Originally published in Marketing Profs
“Top 5 Elements of an Annual Business Plan”, MarketingProfs, marketing resource newsletter.
It’s that time again: the end of another fiscal year. Time to assess this year’s successes and start planning for next year. What does this mean? It means it’s time to write your business Plan.
Whether you’re a sole proprietor or a multi-million dollar enterprise, you need a business plan. Why? It sets the course for the coming year. It defines strengths (and what worked) and weaknesses (and what didn’t work). It identifies priorities for the coming year and serves as a guide for your business.
A business plan can be hundreds of pages or just a few. Whatever the volume, it needs to contain at least the following.
- Situation Analysis
A situation analysis defines the current situation. This must be an objective assessment. It’s not a marketing pitch for your clients. It’s an honest description of where you are today. Look at revenues for the past three years. How do you match up against your closest competitors?
Take a hard look at your strengths and weaknesses. As you evaluate the opportunities in the marketplace, do a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to see how you measure up internally. Start to look at what is unique about your product or service compared to your major competitors.
Analyze the main environmental factors that affect your business. At a minimum, take a look at the economic climate in the industry where you plan to do business in the coming year.
Is it in growth mode or has it been adversely affected by the current economic conditions? Are there regulatory issues that may affect your ability to grow your business? These are factors that are beyond your control, but they have a direct and immediate effect on where you should spend your time and dollars in the coming year.
- The Market
Do an in-depth assessment of your competition. Who are your toughest competitors? What are they doing to entice customers to buy their products or services? Are they doing something that you aren’t?
Take a minute to think out of the box and look more broadly at your competition. For example, if you provide snack vending machines for local businesses, you know that your competitors are other snack vending machine suppliers. But, you’re also competing against nearby convenience stores, company cafeterias, a fast food restaurant across the street, a brown bag lunch from home. It’s often more than what you see on a first pass.
What is the price of your product compared to your competitors? Is your product the premium product? Is it the lowest-priced product? Are your services priced about the same as others offering similar services? Does price affect how your customers compare you to others offering comparable products or services?
How does your competition promote their products and services? Do they have a website? Do you? If you are a professional services consultancy, are your competitors emailing a monthly newsletter with information about their services? Are you?
- Positioning your Product or Service
What is unique about your product or service? If you can’t describe what makes your product or service different, review why your customers bought from you in the past. Then think why they might buy from you in the future.
Define who is most likely to buy your product or service. Look at your current customers as they are a good indication of who will buy from you in the future. Drill down from those customers to determine who your target customers are. Create a scenario that will describe what you can do to get that target customer to buy from you next year.
- Setting Objectives
All the analysis you have done so far in your business plan is lost unless you absorb the data and use it to set objectives for the coming year. Objectives should include projections for monthly revenues, the number of clients you will need to reach those monthly revenue goals, etc.
Don’t forget that objectives are measurable. When you set an objective, include dates for completion and provide time to monitor your progress.
This may be the most important section of your plan. Based on the situation analysis, your competitors, your positioning statements and your objectives, it’s time to define how you are going to reach your goals. What strategies will you use to meet your financial and product and services goals next year?
Be honest with yourself; set realistic goals that track with your prior year’s performance. Target areas where you think you can get business and concentrate on those.
Now that you have all the ingredients, it’s time to get started. Remember, a business plan needs to be written, no skimping on this. A written plan forces you to think it through, follow a defined outline, and be specific
Good writing and good luck!