How to Create a Marketing Plan

Without a solid marketing plan, too much is left to chance. When you rely on “hope based marketing” you’re at very high risk of losing money, time, and traction, because nothing is strategic and everything is reactive.

As the old adage states, “A failure to plan is a plan to fail”

Before we dive in, there are three key areas you must be brutally honest with yourself about:

Budget – How much are you willing to invest to get the word about your product (or store) out there? This includes anything from advertising spend to hiring people to fill necessary roles.
Talent – What strengths and assets does your team currently have at their disposal? This could mean anything from having a large rolodex of industry contacts, to being extremely saavy with PPC, having a keen eye for design, or a knack for making sales in person.
Your Limitations – Don’t know a lot of people with access to larger groups? Don’t have a lot of money? Time?
It’s important you know each of these things up front, because it will guide you into being realistic with yourself about your goals and what it will take to reach them.

I’ve seen plenty of first time entrepreneurs say they’ll “do SEO” as their primary means of acquiring customers, completely oblivious to the notion that SEO is a rich man’s game. That’s not to say that it’s impossible, but it’s probably not the best use of time if you don’t already have the talent, budget or time to execute a fully fleshed out SEO campaign.

All that being said, this guide is intended to help you make informed, grounded decisions based on your current position, strengths and limitations.

As you create a marketing plan for yourself, please accept that several areas of this will ask that you do considerable research on your market, your competitors, and your place in it. This takes time, but it is time that will help guide you and keep everyone on same page and moving in the same direction.

Executive Summary

This is exactly as it sounds, and should be the last thing that you write.

It will summarize the other sections in the document and provide you, your employees, your advisors, and your (potential) investors an overview of your plan.

Section 1 – Goals & Objectives

This is where you set the stage and paint a broad picture of what your marketing activities will be focused on for the upcoming year.

Goals might include (but are not limited to):

Penetrating or Creating a Market
Stealing Customers From an Established Competitor
Expanding Product Distribution (on or offline)
Launching a New Product or Product Line
Karen Albritton of marketing firm Capstrat says, “If your business goal is to grow revenue, what marketing objective will accomplish this? Adding more customers? More repeat customers? Higher expenditures?”

As you define your objectives, use real numbers to add gravity to how you plan to achieve the goal.

If the goal is “Grow Revenue by 25% each Quarter ” your objectives might be:

Add 40 new customers/month
Increase repeat purchases by 10%
Increase AOV by 15%
Don’t worry about getting into the “how” just yet, but rather let this Goals & Objectives summary set the stage for the rest of the marketing plan. As you flesh out the next few sections, you’ll build the case for why the market will be receptive, and how to achieve these objectives tactically.

Part 1 – Organization Mission Statement & Value Proposition

This is typically a finely-honed paragraph that considers the following:

A stable, long-term vision of the company and answers questions like:
Why are we in business?
What markets do we serve and why?
What are the main benefits we offer our customers? ( Low prices? High quality? Hand-crafted? Carefully curated?)
What does the company want to be known for?
What does the company want to prove to the industry, customers, partners, etc?
What’s the general philosophy for doing business?
What products/services does the company offer?
Company History
The companies age, how/why it was started, product evolution, markets served

Resources & Competencies
What are we good at?
What’s special about us compared to current and future competitors? (no need to name names)
What gives us a competitive advantage?
What are our advantages in terms of people, products, finances, technical, partnership/supply chain, etc
Not all of these things need to make it in to the mission statement of course, but having an awareness of each of these elements can help you to choose what is most important to the organization.

For example, there’s an old, high end men’s shoe store in my town. If they were to launch an online store, I would write their mission statement to say:

“Since 1915, Lexington Shoes has outfitted gentlemen with luxury, hand-crafted footwear. Our founder Charles Lexington believed the only way to deliver a premium experience was to make eye contact, listen deeply and make recommendations based on the person, not the products on the shelf.

100 years and 3 generations later, we stand by this value and feel its increasing importance in our ever connected, too busy to slow down and see each other world.”

The mission statement differs from the value proposition, in that the value proposition is a concise promise of value. Peep Laja of ConversionXL says:

“[A value proposition is] the primary reason a prospect should buy from you.
In a nutshell, value proposition is a clear statement that
explains how your product solves customers’ problems or improves their situation (relevancy),
delivers specific benefits (quantified value),
tells the ideal customer why they should buy from you and not from the competition (unique differentiation).
You have to present your value proposition as the first thing the visitors see on your home page, but should be visible in all major entry points of the site.” Read More on Value Propositions.

Section 2 – Target Customers

In this section of the marketing plan, detail everything you can about your target customer or customer groups.

This includes any relevant customer demographics:

Geographic location
Purchasing Power
Family Status
Or any other quantifiable data
This article on Entrepreneur is a phenomenal primer on customer demographics. If your customers are U.S based, it recommends using the Census Bureau and Bureau of Labor’s website to gather the information. I’ve also found to be an excellent source of quantifiable demographic information.

The target customers section should also include relevant psychographic profile information:

Television Shows
All of this will influence a wide range of areas in your business, including brand positioning, advertising creative, ad placement, local markets you want to penetrate and more.

Being able to more clearly identify your target market will help you to “speak the language” of your prospective customers, and get a higher return on your investment for your creative assets.

Using this, describe your target market approach. Are you using a mass-market strategy or speaking to a niche?

When evaluating your target market try to answer the following questions:

What are the needs/benefits sought by the market overall?
Who uses the product?
Why do they use the product?
When do the use the product?
How is the product used?
You should also use this section to discuss how customers perceive your product in relation to competitor’s products or the other solutions they use to solve the same problem. What are their attitudes toward your company, and to the general product category you serve? (i.e “I wish more furniture sites offered X,Y, Z feature)

Describe their purchasing process as well:

What does the decision-making process involve?
What sources of information do they seek?
What’s the timeline for their purchase?
Who actually makes the purchase?
Who or what influences the purchase?
And finally, provide market size estimates for those included in your target market.

What is the largest possible market if everyone bought?
What percentage actually bought from you in the past?
Given the current timeframe for the plan, how much growth do you think is possible in the next year and longer?
If estimating the market size seems daunting, Rastislav Turek – CEO of gives an exellent response on Quora that breaks it down in very simple to understand terms.

Section 3 – Situational Analysis

This section of your marketing plan is to provide a snapshot of where everything stands at the time the plan is presented.

This section in particular can take a significant amount of time as it scrutinizes multiple levels of your business, your market, where you stand, and how your competitors are doing.

If you’re running an established business, this is where you take inventory of what’s currently working and what isn’t. For new businesses, this is the research you that’ll help you understand the market you’re getting into. (See Also: Preparing A Market Study)

This includes an analysis of the following areas:

1. Current Products

Product Attributes

What are the main features of the products, and major benefits received by those using the product, current branding strategies, etc – If you’re selling the same product other retailers, the “product” would be in how you’re positioning the product category and the benefits of buying from you instead of everyone else.


Describe pricing used at all distribution levels, including the pricing to final users, wholesale buyers, the incentives offered, discounts, etc


Talk about the various ways the product is made accessible to final users, including the channels used, major benefits received by distributors, how the products are shipped, process for handling orders.


Describe the promotional strategies and tactics in terms of advertising, sales promotions, personal selling, public relations and how the product is currently positioned in the market.

Take inventory of which promotions exceeded expectations in the previous year, and which did not perform to expectations. Include hard numbers when possible.

Services Offered

Discuss the various services offered to final users and distributors before, during & after the sale.

Include performance and/or usage metrics of each service, and impact it’s had on the bottom line. (i.e: Customers who use our personal styling service tend to spend 4x more than customers who do not. Wholesalers who use the quick order function in the ordering portal process 2x more orders than wholesalers that do not.)

2. Distributor Networks

Evaluate how your company’s product is currently (or will be) distributed.

This includes your own website, any third-party marketplaces you might sell on, physical retailers, pop-up shops, affiliates, referrals from existing customers etc.

For your own website, it’s also worth breaking down which traffic sources brought the most sales in the past (i.e Adwords, Facebook Ads, Organic Search etc.)

List out each of the channels in the supply chain and provide an overview of their performance.

Be sure to include the needs/benefits sought by distributors. This might include referral fees on marketplace sites like Amazon or Etsy, or the need for localized co-promotion with a physical retailer.

Also include your product’s role within the distributor’s business.

How important is it to their strategy?
How do they position it in relation to the competition?
How do they make their purchases & who influences their purchase decision?
When evaluating distributors, be sure to list the type of distributor, their size, geographic region, and the markets they serve.

3. Competition Analysis

This is where you’ll examine your primary competitors serving the same target market.

You’ll want to analyze direct competitors:

Target markets served
Product attributes
Distribution & Distribution Network
Services Offered

You’ll also want to discuss their strengths and weaknesses including

Financial standing
Target market perception
R & D capabilities
Finding this will take some digging. Audienti has a great article that can help.

It may also be a good idea to provide a S.W.O.T analysis on your competitors to provide an overview of their Strengths, Weaknesses, Opportunities, and Threats.

4. Current Financial Condition

Using charts, tables, and graphs along with a brief paragraph explaining what you’re looking at will prove invaluable for making the information easy to digest.

Current Sales Analysis

Overall industry sales and market share:

Total market sales
Total for your company’s products
Total for competition
By segments/ product categories:

Total for segments/product categories
Total for company’s products
Total for competition
By distribution channel

Total for each channel
Total for company’s product by channel
Total for competition by channel
By geographic region:

Total for each region
Total for company’s product(s) by region
Total for competition by region
Competitive information might be difficult to obtain on your own. Depending on where your business is at, It may be worth working with an agency to conduct the competitive intelligence for you.

Profitability Analysis

In addition to the sales analysis, you’ll want to look at how your expenses impacted those sales, and identify the areas where you should scale back or double down.

Marketing expenses:

Direct – those that can be tied back to the product. (i.e ad spend, spend on creative assets, etc)
Indirect – expenses that are tied to talent and technology fees.
The point of this is for you to evaluate if certain channels, markets, geographic regions, etc are worth it moving forward.

For highly detailed plans, this may need to be broken down by individual products or product categories.

5. External Forces

These are the areas you have no control over that have a (positive or negative). This could include product trends, natural disasters, seasonality, etc.

Other areas to consider are:

Social & cultural
Demographic shifts
Economic considerations (i.e housing market crash, rise in oil prices)
Legal, regulatory, ethical
If you’re an established business, consider these from the previous year and discuss if/how this impacted certain rises or drops within specific markets/channels.

If however, you do not have your own historical data to consider, measure the known impact these external forces have had on established competitors and those in your market.

Being prepared for external factors could lead to major opportunities. Think – having enough snow shovels on the shelves during a blizzard, or having enough medical supplies during a natural disaster, or having a protocol in place for upcoming regulatory changes within an industry.

Being prepared for external forces is where a company can catch it’s competitors sleeping.

6. Summary Of The Situational Analysis

Because there is so much to take in with the situational analysis, it’s good to provide a summary of everything you’ve just talked about.

Discuss the opportunities that may arise as a result of any of these factors, what you’d like to spend more on, and where you should spend less.

Section 4 – Pricing & Positioning Strategy

In this section of your marketing plan, detail the positioning you desire within your industry and how your pricing will support it.

Using the information you’ve collected in your situational analysis, pricing will likely need to be adjusted by distribution channel, competitor positioning, geographic region, and so on.

Pricing on channels you own should not also be overly competitive with distribution partners who sell the same product. If you’re selling for 20% less than a highly visible partner for example, you could risk upsetting the partner and losing their distribution.

When discussing positioning, you may also want to briefly discuss how you’ll want to position your product with your existing distribution partners. Don’t worry about going into too much detail on the positioning here, as it will covered in detail in the next sections.

Do you develop exclusive product lines with specific distributors? Will you include special bonuses for customers who buy through that partner? Are certain items only available when a customer orders direct?

Tie all of these adjustments and changes into real numbers and how it impacts the bottom line.

Do this showing the impact of:

Customer sales

By volume and growth percentage
By customer segments
Channel sales

By volume and growth percentage
By channel
Also show the margins associated with working with each channel and how profitable potential price/positioning changes will be.

Because this relates specifically to your existing channels the goal is to show how these changes will attribute to the objectives outlined in Section 1

Section 5 – Distribution Plan

This is where you detail how & where customers will be buying from you.

Are the buying directly through you? Are they buying from other retailers and distributors? Are you doing pop-up shops or selling in person?

If you’re working on a large scale, it’s worth organizing your distribution touch-points into various regions.

Section 6 – Promotions Plan

This section is where you’ll give an overview of your overall promotion plan, providing a summary on existing and new channels you’d like to add to the mix and how it could impact your growth.

This is where you discuss your positioning within each marketing channel (old & new) and specific & detailed plans for each distributor.

It is important to calculate the both the monetary and time costs that will be associated with each channel, and how it will impact growth.

For Example: You currently work with a smaller marketplace site, and for $1,000/day, you’re able to receive front page & sitewide promotion to the products you sell with them. Estimated traffic during the time frame is X. If existing conversion rates are Y and there is a Z% increase in traffic, it could result in ___ new revenue.

Make sure you include all possible channels you want to explore including but not limited to:

Direct Mail
Physical Retail
Other Social Media
Please Note: At scale, each of these channels has a real cost to be done properly. For as much as you can build backlinks and perform keyword research on your own and maybe get early traction, at some point, you will need to hire somebody who knows what it takes to break into more competitive serps.

I highly recommend reading Nick Eubank’s article on Realistic SEO as it will show you just how difficult SEO can be to break into competitive verticals.

I bring this up, especially for early stage entrepreneurs, depending on your budget, skillset & time, the channels that seem “free & easy” are typically even more challenging to break through the noise.

For each area that falls under “Online Marketing” you may want to create separate documents for each, as these plans can be quite detailed on their own.

Section 7 – Marketing Assets

This is the creative used to promote your content to current and existing customers. This may include:

Your website
Ad creative
Design Talent
HD Photography
Business cards
Identify what you already have, and what’s needed to successfully execute the promotion strategies discussed in the previous section.

Section 8 – Conversion Strategy

Once you get people to yours or one of your distributor’s sites, how do you plan on converting them to paying customers?

On sites you don’t control, this could include, but is certainly not limited to:

Improving sales copy
High quality photography
On sites you do own, you’re free to experiment with iterative testing, such as making the search function easier to use, improving the value proposition, and increasing the visibility of features that prospective customers need to feel comfortable buying.

Using what you know about the different customer segments you’ve identified (i.e High Ticket Spenders, Frequent Buyers, etc) propose a handful of ways you might be able to get them spending more & more frequently in this section

Conversion optimization is an ongoing process that is too encompassing to boil down to a handful of tactics. However, if you’re providing an overview here, it’s a good starting point for a separate fully fleshed out document for later.

Section 9 – Joint Ventures & Partnerships

This is where you identify the agreements you’ve made with other organizations to help reach new customers or better monetize your existing customers.

When you see McDonald’s co-promote Coca-Cola, or when you buy a remote and it includes Energizer batteries, this is JV and Partnerships at work.

Think about what other purchases your customers are making before, during, or after they buy from you. Make a list of the companies that provide those solutions and reach out to secure them.

Section 10 – Strategy For Increasing Orders

Here, you detail you’ll make more revenue per customer:

This could include using:

Free shipping thresholds or
Free shipping membership program (flat rate membership)
Product bundling
Subscription services
Increase prices
In this section, be sure to reiterate any relevant qualitative research or data you’ve found that would support a need for the program. Also provide estimates of how much each program might cost to implement and projected impact it may have on growth.

Section 11 – Referral Strategy

How to you incentivize existing customers to refer new customers?

A strong referral marketing program could do wonders for your business, however it requires careful planning and needs to ensure the rewards for joining are valuable for your existing customer and whoever they’re referring.

Which customer segments will be the most receptive to taking action with a referral marketing program, and at what point you should reach out to them. Frequent buyers, for example, may be a good starting point.

Section 12 – Financial Projections

Here is a final summary of all of the expenses incurred from each of the previous sections as well as their projected growth rates and timelines.

While these will never be 100% accurate, they will provide solid guideposts for your overall marketing strategy and goals to achieve.

As you progress through the year, work off of this document and create parallel documents to track the success/failure of certain campaigns. With any luck, you will exceed your own expectations and have even more budget to play around with the next year.

Perfecting Your Business Model

Your business model is your lifeline to a successful and profitable business. Consider the following to create, or fine tune your enterprise:

Value proposition

A description of your customer’s problem, the solution that addresses the problem, and the value of the product from the customer’s perspective.

Market segment

This is your group of customers to target, recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted.

Value chain structure

Your position and activities in the value chain and how you will capture part of the value that it creates in the chain.

Revenue generation and margins

How your revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.

Position in value network

Identify your competitors, complementary partners, and any network effects that can be utilized to deliver more value to the customer.

Competitive Strategy

How your company will attempt to develop a sustainable competitive advantage, for example, by means of a cost differentiation, or niche strategy.

Fundamental Problems in Business and How to Overcome Them

There are so many common errors of the startup business. Poorly written shareholder agreements, over-estimating market demand, under-estimating competition, taking advice from people with limited company building experience, and failures to consult a CPA or lawyer on critical issues are just a few examples.

The best way to survive the potholes of business is to think like an investor and avoid common errors.

Most founders have excessive spirit of entrepreneurship. Company building gets confused with entrepreneurship. Most founders don’t know their weaknesses. Founders are overloaded with and confused by information from incubators, accelerators, mentors, angels, and job coaches.

Most founders do not have the executive skills needed to build a successful startup, they typically have technical or lower-level management backgrounds. Most founders are incapable of evaluating their ideas objectively. It takes 1o to 20 years to develop CEO level executive skills. No one can turn an inexperienced founder into a fundable CEO, as the results are always disappointing. Company building skills require additional experience.

About half the job opportunities are in small businesses. Millions of new jobs are created every year by new startup companies. Unfortunately, a very high percentage of these companies go bankrupt unnecessarily. They fail because something like 99% of Americans believe that starting a new business is easy. They see the success of Bill Gates, Mark Zuckerberg, Richard Branson, and the Shark Tank guys for example, and they think ‘that’s easy – I can do that!” These three entrepreneurs were wildly successful but they are, by far, the exception, not the rule. The dirty little secret known almost exclusively to venture capitalists who provide financing for new businesses is that most successful businesses are run by experienced CEOs. So what’s going on here? Why the gigantic misconception? And what to do about it? There is a very good answer for this question.

Business financing is a confused industry. Accelerators, incubators, job coaches, mentors, advisors, angels, SBDC, finders, brokers, and dealers all promise ideas and connections. Enormous amounts of wasted and ill-advised funding occurs. Seductive propositions that provide little value.



Refining Your Business Plan For Raising Capital

In order to tailor your business plan for raising capital you must understand what your specific audience wants to see and know when looking at your business plan. Follow these guidelines to refine your plan for raising capital:

For Bankers

Bankers want assurance of orderly repayment and they will want to see:

  • Amount of loan
  • How the funds will be used
  • What this will accomplish – how will it make the business stronger?
  • Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate but may be able to negotiate a longer repayment term, which will help cash flow.
  • Collateral offered, and a list of all existing liens against collateral.

For Investors

Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards:

  • Funds needed short term
  • Funds needed in two to five years
  • How the company will use the funds, and what this will accomplish for growth
  • Estimated return on investment
  • Exit strategy for investors (buyback, sale, or IPO)
  • Percent of ownership that you will give up to investors
  • Milestones or conditions that you will accept
  • Financial reporting to be provided
  • Involvement of investors on the board or in management

For Type of Business


  • Planned production levels
  • Anticipated levels of direct production costs and indirect (overhead) costs – how do these compare to industry averages (if available)?
  • Prices per product line
  • Gross profit margin, overall and for each product line
  • Production / capacity limits of planned physical plant
  • Production / capacity limits of equipment
  • Purchasing and inventory management procedures
  • New products under development or anticipated to come online after startup

Service Businesses

  • Service businesses sell intangible products. They are usually more flexible than other types of businesses, but they also have higher labor costs and generally very little in fixed assets
  • What are the key competitive factors in this industry?
  • Your prices
  • Methods used to set your prices
  • System of production management
  • Quality control procedures. Standard or accepted industry quality standards.
  • How will you measure labor productivity?
  • Percent of work subcontracted to other firms. Will you make a profit on subcontracting?
  • Credit, payment, and collections policies and procedures.
  • Strategy for keeping client base.

High Technology Companies

  • Economic outlook for the industry.
  • Will the company have information systems in place to manage rapidly changing prices, costs, and markets?
  • Will you be on the cutting edge with your products and services?
  • What is the status of research and development? And what is required to:
  • Bring the product or service to the market?
  • Keep the company competitive?
  • How does the company:
  • Protect intellectual property?
  • Avoid technological obsolescence?
  • Supply necessary capital?
  • Retain key personnel?

High-tech companies sometimes have to operate for a long time without profits and sometimes even without sales. If this fits your situation, a banker will probably not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer-term financial forecasts to show when profit take-off is expected to occur. And your assumptions must be well documented and well argued.

Retail business

  • Company image.
  • Pricing: Explain markup policies. Prices should be profitable, competitive, and in accordance with company image.
  • Inventory: Selection and price should be consistent with company image.
  • Inventory level: find industry average numbers for annual inventory turnover rate (available in RMA book). Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected first year’s cost of goods sold. If it is not, you may not have enough budgeted for startup inventory.
  • Customer service policies: These should be competitive and in accord with company image.
  • Location: does it give the exposure that you need? Is it convenient for customers? Is it consistent with company image?
  • Promotion: methods used, cost. Does it project a consistent company image?
  • Credit: Do you extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?



Your Easy Guide to Creating a Business Plan To Attract Investment

The following questions will help you answer what you need for your business plan.

I. What business are you in? What do you do? Many organizations have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. Goals are destinations, where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.

What is important to you in business? To whom will you market your products? Is your industry a growth industry? What changes do you forsee in the industry, short term, and long term? How will your company be poised to take advantage of them? Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?

Legal form of ownership: sole proprietor, partnership, Corporation, Limited liability corporation (L.L.C.)? Why have you selected this form?

II. Write your Executive Summary section last. Make it two pages or fewer. Include everything that you would cover in a five minute interview. Explain the fundamentals of the proposed business. What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and industry?

Make it enthusiastic, professional, complete, and concise. If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment.

III. Now outline a marketing strategy that is consistent with your niche. How will you get word out to customers? What media, why, and how often? Why this mix and not some other? Have you identified low-cost methods to get the most out of your promotional budget? Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), and network of friends or professionals? What image do you want to project? How do you want customers to see you?

In addition to advertising, what plans do you have for graphic image support? This includes things like logo design, cards and letterhead, brochures, signage, and interior design (if customers come to your place of business). Should you have a system to identify repeat customers and then systematically contact them?

How much will you spend on the items listed above? Before startup? (These numbers will go into your startup budget). Ongoing? (These numbers will go into your operating plan budget). Explain your method of setting prices. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under price you anyway. Usually you will do better to have average prices and compete on quality and service. Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why?

How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?

IV. Products and services need to be described in depth on your products or services (technical specifications, drawings, photos, sales brochures, and other bulky items belong.

What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique proprietary features. What are the pricing, fee, or leasing structures of your products or services?

 V. No matter how good your product and service, the venture cannot succeed without an effective marketing plan. And this begins with careful, systematic market research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts. Your time will be well spent.

There are two kinds of market research: primary and secondary. Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies. Start with your local library, and our favorite “librarian” Google. Your chamber of commerce has good information on the local area. Trade associations and trade publications often have excellent industry-specific data.

Primary research means gathering your own data. You could not do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus-group interviews to learn about consumer preferences. Professional market research can be very costly, but there are many books that show small business owners how to do effective research themselves.

In your marketing plan, be as specific as possible, give statistics, numbers and sources. The marketing plan is the basis, later on, of all the all-important sales projection. You need to define the economics and facts about your industry as well. What is the total size of your market? What percent share of the market will you have? (This is important only if you think you will be a major factor in the market).

What is the current demand in your target market? What are the growth trends, trends in consumer preferences, and trends in product development? What’s the growth potential and opportunity for a business your size?

What are the barriers to entry that you face in entering the market? Typical barriers include high capital, production, and marketing costs, consumer acceptance and brand recognition, training and skills, unique technology and patents, unions, shipping costs, and tariff barriers and quotas. How will you overcome the barriers? How could change in technology, government regulations, economy, and industry affect your company?

VI. Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment. How and where are your products or services produced? Explain your methods of production techniques and costs, quality control, customer service, inventory control, and product development. What qualities do you need in a location? Describe the type of location you’ll have: your physical requirements such as amount of space, type of building, zoning, power, and other utilities.

Is it important that your location be convenient to transportation or to suppliers for access? Do you need easy walk-in access? What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers? Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.

VII. In your products and / or services section, you described your products and services as you see them. Now describe them from your customer’s point of view. List all of your major features and benefits. Describe the most important features. What is special about it? Describe the benefits. What will it do for the customer?

Your bottom line is your revenue, cost and expenses over the investment amount.

VIII. Who will manage the business on a day-to-day basis? What experience does that person bring to the business? What special or distinctive competencies do they have? Is there a plan for continuation of the business if this person is lost or incapacitated? If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees.

List your professional and advisory support including Board of Directors, management advisory board, attorney, accountant, insurance agent, banker, consultants, and mentors or key advisors.

VIV. Include personal financial statements for each owner and major stockholder, showing assets and liabilities held outside the business and personal net worth. Owners will often draw on personal assets to finance the business, and these statements will show what is available. Bankers and investors usually want this information as well.

You will have many startup expenses before you even begin operating your business. It’s important to estimate these expenses accurately and then to plan where you will get sufficient capital. The more thorough your research efforts, the less chance that you will leave out important expenses or underestimate them.

Even with the best of research, however, opening a new business has a way of costing more than you anticipate. There are two ways to make allowances for surprise expenses. The first is to add a little “padding” to each item in the budget. The problem with this approach is that it destroys the accuracy of your carefully wrought plan. The second approach is to add a separate line item, called contingencies, to account for the unforeseeable. This is the approach we recommend.

Talk to others who have started similar businesses to get a good idea of how much to allow for contingencies. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20 percent of the total of all other startup expenses.

Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed loans. Also explain in detail how much will be contributed by each investor and what percent ownership each will have.

Judging Business Plans

Most business plans would benefit from a more thoughtful and sophisticated approach to analyzing the company’s competition.  The issue is not, “Who are your competitors?”  Nor is it “What features do you have that your competitors don’t have?”  The important questions are:
  • What are the competitive dynamics in your industry?
  • What is the basis for competition?
  • Who are the dominant players, and how do they compete?
  • How do customers decide which product to buy?
  • How do you intend to position your company within this industry?
  • How do you know that your competitive position will be “enough” better to compel customers to buy?
  • What will you do to achieve your positioning?
  • What “alternative solutions” might compete with you, even though they are a different product?
  • What companies might enter the industry in the future?
If you want to write a really good section on “Competition” read the classic by Michael Porter:  Competitive Strategy, Free Press, New York, 1980.