The first section of your smart business plan begins with a description of your product, market and competition.
You should be able to explain how you will get your product into the market, outsmarting competition for a share of the market within a reasonable timeframe.
The name you choose for your company should tell people the type of business you are into. Your choice of business name, logo, colour, font type and size, and byline should make a bold statement about your idea and what you want to offer.
The difference your business makes
Jewel John, our new young entrepreneur is setting up EthnicSnacks Shop. She is offering healthy, tasty and pocket-friendly branded seasonal ethnic snacks served hot in a clean environment within three minutes per customer.
Your competitive advantage tells people what you are best at and why customers should come to you (instead of going elsewhere).
When asked, you should be able to state what your company is best at without hesitation in less than 60 seconds.
Do you have a competitive advantage?
Write out in a simple sentence your business name, what you are best at and why you are the best service provider customers should patronise.
Know your customers
EthnicSnacks Shop targets primary and secondary customers in its vicinity. The former is cosmopolitan and upwardly mobile working class. The latter comprises of drive-through and walk-in customers outside the vicinity. Both have class, passion for healthy afro-centric diets and reasonable disposable income for luxury.
You cannot sell to everybody. You have to select your potential customers. You should describe the type of customers that your service offering can magnetise.
Do you know your potential customers?
Describe their characteristics: demographic compositions, size in your target market, purchasing power and location.
The market you will serve
Research conducted by EthnicSnacks Shop revealed that its target market generated an average of N69.3m the previous year: its primary customers contributing 72 per cent; secondary customers 28 per cent. The market should grow by some 16 per cent in the current year. EthnicSnacks Shop targets 20 per cent market share in the first 12 months, and grow incrementally to 35 per cent over a period of three years.
Companies thrive because there is a market for their goods and services. You have to know the size, trends, phase and growth potentials of the market you are entering. You should be familiar with drivers of growth in this market: the things that stimulate customer experience to buy from and become loyal to a new entrant.
You should determine how you intend to penetrate the market: What will you do differently? What new thing are you bringing into the market? What value you are offering the market? Why should the market shift loyalty to your product?
Do you know the market you want to serve?
Draw up your market size, determine the direction the market is going and state how you intend to penetrate the market.
Competitors are real and diverse
EthnicSnacks Shop has identified ten competitors in its market: five major and five minor players. It has profiled these ten, listed their strengths and weaknesses, and subsequently put measures in place to enable it compete in the market.
Doing business is like waging a war. In business, you have competitors. In warfare, you have enemies. Your competitors are your “enemies”.
Sun Tzu in The Art of War said “Know the enemy, know yourself, and victory is never in doubt, not in a hundred battles.” He added that “He who knows self but not the enemy will suffer one defeat for every victory. He who knows neither self nor enemy will fail in every battle.”
Ours is a capitalist economy; a free market. You have to be familiar with the competitor landscape; know who your competitors are, their size in the market, share of the market, annual turnover, products and prices. The things they get right. The things they are not doing well enough. The things the market is saying about them.
Do you know all your competitors?
You should list out ten competitors, stating their products, prices, annual turnover, sizes, strengths and weaknesses, and put measures in place to compete in your target market.
SWOT your business
EthnicSnacks Shop has carried out a SWOT analysis on its business. It will use the positive factors to promote the effortless take off of its startup. The negative factors will be worked upon and converted to strengths and opportunities in order to remove any hindrance to the successful implementation of the startup.
Sun Tzu said you should know yourself after gaining knowledge of your competitors.
SWOT Analysis is a business planning tool for assessing the strengths, weaknesses, opportunities and threats of your business in the market. Strengths and weaknesses are internal factors within the business and could be finance, people, strategy, structure, competence or operations. Opportunities and threats are external factors such as political, economic, social, technological, legal or ethical trends in the market.
Do you know your SWOT?
You should draw up a SWOT of your business, identifying your strengths and weaknesses as well as your opportunities and threats in the market and how to convert your weaknesses to strengths, and threats to opportunities.
How much can you sell?
EthnicSnacks Shop will make a sales projection per product line per annum identifying the unit price for each product, annual volume production and the cost of production. It will have a clear picture of its gross margin from the total sales after netting off the cost of production. Otherwise, it will rethink its business strategy.
You are only in business when you are able to produce and sell your products at a margin that returns profit to you.
Do you know how much you will sell your product?
You should determine the cost of producing your product, how much you will sell each unit and the volume you intend to generate in the year to justify your reason for wanting to go into business.
Author: Babatunde Fajimi
This article was first published in The Punch newspaper on Friday, March 13, 2015 and can be read online via http://www.punchng.com/business/am-business/your-product-market-and-competition/. It is the continuation on the series on Entrepreneurship and sequel to the article titled Writing Your Business Plan via http://www.punchng.com/business/am-business/writing-your-business-plan/