January is such an exciting time for businesses.  Owners normally find themselves rejuvenated after the holidays and ready for an even BETTER new year.  The desk gets cleared, the blank pages come out, the pen is poised and the first question that comes to mind is, “where do I start?”

Here is the thing with planning and goal setting.  It’s fun, especially when done at the 50,000 foot level that entrepreneurs love.   However, somehow these great ideas need to be realistically achieved or you are simply setting yourself up for failure.  

Here are some guidelines to Plan for Success:

Start with the end in mind. 

Where do you want to be a year from now? Obviously one of the main goals you should determine is your gross revenue for the company and the net pay that goes into your pocket.  But some other goals you may want to achieve relate to company growth (e.g. # of employees, new regions, products & services, etc).  There is also nothing wrong in throwing in personal goals.  Life is about balance.  Good health, a positive outlook and peace of mind always make for a more productive business owner.

Make your goals S.M.A.R.T. 

Stay away from obscure goals.  SMART goals are:

a) Specific – Avoid generalizing in your goals.  Make them as specific as possible by incorporating as many of the following as you can into each goal.

• Who is involved in the goal?
• What are you trying to accomplish?
• When will the goal be completed by?
• Where will this goal take place?
• How will this goal be reached?

   b) Measurable – Ask yourself, “How will I know I achieved my goal?”  You will need to include measurement in your goal so you know you have succeeded in reaching them.  (e.g.  Increase of 2 employees, overall business growth of 6%, etc).

   c) Agreed Upon – Goals should be agreed upon by all those that will be involved in making them happen.  Even if you are solopreneur, if you delegate to others, ensure that they understand the importance of the goal.  You also must agree to yourself that this goal is important.  It is a good idea when making goals that you set priorities for each goal and that you put some serious thought into whether or not they are TRULY important to you.  Because when the going gets rough, its easy to abandon your goals.

   d) Realistic – One of the biggest mistakes you can make is to set yourself up to fail.  The goals you set should be achievable within the time period you specified.  It is an art to determine goals that stretch you just enough without becoming unrealistic.  The more facts you are basing your goals on the better you can predict real results.

   e) Have a Target Date – Always, always include a target date to achieve your goals.  Then note those dates in your calendar.  Important to note here is HOW much time you allocate to each goal.  Too much time affects your overall performance and not enough time sets you up for failure or poor quality.

Work Backwards

Once you have set your long term goals, you will need to break those goals down into monthly, then weekly then daily mini-goals.  I’m a big fan of Excel sheets and calendars to show you what you need to do at specified intervals to achieve the end result.  This is time management at its best and will help you to be as productive as you possibly can. 

You should identify others that you need to delegate to in order to achieve your goals and when they need to complete their tasks by.  Working backwards helps you avoid being at the same place a year from now, wandering why you didn’t succeed.

Review, Revise, Reimplement

Schedule regular intervals throughout the year to review your goals and whether or not you are on track to achieving them.  If you are ahead or behind schedule, determine what has caused the change, revise your plans accordingly and reimplement for the remainder of the year.

This is a vital step to staying on track.  Just like a captain steering his ship, a business owner needs to check direction and adjust for unforeseen circumstances to get to their final destination.

Goal setting and company planning should be done every year you are in business.  Not only does this keep you on track, but it keeps you motivated.  As a mother and an entrepreneur, who doesn’t need a little dose of motivation at times to keep you moving forward with your dream!

About the Author…
Cidnee Stephen is the owner of Strategies for Success – a marketing company that focuses on the needs of budget-minded small businesses and professional services. She has helped hundreds of small businesses get out of their peak and valley ruts to finally achieve that next vital level of success. Cidnee is also a sought-after speaker, writer and blogger on marketing topics that affect small businesses and B2B service based operations. Subscribe for Free to her bi-weekly marketing tips for small businesses and also receive a special report on the 7 Steps of Marketing Success.

Market forecast
Analyze your market by segments and project market growth for five years.

Sales forecast
Forecast your sales by product or service. The mathematics are simple, but important. You can’t do a marketing plan without a sales forecast.

Expense budget
The budget is another absolute essential. How much are you going to spend? On what? How does your spending relate to strategy?

Milestones
This is perhaps the most important table in the whole plan: concrete milestones to make it real, with managers, deadlines, and budgets.

Sample tables from Marketing Plan Pro.

• Situation Analysis: Normally this will include a market analysis, a SWOT analysis (strengths, weaknesses, opportunities, and threats), and a competitive analysis. The market analysis will include a market forecast, segmentation, customer information, and market needs analysis.
• Marketing Strategy: This should include at least a mission statement, objectives, and focused strategy including market segment focus and product positioning.
• Sales Forecast: This would include enough detail to track sales month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales by product, by region or market segment, by channels, by manager responsibilities, and other elements. The forecast alone is a bare minimum.
• Expense Budget: This ought to include enough detail to track expenses month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales tactics, programs, management responsibilities, promotion, and other elements. The expense budget is a bare minimum.

Are They Enough?
These minimum requirements above are not the ideal, just the minimum. In most cases you’ll begin a marketing plan with an Executive Summary, and you’ll also follow those essentials just described with a review of organizational impact, risks and contingencies, and pending issues.

Include a Specific Action Plan
You should also remember that planning is about the results, not the plan itself. A marketing plan must be measured by the results it produces. The implementation of your plan is much more important than its brilliant ideas or massive market research. You can influence implementation by building a plan full of specific, measurable and concrete plans that can be tracked and followed up. Plan-vs.-actual analysis is critical to the eventual results, and you should build it into your plan.

Market Forecast – Example

The AMT computer store has a simple market forecast. The plan defines two target market segments, and the forecast projects how many potential customers in each of those segments by years, for five years.

In the market forecast, the numbers indicate that there are 25,000 home offices included in the market, and that number is growing at an estimated five percent per year. There are also 10,000 small businesses in the area, and that number is also growing at five percent per year.

These numbers are estimates. Nobody really knows, but we all make educated guesses. AMT’s owners researched the market as well as they could, then estimated populations of target users in their area and the annual growth rates for each.

The chart below offers a visual representation of the AMT market forecast.

The table below shows the market forecast described for AMT.

Market Value

Normally you would also look at market value, not just market size. For example, even though AMT’s high-end home segment is 2.5 times larger than its small business segment as measured by number of customers, the small business customer spends almost four times as much as the home office customer. Therefore the small business market is a more important market in terms of dollar value. The table below shows AMT’s method for tracking market value.

The important numbers in this table are the average purchase per customer and the market value:

Average purchase per customer is an educated guess based on AMT’s experience. Sales managers got together to make the estimate. Although AMT would have liked some external source of information to use for this, there was none available. Notice that the home office customer tends to purchase much less overall than the small business customer.

The market value is simple mathematics. Multiply the number of potential customers in the market by the average purchase per customer. In this case they took the average number of customers in each segment over the five-year forecast period and multiplied that by the average purchase per customer, to calculate the market value.

The other items in this market analysis table are subjective qualities that help with marketing. AMT assigns these points to people charged with preparing marketing materials.

Reality Checks

A market forecast should always be subject to a reality check. When you think you have a forecast, you need to find a way to check it for reality. In AMT’s case, if the total market is worth some estimate they could estimate sales of all the competitors and see if the two numbers relate to each other. In an international market, you might check production and import and export figures to see whether your estimates for annual shipments appear to be in the same general range as published figures. You might check with vendors who sold products to this market in some given year to see whether their results check with your forecast. You might look for macroeconomic data to confirm the relative size of this market compared to other markets with similar characteristics.

Review Target Focus

The market analysis should lead to developing strategic market focus. That means selecting the key target markets. This is the critical foundation of strategy. We talk about it as segmentation and positioning.

Under normal circumstances, no company will attempt to address all the segments in a market. As you select target segments, think about the inherent market differences, keys to success, competitive advantage, and strengths and weaknesses of your company. You want to focus on the best market, but the best one is not necessarily the largest one or the one with the highest growth. It might be the one that matches your own company profile.

The SWOT analysis begins by conducting an inventory of internal strengths and weaknesses in your organization. You will then note the external opportunities and threats that may affect the organization, based on your market and the overall environment. Don’t be concerned about elaborating on these topics at this stage; bullet points may be the best way to begin. Capture the factors you believe are relevant in each of the four areas. You will want to review what you have noted here as you work through your marketing plan. The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy.

Some experts suggest that you first consider outlining the external opportunities and threats before the strengths and weaknesses. Marketing Plan Pro will allow you to complete your SWOT analysis in whatever order works best for you. In either situation, you will want to review all four areas in detail.

Strengths

Strengths describe the positive attributes, tangible and intangible, internal to your organization. They are within your control. What do you do well? What resources do you have? What advantages do you have over your competition?

You may want to evaluate your strengths by area, such as marketing, finance, manufacturing, and organizational structure. Strengths include the positive attributes of the people involved in the business, including their knowledge, backgrounds, education, credentials, contacts, reputations, or the skills they bring. Strengths also include tangible assets such as available capital, equipment, credit, established customers, existing channels of distribution, copyrighted materials, patents, information and processing systems, and other valuable resources within the business.

Strengths capture the positive aspects internal to your business that add value or offer you a competitive advantage. This is your opportunity to remind yourself of the value existing within your business.

Weaknesses

Note the weaknesses within your business. Weaknesses are factors that are within your control that detract from your ability to obtain or maintain a competitive edge. Which areas might you improve?

Weaknesses might include lack of expertise, limited resources, lack of access to skills or technology, inferior service offerings, or the poor location of your business. These are factors that are under your control, but for a variety of reasons, are in need of improvement to effectively accomplish your marketing objectives.

Weaknesses capture the negative aspects internal to your business that detract from the value you offer, or place you at a competitive disadvantage. These are areas you need to enhance in order to compete with your best competitor. The more accurately you identify your weaknesses, the more valuable the SWOT will be for your assessment.

Opportunities

Opportunities assess the external attractive factors that represent the reason for your business to exist and prosper. These are external to your business. What opportunities exist in your market, or in the environment, from which you hope to benefit?

These opportunities reflect the potential you can realize through implementing your marketing strategies. Opportunities may be the result of market growth, lifestyle changes, resolution of problems associated with current situations, positive market perceptions about your business, or the ability to offer greater value that will create a demand for your services. If it is relevant, place timeframes around the opportunities. Does it represent an ongoing opportunity, or is it a window of opportunity? How critical is your timing?

Opportunities are external to your business. If you have identified “opportunities” that are internal to the organization and within your control, you will want to classify them as strengths.

Threats

What factors are potential threats to your business? Threats include factors beyond your control that could place your marketing strategy, or the business itself, at risk. These are also external – you have no control over them, but you may benefit by having contingency plans to address them if they should occur.

A threat is a challenge created by an unfavorable trend or development that may lead to deteriorating revenues or profits. Competition – existing or potential – is always a threat. Other threats may include intolerable price increases by suppliers, governmental regulation, economic downturns, devastating media or press coverage, a shift in consumer behavior that reduces your sales, or the introduction of a “leap-frog” technology that may make your products, equipment, or services obsolete. What situations might threaten your marketing efforts? Get your worst fears on the table. Part of this list may be speculative in nature, and still add value to your SWOT analysis.

It may be valuable to classify your threats according to their “seriousness” and “probability of occurrence.”

The better you are at identifying potential threats, the more likely you can position yourself to proactively plan for and respond to them. You will be looking back at these threats when you consider your contingency plans.

The implications

The internal strengths and weaknesses, compared to the external opportunities and threats, can offer additional insight into the condition and potential of the business. How can you use the strengths to better take advantage of the opportunities ahead and minimize the harm that threats may introduce if they become a reality? How can weaknesses be minimized or eliminated? The true value of the SWOT analysis is in bringing this information together, to assess the most promising opportunities, and the most crucial issues.

An example

AMT is a computer store in a medium-sized market in the United States. Lately it has suffered through a steady business decline, caused mainly by increasing competition from larger office products stores with national brand names. The following is the SWOT analysis included in its marketing plan.

Strengths

1. Knowledge. Our competitors are retailers, pushing boxes. We know systems, networks, connectivity, programming, all the Value Added Resellers (VARs), and data management.
2. Relationship selling. We get to know our customers, one by one. Our direct sales force maintains a relationship.
3. History. We’ve been in our town forever. We have the loyalty of customers and vendors. We are local.

Weaknesses

1. Costs. The chain stores have better economics. Their per-unit costs of selling are quite low. They aren’t offering what we offer in terms of knowledgeable selling, but their cost per square foot and per dollar of sales are much lower.
2. Price and volume. The major stores pushing boxes can afford to sell for less. Their component costs are less and they benefit from volume buying with the main vendors.
3. Brand power. Take one look at their full-page advertising, in color, in the Sunday paper. We can’t match that. We don’t have the national name that flows into national advertising.

Opportunities

1. Local area networks. LANs are becoming commonplace in small businesses, and even in home offices. Businesses today assume LANs are part of normal office work. This is an opportunity for us because LANs are much more knowledge and service intensive than the standard off-the-shelf PC.
2. The Internet. The increasing opportunities of the Internet offer us another area of strength in comparison to the box-on-the-shelf major chain stores. Our customers want more help with the Internet and we are in a better position to give it to them.
3. Training. The major stores don’t provide training, but as systems become more complicated with LAN and Internet usage, training is more in demand. This is particularly true of our main target markets.
4. Service. As our target market needs more service, our competitors are less likely than ever to provide it. Their business model doesn’t include service, just selling the boxes.

Threats

1. The computer as appliance. Volume buying and selling of computers as products in boxes, supposedly not needing support, training, connectivity services, etc. As people think of the computer in those terms, they think they need our service orientation less.
2. The larger price-oriented store. When they have huge advertisements of low prices in the newspaper, our customers think we are not giving them good value.

Leveraging the insight the SWOT analysis can bring is time well invested.

Originally published on Bplans.com.

One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” has proven to be a useful tool for both business and marketing-based planning.

Background
The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment.

• Suppliers
• Buyers
• Entry/Exit Barriers
• Substitutes
• Rivalry

Supplier power

• Supplier concentration
• Importance of volume to supplier
• Differentiation of inputs
• Impact of inputs on cost or differentiation
• Switching costs of firms in the industry
• Presence of substitute inputs
• Threat of forward integration
• Cost relative to total purchases in industry

Buyer power

• Bargaining leverage
• Buyer volume
• Buyer information
• Brand identity
• Price sensitivity
• Threat of backward integration
• Product differentiation
• Buyer concentration vs. industry
• Substitutes available
• Buyers’ incentives

Entry/exit barriers

• Absolute cost advantages
• Proprietary learning curve
• Access to inputs
• Government or other binding policy
• Economies of scale
• Capital requirements
• Brand identity
• Switching costs
• Access to distribution
• Expected retaliation
• Proprietary products

Substitutes

• Switching costs
• Buyer inclination to find alternatives
• Price-performance
• Trade-off of the available substitute products or services

Rivalry

• Exit barriers
• Industry concentration
• Fixed costs
• Perceived value add
• Industry growth
• Overcapacity status
• Product differences
• Switching costs
• Brand identity
• Diversity of rivals
• Corporate stakes

Service

• Level of service compared to others
• Added value perceptions
• Dynamics with other attributes

Power of suppliers
An industry that produces goods requires raw materials. This leads to buyer-supplier relationships between the industry and the firms that provide the raw materials. Depending on where the power lies, suppliers may be able to exert an influence on the producing industry. They may be able to dictate price and influence availability. A segment is unattractive when an organization’s suppliers have the ability to:

• Increase prices without suffering from a decrease in volume
• Reduce the quantity supplied
• Organize in a formal or informal manner
• Compete in an environment with relatively few substitutes
• Provide a product/material that is a critical part of the end product or service
• Impose switching costs on their customers when they depart
• Integrate downstream by purchasing or controlling the distribution channels.

One example of this is DeBeers’ ability to wield influence within the diamond industry. DeBeers’ high level of control over some of the most productive diamond mines in the world gives them extreme power within the industry.

The best defense in mitigating the power of suppliers is to build win–win relationships with suppliers or arrange to use multiple suppliers.

Power of buyers
The power of buyers describes the impact customers have on an industry. When buyer power is strong, the relationship to the producing industry becomes closer to what economists term a monopsony. A Monopsony is a market where there are many suppliers and one buyer. Under these market conditions, the buyer has the most influence in determining the price. Few pure monopsonies actually exist, but there is often a connection between an industry and buyers that determines where power lies.

The bargaining power of buyers increases when they have the ability to:

• Be “organized” in some form with others providing similar products and services
• Purchase a product that represents a significant fraction of the buyer’s costs
• Buy a product that is undifferentiated
• Incur low switching costs when they change vendors
• Be price sensitive, with other options available
• Integrate upstream, to purchase the providers of the goods.

To mitigate the power of buyers, sellers can seek to select buyers with less power to negotiate, switch suppliers, or develop superior offers that strong buyers cannot refuse.

Barriers to entry/exit
The possibility of new firms entering the industry impacts competition. A key is to assess how easy it is for a new player to enter an industry. The most attractive segment has high entry barriers and low exit barriers. Although any firm should be able to enter and exit a market, each industry often presents varying levels of difficulty, commonly driven by economics. Manufacturing-based industries are more difficult to enter than many service-based industries. The definable characteristics of each industry protect profitable areas for firms and inhibit additional rivals from entering the market. These inhibitive characteristics are referred to as barriers to entry.

Barriers to entry are more than the expected ebb and flow that markets typically experience. For example, when industry profits increase, one would expect firms to enter the market to take advantage of the high profit levels, which will eventually result in reducing profits.

Conversely, when profits decrease, we would expect some firms to exit. Other factors that will deter new entrants are falling prices, actions that keep prices artificially low, expectations that future prices will fall, large or unpredictable start-up expenditures, and other extreme uncertainties.

Barriers to entry are unique characteristics to each industry. They reduce the rate of entry of new firms and, therefore, maintain a level of profits for current industry competitors. Barriers to entry can be created or exploited to enhance a firm’s competitive advantage.

Barriers to entry arise from several sources:

• Patents and proprietary knowledge
• Asset specificity – (Specialized technology or infrastructure)
• Economies of scale
• Government.

Barriers to exit work similarly to barriers to entry. Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry – unable to leave the industry, a firm must compete. Some of an industry’s entry and exit barriers can be summarized as follows: Profitability potential is high when both entry and exit barriers are high. In this situation, firms do face more risk because poorer-performing ones tend to continue to produce regardless of profitability and, therefore, continue to add to the supply.

Substitute products
Porter’s Five Forces model refers to “substitute products” as those products that are available in other industries that meet an identical or similar need for the end user. As more substitutes become available and affordable, the demand becomes more elastic since customers have more alternatives. Substitute products may limit the ability of firms within an industry to raise prices and improve margins.

For example, the price of aluminum cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the same industries. A substitute product to the services offered by a CPA firm is accounting or tax-based software – two very different industries that offer some of the same consumer benefits.

The treat of substitutes often impacts price-based competition. There are other concerns in assessing the threat of substitutes relating to technology. New technologies contribute to competition though substitute products and services. Think of the impact wireless technologies have had on traditional telephone service. Except in remote areas it is unlikely that cable TV could compete with free broadcast TV from an antenna without the greater diversity of entertainment that it affords the customer.

Again, a segment is unattractive when there are actual or potential substitutes for a product.

Rivalry
Firms strive to secure a competitive advantage over their rivals. The intensity of rivalry varies within each industry and these differences can be important in the development of strategy.

Industries that are “concentrated,” versus “fragmented,” often display the highest level of rivalry. Many, including The US Bureau of Census, recognize industry concentration and measure it by the “concentration ratio” (CR). The Census Bureau reports the CR by Standard Industrial Classification (SIC) Code and it indicates the percent of market share held by the four largest firms. A high concentration ratio indicates that a majority of market share is controlled by the largest firms. If a few firms hold a large market share, the competitive landscape is less competitive as it nears that of a monopoly. A low CR indicates that the industry has many rivals, none with significant market share. These fragmented markets are said to be competitive.

In pursuing an advantage over its rivals, a firm can choose from several competitive moves:

• Changing prices
• Improving product differentiation
• Creatively using channels of distribution
• Exploiting relationships with suppliers.

For example, the intensity of rivalry is increased by the following industry characteristics:

• Numerous competitors that are particularly strong or aggressive that are competing for the same customers and resources
• Declining sales revenues and volumes resulting in slow market growth, creating the need to actively fight for market share
• High fixed costs result in an economy of scale effect
• High storage costs or highly perishable products
• Plant capacity is being added, over and above what is needed to meet demand
• Low switching costs for buyers
• Low levels of product differentiation
• Strategic stakes are high when a firm is losing market position or has potential for great gains
• High exit barriers place a significant cost on abandoning the product
• A diversity of rivals with different cultures, histories, and philosophies
• An industry shakeout
• When a rival acts in a way that elicits a counter-response by other firms
• Competitors have high stakes – economic and other – and will battle to remain as a player within the segment.

These conditions will make competing within the industry more challenging, commonly leading to frequent price wars, advertising battles, and the addition of new products.

Service
Service can also play a part in the industry’s dynamics. Those competitors that provide superior service may bring an advantage to their competitive position if the industry/customer places value on this attribute. This is another point of differentiation and can be a key strategic element to consider. If a competitor has a service component that is difficult to replicate, it will prove to offer a strategic advantage.

The result
We can look at several industries and see how Porter’s Five Forces would depict them; the entertainment industry is in flux, telecommunications companies are volatile, computer firms are merging, utility industries are down, the housing market is up. Porter’s Five Forces can assist us to better understand these dynamics in a more objective manner and hopefully make better strategic decisions as a result.

Originally published on Bplans.com.

• organization size
• market share
• comparative product quality
• growth
• available capital and resources
• image
• marketing strategy
• target markets
• and any attributes you consider important.

Industry associations, industry publications, media coverage, information from the financial community, and their own marketing materials and websites may be good resources to identify these factors and “rate” the performance of each competitor.Your access to competitive information will vary. Competitors that are publicly traded may have a significant amount of information available. Competitive information may be limited in situations where your competitors are privately held. If possible, you may want to take on the task of playing the role of a potential customer and gain information from that perspective.

Discuss how your service offering compares to the others. For example:

• Your travel agency might offer better airline ticketing than others, or perhaps it is located next to a major university and caters to student traffic.
• Your graphic design business might be mid-range in price, but well known for proficiency in creative technical skills.
• Your management consulting business is a one-person home office, but enjoys excellent relationships with major personal computer manufacturers who call on you for work in a vertical market in which you specialize.

Discuss how you are positioned in the market.

• Why do people buy your services instead of the other services offered in the same general categories?
• What benefits do you offer?
• At what price?
• To whom?
• How does your mix compare to others?

Think about specific kinds of benefits, features, and market groups, comparing where you think you can show the difference your company provides relative to your competition.Explain the general nature of competition in this business, and how the customers seem to choose one provider over another. In the restaurant business, for example, competition might depend on reputation and trends in the high-end part of the market, and on location and parking for a fast food restaurant. In many professional service practices, the nature of competition depends on word of mouth because advertising is not completely accepted.

For example:

• Is there price competition between accountants, doctors, and lawyers?
• How do people choose travel agencies or florists for weddings?
• Why does someone hire one landscape architect over another?
• Why choose Starbucks, a national brand, over the local coffee house?

All of this is the nature of competition. These considerations provide focus to your competitive analysis:

• What factors make the most difference for your business?
• What might make customers choose one of your types of business over another?
• Price or billing rates?
• Reputation?
• Image and visibility?
• Are brand names important or is it simply word of mouth, in which the secret is long-term satisfied customers?
• In what segments of the market do your competitors operate?
• What seems to be their strategy?
• How much do they impact your business, and what threats and opportunities do they represent?

The goal of the competitive analysis is to better position your organization to leverage your competitive edge. How is your company different from others? In what way does it stand out? Is there a sustainable value that you can maintain and develop over time? For example:

• A restaurant might have an excellent location, and/or a well-known master chef. The competitive edge might be different for any given company, even between one company and another in the same industry.
• A graphic design firm might have a head start in Internet Web design or a programming staff as a competitive edge, which puts it ahead of most competitors.
• An accounting practice might have a very-well-known senior partner, whose books are used as texts.

Business plans should incorporate a section addressing the competitive analysis. Business Plan Pro by Palo Alto Software is one example of how the competitive analysis is integrated into the plan. This information and perspective is then used to build a more comprehensive competitive business strategy.

Originally published on Bplans.com.

Palo Alto Software partnered with marketing guru John Jantsch, creator of the proven Duct Tape Marketing System, in the developement of Marketing Plan Pro v11 powered by Duct Tape Marketing. The software has several outlines to help you tailor your marketing plan.

The 30-Minute Marketing Plan offers just the basics, a very simple plan that you can get done quickly. It is a good way to document your thinking, or just get started. It lets users who are already familiar with the Duct Tape Marketing System briefly summarize the main sections of the marketing action plan.
Click here to see a PDF of a 30 Minute Marketing Plan outline

The Basic Marketing Plan is a modest marketing plan for the people who don’t have the time, or the need for an extremely detailed plan. You can start here, including such topics as internal Marketing Training, drafting your Marketing Materials, and more. You can Switch to the Standard plan later when you need to expand your marketing activities.
Click here to see a PDF of a Basic Marketing Plan outline for the same company.

The Standard Marketing Plan walks you through all the steps of the Duct Tape Marketing System. It includes the most detail, and breaks each task down into smaller steps for you to plan your marketing actions in detail.
Click here to see a PDF of a Standard Marketing Plan outline for the same company.

The marketing plan examples linked above show how the same company begins its marketing program with a simple action plan and then expands its plan and activities. Note that in each case the idea is to write a plan that serves just the needs of moment. It is an action plan.

Write the plan, take the actions, review the results. Keep what works, change what doesn’t, and expand the plan and the actions as the company grows.

• Click here to see a PDF of a 30 Minute Marketing Plan outline
• Click here to see a PDF of a Basic Marketing Plan outline for the same company.
• Click here to see a PDF of a Standard Marketing Plan outline for the same company.

In most situations, the best way to create a market forecast estimate is to find an expert forecast, estimate from past data, find parallel data or apply a model.

Finding an expert forecast
If you can find an expert forecast already published, or if you have a budget to pay for an expert forecast, that’s a luxury. This probably means you don’t have to do your own.

Many expert forecasts are published where you can obtain their results for free. Some of these are government forecasts intended to be free, some are expert forecasts made during interviews or news media coverage, and some are professional forecasts whose highlights are released to the media as teasers to sell the more expensive research.

You can look for these forecasts in published news reports, on the Internet, in library reference materials, and in trade association publications. Where yours might be found depends on your industry and the exact nature of your business. Unfortunately, nobody but you can pinpoint exactly where to look for your industry and your plan, but at least you can consider some examples.

The U.S. Bureau of Labor Statistics regularly publishes job outlooks that include forecasts of the numbers of certain kinds of jobs into the future. If your marketing plan needed to project growth in the number of accountants, or chief executives, or heavy machinery operators, you could find that at the BLS site. You could also find a projection showing projected growth of computer industry jobs, or growth in specific employee categories.

If, for example, you are working on a marketing plan involving soft drinks you could go to the national soft drink association’s publication Beverage World for a detailed five-year forecast of soft drink consumption.

Several major business magazines publish economic forecasts regularly. You could go into a reference library and use the Reader’s Guide to Periodic Literature to find published data related to your data needs. Business Week magazine has a weekly column on business outlooks, and quarterly surveys of industry outlooks.

Estimating from past data
Although the past doesn’t really predict the future, it can indicate trends. Sometimes you can find past data on a market and use that to project into the future.The principle of using past data as a guideline for the future is one of the fundamentals of forecasting.

It’s particularly important for market forecasting, however, because you’ll frequently find ample data about your market’s recent past even when you can’t find a market forecast. Using the past data will get you a good starting point and a sense of reasonableness for your forecast.

Past data estimate example
For example, say I want to project the market for restaurant equipment in Lane County, Oregon. I can go to the U.S. Census Bureau County Business Patterns to find out that Lane County had 611 “eating and drinking places” in 1996 and 639 in 1999. I don’t particularly like the fact that these numbers are several years old, but they are the latest available and they are also better than any other numbers I can find. I could count eating and drinking establishments by using the Yellow Pages in the telephone directories, or some other means, but any alternative would be impractical and expensive. So I accept the latest available census data. So I accepted the latest available census data. I calculated the growth rate for 1996 to 1999 and applied that same rate into the future to create a market forecast, as shown in the illustration below.

Adding common sense and educated guessing
Is this the best I can do? Maybe not. I can probably take the past data as a base number, and then add my own research and common sense to improve on it. For example:

• I could contact the local Chamber of Commerce or restaurant association and ask for an expert opinion about the fate of eating and drinking establishments in the recent past and foreseeable future. If the local expert says there has been a boom in restaurants, or a problem with restaurants, then I can use that information to adjust my growth rate up or down. In my marketing plan text I would explain what the past growth rate was and why I was expecting it to change.
• I could also check with the Chamber of Commerce or the local governments to find economic growth numbers. I could compare general economic health in the 1996-1999 period to the 2000-2005 period as well as projections for the foreseeable future. I would then revise my projected growth rate accordingly, and explain in my text about the source of the growth rate figure.

The important point is that I wouldn’t have to just take a wild guess about the restaurant population. By starting with past numbers I improve the overall quality of the forecast. This is mainly just common sense and educated guessing.

This example of a simple market forecast defines two target market segments and projects the potential customers in each of those segments by years, for five years.

Market size forecast

In the market forecast, the example numbers indicate that there are 25,000 home offices included in the market, and that number is growing at an estimated five percent per year. There are also 10,000 small businesses in the area, and that number is growing at five percent per year.

These numbers are estimates. Nobody really knows, but we all make educated guesses. The developers of the plan researched the market as well as they could and then estimated populations of target users in their area and the annual growth rates for each.

You can use your market forecast numbers to draw a chart of projected market growth, like the one shown here below. It offers a visual view of the market forecast.

Market value
Normally you would also look at market value, not just market size. For example, although the high-end home segment is 2.5 times larger than the small business segment as measured by number of customers, the small business customer spends almost four times as much as the home office customer. Therefore, the small business market is a more important market in terms of dollar value.

The important numbers in this table are the average purchase per customer and the market value.

• Average purchase per customer is an educated guess based on experience. Sales managers got together to make the estimate. Although they would have liked some external source of information to use for this, there was none available. Notice that the home office customer tends to purchase much less overall than the small business customer.
• The market value is simple mathematics. Multiply the number of potential customers in the market by the average purchase per customer. In this case they took the average number of customers in each segment over the five-year forecast period, and multiplied that by the average purchase per customer, to calculate the market value.

The other items in this table are subjective qualities that help with marketing. The planners assign these points to people charged with preparing marketing materials.

Reality checks
A market forecast should always be subject to a reality check. When you think you have a forecast, you need to find a way to check it for reality. In this case if the total market is worth some estimate, you could estimate sales of all the competitors and see if the two numbers relate to each other. In an international market, you might check production and import and export figures to see whether your estimates for annual shipments appear to be in the same general range as published figures. You might check with vendors who sold products to this market in some given year to see whether their results check with your forecast. You might look for macro-economic data to confirm the relative size of this market compared to other markets with similar characteristics.

Review target focus
The market analysis should lead to developing strategic market focus. That means selecting the key target markets. This is the critical foundation of strategy. We talk about it as segmentation and positioning.

Under normal circumstances, no company will attempt to address all the segments in a market. As you select target segments, think about the inherent market differences, keys to success, competitive advantage, and strengths and weaknesses of your company. You want to focus on the best market, but the best one is not necessarily the largest one or the one with the highest growth. It will be the one that matches your own company profile.