Had Coke come out with an apple flavored cola beverage it probably would not be successful. While the idea clearly is unique to the brand and the category, it most likely is not something to which the users of Coke or Pepsi could relate as being a desirable flavor.
* Is Easy to Understand - A vital element in the evaluation of an idea is whether the target consumer quickly and easily under- stands it. For example, the addition of a citrus flavor to traditional Coke is a simple concept that any customer would understand immediately. On the other hand, if a smart phone manufacturer added a feature that would dramatically reduce the number of dropped calls or would expand the coverage of the phone, this would have to be explained in very simple terms to the consumer. Most consumers do not care how the company achieved this capability; they only want to know that it is a benefit they will get from the enhancement.
* Can provide adequate profits to support the business. – A large percentage of clients come to SCORE with a “wonderful” new business idea but have never done the homework necessary to determine if there is sufficient demand for it, and it has a cost structure that will enable it to be sold at a price that will appeal to the target market.
* Represents a BENEFIT versus a FEATURE – Customers make purchase decisions based on the benefit the new product or service provides them, rather than the features that a new product offers. For example, if a tool company developed a new type of drill that could withstand the heat of constant use, the customer (i.e., professional contractor, DIY home user) would be more interested in what that means for them in terms of the use of the drill. It still makes the same hole, but the benefit is probably that the drill will save time as you can work continuously without having to wait for it to cool off. Therefore, the benefit of the new technology is saving of time or perhaps to a professional contractor, saving money!
Another example of promoting features versus benefits would be a new plumbing service business. They could advertise their feature of having more plumbers in the town than any other company (a feature) but benefit to the consumer is that they provide 1-hour service for all emergencies.
* Advertiseable / Marketable - The last criterion is that the point of difference of this new product or service be advertise-able and marketable to the target audience so that it can easily be communicated in advertising, promotion or packaging. To accomplish this, it must be able to be communicated within only 5-7 words. If it requires more than that it probably has little value in terms of the communications capabilities to the target customer.
SUMMARY - Nothing is more important than the idea you have for your business. Before beginning to plan the tactics of a new product introduction, it is essential that effort is made to ensure that you have carefully evaluated the idea based on the items outlined in this chapter. This evaluation will be extremely important to your venture as you begin to do the appropriate business planning necessary to move it to the marketplace.
CHAPTER THREE
The Business Plan
One of the first questions that clients raise when coming to SCORE for counseling is whether they should write a business plan. The correct answer to this question is almost always YES, whether the individual is planning to use the business plan as a working document in the venture, or only as a one-time exercise to help raise money needed to start the business. The business plan should be a living document that is developed when a business is started, and then maintained and updated at regular intervals as the venture matures.
Why Develop a Formal Business Plan? – There are several very important reasons why a business would benefit from the exercise of writing a business plan. Specifically:
* It provides a discipline that forces the writer to think through all the aspects of a business which will be important to the success of the venture. This includes both the strategic approach (i.e., overall business strategy, marketing strategy, pricing strategy, etc.) and the tactical elements (promotion programs, advertising, networking, etc.) of a program to launch the business.
* It increases the likelihood that the writer of the plan has carefully evaluated the competitive marketplace, is familiar with the category/business where they will compete and, importantly, knows the profile of the major competition to whom they will face as they begin the venture.
* It provides a very important communications vehicle for explaining the business to other parties. For example, a potential investor or loan provider would not consider giving money to the venture without a thorough business plan. This is because they need to be able to understand the market in which the business is operating and what their plan is to enter the category in light of the competition. It also provides the very important financial details such as P&L projections, cash flow analyses and balance sheet estimates for the first three years of the venture.
* It forces you to set financial goals for the business that will become the benchmark for success as the venture matures. These goals should be updated at least semi-annually based on the experiences in the actual marketplace.
* It gives you the discipline to set specific goals for the business for the coming year. For example, what are the 3-5 things that you would like your business to accomplish in the plan year? Do you want to generate “x” number of new accounts, “y” levels of awareness, “z” levels of retail distribution, etc. These are very important benchmarks against which you would be able to judge the progress of the business as time goes on. Importantly, this is an exercise that should be ongoing, and not just something that is implemented only in the first year of preplanning the business.
How to Write a Business Plan - An effective business plan is generally written over an extended period (weeks or months) as each section will require research and analysis. Some SCORE clients come to us with the goal of seeking to develop an effective plan, and our goal is often to try and write one section every week or two based on the learning at that point in time. There are a few key steps that should be taken in the process that will facilitate writing the plan.
* Conduct your own research of the business category in which you will enter, with the objective of learning as much as possible about how the category operates, and importantly what it takes to be successful in the market. Before you write the plan, you should be able to identify the 3-5 keys to success in the business you will be entering. It is much more beneficial to develop your own plan, possibly with the help of others, rather than to pay someone else to write the plan for you. This is because when you write the plan you completely understand every element and will be much better equipped to run the business when it begins.
* Seek secondary sources that can add to your knowledge of the categories. For example, some business libraries will have examples of business plans written by others that you could use as an example of how you plan to approach the venture. One library in New York City (Science and Industry Business Library…SIBL) contains hundreds of business plans for different types of companies, and you might find one written about your type of business or something very close to it. Another excellent source for business plan examples is the website www.bplans.com. They also have hundreds of sample plans you can use to help develop your document.
* Identify a business plan format that appeals to you. There is no “right” business plan format. If you search Google for business plan formats you will get 20,800,000 results, none of which is the ideal, but most of which are probably adequate. In this chapter, we will identify the sections of a business plan that we believe to be most important. You can decide if this is right for you, or you go to other sources for an approach that makes you feel more comfortable. This book provides two options for business plans, both of which are extremely effective.
* Determine your personal goals. Specifically, what are you trying to achieve with your venture. Are you seeking to develop a large business with many employees that will generate approximately $XXX in personal income? Or is your goal to just create a successful one-person venture