What’s a business without a business plan? Answer: an unorganized one! It is not a surprise that planning a complete business model with projections, customer acquisition costs, and knowing 100% who your target market is nearly impossible when you are just starting out. But, sometimes in order to receive a bank loan or even a private loan from a family member or angel investor, you need to have a plan in place.
Before moving forward with your business idea, it is important to complete basic research. Make sure you have a good understanding of your total market. Many times this preliminary research is essential to obtain funding. There are four main areas that you should research thoroughly before starting your business. You will also want to incorporate much of this research into your business plan.
Who is Your Customer?
If you answered this question as, “everyone.” We love the enthusiasm, but suggest taking a deeper dive. Are you taking on a B2B (Business to Business) or B2C (Business to Consumer) model? Establish a customer archetype that showcases not only demographics but also psychographics for your target audience. Your customer description should be specific and identify their characteristics such as age, gender, location, income level, occupation, family structure, education and general demographics. It may be helpful to include your customers’ likes, dislikes, habits, hobbies, etc. If your customer is a business, you will want to include a breakdown of the types of businesses you are targeting, industry, location, size of firm, etc. Identify decision makers in these businesses and develop characteristics for them as well. Furthermore, talk to your customers. They will give you the best insight on determining what markets you should and should not be targeting. Save time and money by going directly to potential customers and listen to their input.
What/Where is Your Target Market?
Next, you will want to determine the geographic area where most of your targeted customers will be coming from. Are your customers mostly local, or will you reach out to customers nationally? Will you target customers within a 100 mile basis, or will you primarily target customers driving by your business on a daily basis? In the market area you defined, how many customers are there? Will your business be able to sustain on the target market you have defined?
What is the Industry Like Both Locally and Nationally?
You will also want to take a look at the condition of your industry locally and at a national level. Is the industry booming, or is it a fading fad? What is the demand for your product/service in your defined market area?
Who is Your Competition?
What companies or products/services will be in competition with your business? List your direct competitors and compare them to your company by looking at the products/services offered, location, price, target markets served, reputation and image, customer service, marketing/advertising, and their current market share. It is also important to examine competitors that are not considered direct, but still make up a part of the market share. For example, if you owned a movie theater, a bowling alley would be considered an indirect competitor, as another location customers could spend their recreational time and money. Create connections with local businesses that are considered indirect or direct. Keep your competition in your corner by establishing a relationship that can lead to marketing opportunities and a support system.
Below are some additional ideas on what research you’ll need to get started:
- Research market potential using census data and demographic databases (who will pay for your product or service?)
- Research production options using business databases (how will you deliver the product or service?)
- Research patent filings (is your product or idea patented or trademarked?)
A business plan is as unique as the business it describes. There really isn’t one set way. Writing a business plan is never the same for each business, but there are some principles that stay the same. Some things to consider in your planning, is where your business will be located, and any local city requirements. A benefit to writing your business plan during a Pandemic, is that you can see how businesses in your industry reacted to the crisis, and what they are doing now to come out on top. Study them, learn from them, and add it to your plan to become stronger .
The Business Model Canvas
The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent and pivot your business model. This concept allows anyone currently in business, or starting a new business, to think through the business model of their organization, competitors, or any other enterprise.
The 9 building blocks of the Business Model Canvas include: Watch Video
- Customer Segments - For whom are we creating value? Who are our most important customers?
- Value Propositions - What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve?
- Channels - How are we currently reaching out to our customer segments, and how do they want to be reached?
- Customer Relationships - What type of relationship does each of our customer segments expect us to establish and maintain with them? Which ones have we established and how are they integrated with the rest of our business model?
- Revenue Streams - For what value are our customers really willing to pay? What do they currently pay and how are they paying? How much does each revenue stream contribute to overall revenues?
- Key Resources - What key resources do our value propositions require? Our Distribution Channels, Customer Relationships, and Revenue Streams?
- Key Activities - What key activities do our value propositions require? Our Distribution Channels, Customer Relationships, and Revenue Streams?
- Key Partnerships - Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform?
- Cost Structure - What are the most important costs in our business model? Which key resources and key activities are most expensive?
Learn More About the BMC
The Venture School program is a 6-7 week program, put on by the University of Iowa, that emphasizes real-world entrepreneurship and takes you through the Business Model Canvas in a collaborative environment. Each year, multiple cohort sessions take place around the state. The program works for startups, small businesses, non-profits, and corporate innovation teams. For more information on participating in a Venture School near you, view their schedule.
Meet with a Counselor
Connect with one of our resource partners who can assist you put together your business plan. Several organizations throughout the state offer free one-on-one sessions with trained counselors. Counselors act as sounding boards as you move from evaluating your idea to planning your business and can address a number of start-up issues, including markets, competition, operations and your business plan. When you contact a potential counselor, be specific about what information you need and what kind of business you are starting so you can be matched with the best resource.
Before meeting with a counselor, make note of the following:
- Questions from your market research
- Concerns about how your business will operate
- Issues about competition or location