How to write a business plan? Part II: We study the market and; competitors
The main criterion for evaluating a business plan is very simple and sounds like this: if a business plan solves the customer's problem, then it is good, it does not solve it - it is bad. For example, if the goal of a business plan is to get investments, and investments are received, then the assessment of the business plan is high, even if it is impossible to read it without laughing. If the work was done "for internal use", that is, for the management of the enterprise, the business plan can be highly appreciated if the company fulfills the plans for all indicators determined by the developer.
One problem: if the goal is not achieved, there is usually nothing to show the developer. Indeed, an investor may refuse because he did not believe in your ability to implement a quality business plan. The bank may not give a loan, because, despite the high appraisal of the business plan, it does not provide loans without material security. Finally, your company may not fulfill the most professional business plan due to the incompetence or carelessness of your employees. In all of these cases, the reason for the fiasco is not the quality of the business plan.
Why do you need market analysis
By occupation, I have to evaluate hundreds of other people's business plans. The most common mistake of non-professional performers is not understanding the meaning of such a section of a business plan as market analysis. Many developers consider the inclusion of this section in the business plan an annoying necessity, a whim of the authors of standard business planning structures. In this case, of course, there is no connection between market research and marketing plan, and the initial data for the business plan is taken from the ceiling.
At the same time, market analysis is the most time consuming and creative part of a quality business plan. The purpose of this section is to substantiate marketing goals, marketing strategies and tactics. It is on the basis of marketing research that a sales plan is formed, target client segments are selected, decisions are made in the field of positioning, product development, organization of sales channels, contract-price conditions, advertising and promotion. Accordingly, if this section of the business plan contains random quotes from the Internet, which do not allow drawing conclusions that are reasonable and useful for the subsequent sections, such market analysis is useless, and the quality assessment of such a business plan cannot be high.
As a rule, low-quality market analysis has another noticeable sign - the absence of links to data sources. If the developer was "embarrassed" to indicate links, most likely you are in front of an outright hack.
Look for a prototype
I've already written about how low cost business plans are made. Often, even in the portfolio, developers do not hesitate to include work done by rewriting other people's business plans. The most enterprising people simply copy other people's demo versions of business plans to their sites.
But it's easy to check. Teachers of educational institutions have long been using snrvises that search for similar texts on the Internet, and successfully identify careless students with their help. The same services should be included in the toolkit for assessing the originality of business plans.
Presentation of business valuation services
Evaluation of a business plan is a process of analyzing the potential effectiveness of a project, financial risks, payback periods, development prospects. The first stage in building a successful business is drawing up a plan that describes the technological and organizational aspects of its implementation, potential risks, and ways to minimize and eliminate them. The business plan reflects internal and external factors that affect the profitability of the enterprise.
The business plan is evaluated in several stages:
preliminary examination, taking into account the belonging of a business to a particular industry, in order to determine the comparative position of the enterprise and calculate the probable profitability of the business after drawing up a special scheme (matrix of the enterprise life cycle);
· marketing analysis based on the study of the competitive environment, establishing the compliance of activities with current legal norms, compatibility with foreign and domestic policy of the state to calculate the possibility of new participants entering the market;
· technical assessment to check the feasibility of a business plan in regional conditions (taking into account the location of the enterprise, prices and availability of the necessary materials, resources);
· financial analysis (assessment of payback, economic indicators, analysis of planned cash flows, taking into account the estimated timing of the project, because t. planned production volumes and revenues should cover the total investment);
· institutional analysis, which will help to assess the profitability of a business under the influence of internal and external factors that accompany implementation;
· assessment of production, financial and investment, political, market risks associated with losses during political changes, price fluctuations, interest rates on loans, unstable exchange rates, depreciation of investment and financial portfolios, default on obligations to consumers and creditors.
The final stage of analytics is the assessment of implementation scenarios (pessimistic, optimistic, standard). The most important is the pessimistic one: it most accurately reflects the minimum pace of business development. Evaluation of a business plan is an expert opinion that allows you to eliminate uncertainty when investing in a project, to assess its market value, investment attractiveness, and potential financial strength.
How you always want to start your own business faster, giving up on such a tedious preparatory stage, like writing. We categorically do not recommend that you do this. It only seems to you that there is a clear understanding of how to organize the work of the company in your head. But when you start writing everything down on paper, you will realize how many important points you missed.
You can write and our articles will help. In the first part, we talked about how to describe your company. This article will show you how to conduct a competitive analysis, make marketing and production plans.
No matter how daredevil you are, you cannot dive into an unfamiliar river upside down. Before starting your own business, you need to collect as much information as possible about the market in which you are going to occupy, analyze the main trends in the industry and assess the prospects for its development.
Industry and Market Research
Although the concepts of "industry" and "market" are similar at first glance, there is a difference between them. A market is a collection of consumers, and an industry is a collection of producers.
How detailed the research will be depends on what kind of business you are launching. If you are going to sell jewelry in a small town, then it is not necessary to conduct research on the state of the all-Russian and world market. But it may happen that by conducting a more global study, you will see new and interesting development prospects. However, always try to objectively assess the situation, because this is not a wishlist, but an extremely practical document.
First of all, you need to know the following about your industry and market segment:
- Which market are you going to enter with your products: regional, national or international.
- Market capacity.
- Industry level today and development trends.
- Price and sales dynamics over the past few years and forecasts for the next 5 years.
Sources of market information:
- Internet (specialized resources, forums, social networks).
- Polls in social networks and forums.
- Interview with company employees. Successful sales managers know a lot about the market situation.
- Interview with representatives of the target audience.
- Personal observation. If the industry is new and there are no statistics on it yet in authoritative sources, then you can independently conduct research and make forecasts.
In any business plan, an assessment of the sales market is required: examples and demand for competitive products, determination of directions and volumes of demand, trends and forecasts of further development. Depending on how accurately and in detail these issues are worked out, the business will develop rapidly, bringing significant profits, or will cease to exist in the first months of activity.
There are several types of markets:
- Fruitless, on which there is practically no possibility of implementation.
- The main one, where most of the trade for the selected item takes place.
- Optional, which accounts for a small proportion of sales.
- Growing with visible prospects for increased implementation.
- Custom, where the situation remains unclear and a practical test is needed.
- Layered, characterized by instability. May end up being both active and completely useless.
Markets can be industrial, military or consumer based on the nature of customer demand. Each has its own differences.
The main thing for the defense industry is high quality and the possibility of prompt receipt of raw materials. The industrial market needs precision in contract execution. For ordinary consumers, affordability and prompt delivery mean a lot.
Depending on the results identified, a business penetration strategy is planned for the selected market. New marketing moves should be developed for the main market, opportunities for a lower cost of goods, for holding promotions or charitable events should be considered. In addition, existing markets respond well to the introduction of new modifications to products already on sale.
It is necessary to conduct a thorough research of the target audience, finding out the maximum amount of information about the future consumer, his requests in terms of quality, cost, quantity of consumed goods, expectations for the service.
New markets need to be conquered by making advertising more functional, conducting an intensive search for your buyer. In addition, sometimes it is wise to expand the business by penetrating into related areas and providing a full range of services, which allows you to reduce the cost of goods.
An example of a market assessment in a business plan might be the following document:
“In the field that is engaged in the production of goods (provision of services or sales) in ____, there was an increase from ___ rubles. up to ____ rubles, which in percentage terms is equal to ___% for ___ years.
After studying these documents presented on the market (reports, documents of research companies, marketing agencies), in ___ years, market volumes are expected to increase by ___%. Directly by ___, the market volume will reach ____ million rubles.
Key performance indicators (KPIs) are a whole system of assessment that helps an organization determine the achievement of strategic and tactical goals. Their use gives the organization the opportunity to assess its condition and to help assess the implementation of the strategy.
Business project performance indicators are:
- Break-even point
- Financial strength
- Payback period - PBP,
- Accepted discount rate -D
- Discounted payback period- DPBP
- Net present value- NPV
- Internal rate of return- IRR
- Term of repayment of borrowed funds - RP
- Coverage ratio of outstanding loans (repayment of borrowed funds)
The main indicator of the efficiency of any enterprise is profit, as the most important indicator of the organization's activities.
The next indicator that characterizes the efficiency of an enterprise is profitability.
Profitability means profitability, profitability of an enterprise.
Profitability is the result of the manufacturing process.
The main indicators of profitability are:
1). Product and sales profitability
2). Enterprise ROI
4). Production profitability
It is formed under the influence of factors related to: