to increase your market share.
Project Your Market Share
Arriving at a projection of the market share for a business plan is very much a subjective estimate. It's based not only on an analysis of the market – but also on highly targeted and competitive distribution, pricing and promotional strategies.
For instance, even though there may be a sizable number of cotton diaper customers in 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 your product is 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 your business plan, you must be able to estimate market share for the time period covered in your plan. This will factor into your financial statements. And ultimately will impact your bottom line. This should be getting really exciting. (You’re almost done with the stuff that most women seeking a business grant or loan don’t understand or ever accomplish.)
In order to project your market share over this time frame, you'll need to consider two factors:
- Industry growth which may increase the total number of customers. Most projections utilize a minimum of two growth models by defining different industry sales scenarios. The industry sales scenarios should be based on leading indicators of sales, which will most likely include industry sales, industry segment sales, demographic data and historical precedence.
- Conversion of customers from the total feasible market. This is based on a sales cycle similar to a product life cycle where you have five distinct stages: early pioneer users, early users, early majority users, late majority users and late users. Using conversion rates, market growth will continue to increase your market share during the period from early pioneers to early majority users, level off through late majority users, and decline with late users. You can show this information in the form of a basic graph plotting time on the x-axis and customers on the y-axis.
Defining the market is a huge step in your analysis. With the information you've gained through market research, you can to develop strategies that will allow you to fulfill your objectives. This is what its all about: defining and nailing your objectives.
Positioning Your Business
When discussing market strategy, it's inevitable that “positioning” will be brought up. The positioning statement for your business plan doesn't have to be long or elaborate. It should just point out exactly how you want your product perceived by both customers and the competition.
Your company's positioning strategy will be affected by a number of variables that are closely tied to the motivations and requirements of your target customers within as well as the actions of primary competitors.
Before your product can be positioned, you need to answer several strategic questions such as:
- What specific attributes does your product have that your competitors' don't?
- How are your competitors positioning themselves?
- What customer needs does your product fulfill?
Once you've answered your strategic questions based on the research of your market, you can begin to craft your positioning strategy and illustrate that in your business plan.
Pricing
How you price your product is important to your women owned business 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 according to Entrepreneur Magazine:
- All prices must cover costs.
- The best and most effective way of lowering your sales prices is to lower costs.
- Your prices must reflect the dynamics of cost, demand, changes in the market and response to your competition.
- Prices must be established to assure sales. Don't price against a competitive operation alone. Rather, price to sell.
- Product utility, longevity, maintenance and end use must be judged continually, and target prices adjusted accordingly.
- Prices must be set to preserve order in the marketplace.
Here are a few methods of establishing prices:
Cost-plus pricing. Used mainly by manufacturers, cost-plus pricing assures that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
Demand pricing. Used by companies that sell their product through a variety of sources at differing prices based on demand.
Competitive pricing. Used by companies that are entering a market where there is already an established price and it is difficult to differentiate one product from another.
Markup pricing. Used mainly by retailers, markup pricing is calculated by adding your desired profit to the cost of the product. Each method listed above has its strengths and weaknesses.
Roll up your Sleeves and Make It Happen
Starting a business is a noble goal and few businesswomen can simply do it on gut-level instinct. It takes a solid plan and a well thought out process to understand the factors that can lead to success.
These steps are critical as you formulate your ideas and hone your focus. The only way to get there is to begin. Take your time and think these ideas through. Discuss them with family and friends and find some other women entrepreneurs who have succeeded and failed. Get their thoughts. It will prove very helpful.
If you take the time to carefully work through a process like this, you’ll dramatically increase your chances of launching a profitable business. And that includes securing funding or even getting a grant for businesswomen. At the very least, you’ll avoid many of the common mistakes that cause failure.
In the next report, we’ll examine distribution, promotion and sales as we round out the entirety of the plan.