Course Name: Business Plan Development

Course Author:
Barry Carbol, Ph.D. – COL Consultant, Victoria, BC.
Commonwealth of Learning
Edition 1
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1.0 UNIT 1: CREATING A NEW BUSINESS FROM THE GROUND‐UP

1.1 COMING UP WITH A GOOD BUSINESS IDEA

Every entrepreneur that decides to start a new business has to spend some time developing a
business idea. Most entrepreneurs start with an idea that is driven by their passion and
interests. However, just because you are interested and passionate about something does not
mean that it will translate into a profitable business.

Coming up with a good business idea involves determining the potential demand for your
product or service and having knowledge about your competitors and the needs and wants of
potential customers. Gathering this information means doing research. There are many ways to
identify a new business idea. You may want to ask yourself the following kinds of questions as a
way of helping you to generate a new idea:
 Do you have any particular skills that could form the basis of a new business?
 Are you aware of a gap in the market in the industry that you currently work in?
 Do you have a hobby that could be turned into a business?
 Are there others that you know and trust that you can talk to and brainstorm ideas
about new business ideas?
 Are there any organizations or networks in your local community that you can join that will
act as forums to discuss your ideas and get new ideas from others?

There are various established methods for developing a business idea. For example, you
can:
 Conduct market research to discover whether your idea fills a gap in the market
 Brainstorm your idea with friends, colleagues or staff ‐ they can give different perspectives
on the idea and may know if anyone else is doing the same thing
 Think about whether your idea can take advantage of an opportunity created by new
technologies
 Consider whether social trends will affect demand for your product, e.g. the increasing
demand for organic food or concerns about global warming and carbon footprints
BRAINSTORMING TECHNIQUES
Brainstorming is an effective way of ensuring that you don’t settle on the first thought that
enters your head. The first solution to a problem is seldom the most creative and only
occasionally the best solution. The first solution is, on the other hand, usually the most
common place solution. It is the solution that most people including your competitors ‘would
adopt in the same circumstances. Applying the same solution as your competitors will likely not
lead to success.
Gap Filling
This technique is useful for taking an idea and enhancing it or `filling a gap`. Identify where you
are at with your business idea (Point A) and your end goal (Point B).
Mind Mapping
Mind mapping can be an exciting method for generating ideas because you are building on the
ideas that come to mind and expanding an original idea in what can be new or novel ways. You
are mapping out the tangents that your mind takes
Brain Writing
Brain writing is a particularly useful when working with a group of people who are reluctant to
share their ideas openly in a group.

THE IDEA GENERATION PROCESS

The diagram to the right illustrates the various stages of the idea generation process and the
relative amount of investment. (a little as indicated by the minus (‐) sign or a lot as indicated by
the plus (+) sign) that is required during the early stages of idea generation versus the latter
stages leading up to full commercialization of a business idea. Clearly, the early stages are
inexpensive but when it comes time to test market and introduce a commercial version of the
product or service, the costs can be considerable.

Idea Generation
 Idea Screening
 Concept Development and Testing
 Marketing Strategy
 Business Analysis
 Product Development
 Test Marketing
 Commercialization

1.2 EVALUATING AND FORMALIZING YOUR BUSINESS IDEA

Selecting the best idea from a range of possible business ideas can be a difficult process for an
entrepreneur. Which ones are most likely to succeed and which ones will fail are questions that
entrepreneurs grapple with all of the time. If you have used a brainstorming approach as
suggested in the previous topic you will want to sort and evaluate the ideas that have been
generated before committing to further business development that could cost you or your
potential investors any additional money.

The diagram on the following page illustrates one way to think about the idea selection process
As can be seen in this 4 step process, a typical brainstorming exercise will generate literally
dozens of ideas that will vary in quality. The selection process that is used to pick the best idea
is critical. In the next section of the course we are going to consider a series of questions that
will help you to evaluate and formalize your business ideas. These questions will form a
framework that you can use prior to establishing a business plan.

Will People be Willing to Pay for Your Product or Service?

Great ideas can only translate into a successful business if people are willing to pay for the
product or service.
 First, you need to identify who the target market is for your product. Are you planning to
sell to young people or seniors? Is your product primarily for women, men or both? Are you
going to sell to individuals, other businesses or to the government? What income level
would people need to have to be able to afford your product or service?
 Once you know who you are going to sell to, you should consider doing some market
research

WHO IS YOUR CUSTOMER?

Before you begin selling something, you need to know who you are selling to. If you haven't
determined who your target market is, you are likely to try to be all things to all people and end
up with a product nobody likes or a service that doesn't meet anyone's needs. When
developing a general profile of your customers, you might want to define them by their
demographic characteristics, such as:
 Age, usually given in a range (20‐35 years)
 Sex
 Marital status
 Location of household
 Family size and description
 Income, especially disposable
 income (money available to spend)
 Education level, usually to last level completed
 Occupation
 Interests, purchasing profile (what are consumers known to want?)
 Cultural, ethnic, racial background

Once you have defined your target customers, you must learn about their needs and
preferences.
 What challenges do they have that could be solved with your product or service
 What are their needs and expectations regarding this product or service?
 What types of things do they desire?
 \What do they spend their money on?
 Where do they shop?
 How do they make spending decisions?

WILL YOUR PRODUCT OR SERVICE BE ABLE TO COMPETE WITH EXISTING

COMPANIES?
Once you find out who your customers are, you will need to look at who else is selling similar
products and where they are selling them. Will you be competing with a product that has
already been marketed? If your idea is a consumer product, check stores and catalogues or visit
trade shows to find out what other products are available and what companies market them.
You need to determine why customers will buy from you and not from your competitor. Is your
product superior or is your price lower than other businesses? The best way to do this is to
conduct market research using data that already exists or by doing your own survey.

HOW WILL YOU DISTRIBUTE YOUR PRODUCT OR SERVICE?

To distribute your product or service, you can either start your own company or you can try to
convince an existing company to buy your product or idea from you. It may be easier to start
your own company than to try to convince another company to distribute your product or
service. Many potential buyers are more willing to deal with a company as a supplier than they
are to take on a product or invention from an independent person.

HOW WILL YOU PROMOTE YOUR PRODUCT OR SERVICE?

An idea or invention is not very useful without customers to buy it! Have you considered how
potential customers will discover your product? Some ways to market your product are:
 Participating in and attending trade shows, and by getting known through your trade
Association
 Placing advertisements in newspapers, on the radio, on television and on the Internet
 Distributing brochures
 Having a website and being active in social media (this is something that is becoming
increasingly popular but may not be available in every local area

DO YOU NEED INTELLECTUAL PROPERTY PROTECTION FOR YOUR IDEA?

Intellectual property protection is one of the most important things that you need to attend to
as the originator or owner of an idea. Failure to protect your ideas may result in having them
stolen or copied and used by others for profit. There are a number of different legal ways that
you can protect yourself.
These include:
 Patent protection
 Trade‐marking
 Copyright
 Industrial design protection
The rules that apply to each of these forms of protection and how one applies for them will vary
to some extent from one country to the next. In some cases you may find that your idea cannot
be copyrighted but it may still be worth pursuing from a business perspective.

ARE THERE ANY GOVERNMENT RESTRICTIONS OR OBLIGATIONS THAT

COULD LIMIT YOUR IDEA?
Before you move ahead with your business idea, you may want to check to see if there are any
regulations that may prohibit or limit the sale of your proposed product or service or the
operation of your business.

ANOTHER APPROACH TO EVALUATING BUSINESS IDEAS

When working with firms on brand development it is important to look at a business idea from
four perspectives: company, customer, competitor and collaborator (Keller, 2003).
This approach allows one to scrutinize a business idea before even approaching the topic of
brand development. Here are the perspectives to consider when evaluating a business idea.

Company Perspective
Think of your idea in terms of its product/service features, the benefits to customers, the
personality of your company, what key messages you will be relaying and the core promises
you will be making to customers.

Customer Perspective
There are three different customers you will need to think about in relation to your idea:
Purchasers (those who make the decision or write the check), influencers (the individual,
organization or group of people who influence the purchasing decision), and the end users (the
person or group of people who will directly interact with your product or service).

Competitor’s Perspective
Again, there are three different groups you will need to keep in mind: primary, secondary and
tertiary. Their placement within each level is based on how often your business would compete
with them and how you would tailor your messages when competing with each of these
groups.

Collaborator’s Perspective
Think of organizations and people who may have an interest in your success but did not directly
paid or rewarded for any success your business might realize, such as associations, the media
and other organizations that sell to your customers. Whatever your approach to evaluating
your idea, just be sure you are meeting the research objectives you have outlined for your
product or service. With those goals always top‐of‐mind, your analysis will help you discover
whether your idea has any holes that need patching.
2.0 UNIT TWO – COMPETITOR ANALYSIS
Welcome to the second unit in this course on business plan development. The first two topics
of this unit are intended to provide you with a review and a more in‐depth treatment of some
of the topics that you learned earlier in this program. One of those topics was industry analysis
which forms the basis for competitor analysis. Competitor analysis is a key Ncomponent of any
business plan. You will also be introduced to the strategic force field model which can serve as a
way of outlining the business environment forces that will help you to achieve your business
goals and those that will resist your efforts to sell your idea to the market.

2.1 INDUSTRY ANALYSIS

WHY IS INDUSTRY ANALYSIS AN IMPORTANT PART OF A BUSINESS PLAN?
Industry analysis is not the same as market research or competitor analysis. The latter will be
discussed in some detail in the next two topics in this unit. Make sure your research regarding
the industry is clear and purposeful. Gathering information about the industry supplies
additional data which will tell you whether or not your industry is attractive and has profit
potential.
In addition, it allows you to identify the key success factors, trends, threats and opportunities
that will point out which assets and skills you need to prosper in the industry.

In addition to researching the industry as a whole, you should also research critical market
segments. The following areas should be investigated:
 Actual and potential size of the industry.
 Industry growth prospects.
 Structure of the industry.
 Costs of operating in this field.
 Distribution channels.
 Trends and developments within the industry.
 Key industry assets and skills.

RESEARCHING INDUSTRY SIZE

Knowing the actual and potential size of the industry is important not only to evaluate
investment decisions, but also to determine the market share of each of your competitors. You
can determine the actual size of the industry by referring to several secondary research sources
like the Australian Bureau of Statistics and Department of Commerce and Trade, as well as
industry associations. These sources often provide market information, charting sales by
product line, growth, geographic markets and major players in the industry. To gauge the
potential size of the industry, you will have to look closely at gaps within the industry. Such
gaps may be in product lines, distribution, usage, competitiveness or any number of other
areas. By gathering research on your customers, competitors and the industry, you will be able
to spot those gaps.

WHY FORECAST INDUSTRY GROWTH?

To forecast industry growth, you can set up several growth models and examine what has to
happen for each to occur.

A Chart Illustrating Growth in Telecommunications in Africa

Growth models allow you to develop an idea of when turning points in growth will occur and
what will cause them to occur. Gathering data on leading indicators will allow you to chart
growth. These indicators will most likely be industry sales, industry segment sales and
demographic data. You can develop forecasts for new industries by taking comparable
industries as examples. For example, if you wanted to forecast growth for digital audio tape
(DAT) technology, you might use the market for CD or cassette‐tape technology as a basis for
your projections.

UNDERSTANDING INDUSTRY STRUCTURE

A study of the industry's structure will reveal just how attractive the industry is for a long term
investment. You will need to take the following into account:
 Competition among current firms. You will be primarily interested in uncovering data
detailing the number of competitors in the industry, their comparative size, product lines,
strategies, fid costs, and commitment to the industry. Much of this information should
already appear in your research on your competition.
 Threat of competition from potential entrants.
 Threat of competition from alternate products and technology. These are products or
services that are not in direct competition with you, but whose presence affects the sales
growth of the industry. You can gather this data by analysing secondary competitor groups
and contacting associations pertinent to them.
 The buying power of customers. Determine the buying power of customers by looking at
the amount of competition and by charting prices. If too many businesses are cutting prices
because of customer pressure and do not produce a sufficient profit, investment in the
industry may be unwise.
 The negotiating power of suppliers. To determine supplier power within the industry, find
out who the major suppliers are and the extent of their product lines. You can do this by
looking through trade periodicals and contacting associations.

INDUSTRY COST STRUCTURE AND DISTRIBUTION

When researching the cost structure of an industry, the first thing you will have to do is identify
the stages at which you add value to your product or service. A product‐oriented business will
have the following stages:
 Procurement
 Processing
 Fabrication
 Assembly
 Distribution
 Marketing.

A service business, of course, would not have the "fabrication" and "assembly" steps shown
above. Each stage adds additional value to the final product. Most trade associations have
information regarding production and marketing costs for their respective industries.

DISTRIBUTION SYSTEMS
This section applies mainly to businesses that are involved in the manufacturer of goods. Yours
is a business that most likely relies on additional distribution systems aside from your own sales
force, so you should conduct research into the best distribution system available. When
researching distribution systems within an industry, you should ask yourself three strategic
questions:
 What are the current distribution channels and who controls them?
 Are any alternative distribution channels available?
 Have any new distribution channels emerged? Are any likely to emerge?

Many large industrial companies use their own sales force to sell directly to their customers.
Other, smaller firms might sell directly to retailers or through wholesale distributors, brokers or
agents. Generally, companies that sell more directly to the end user have more control over
their marketing efforts, but also face greater risks.
If a few companies dominate a distribution channel, you may need to consider alternatives. To
choose an alternative system, you need to take a close look at the channels employed by your
competitors.

HOW TO SPOT TRENDS

To spot industry trends, you constantly need to ask yourself several questions concerning your
customers, competitors, and the industry in general, such as:
 What is important to customers?
 Which needs aren’t being met?
 What new strategies are my competitors starting to employ?

You need to sit down and take a close look at your market analysis up to this point to spot the
most significant trends in the industry.

KEY SUCCESS FACTORS

Perhaps the most important result of your industry analysis will be the identification of the key
success factors of your competitors. Key success factors are assets and skills that a company
within a particular industry must have to succeed. Key success factors might be:
 Name recognition (brand recognition)
 Access to distribution channels (market

access)
 Financial resources.
 Price and value.
 Market and competition.
 Loyal consumers.
Whatever the key success factors happen to be in your industry, the completed analysis of the
industry should define them and provide you with enough information to make an educated
guess about success factors needed in the future.

A SHORT HOW‐TO GUIDE ON CONDUCTING AN INDUSTRY ANALYSIS

Every company that sets out on a business venture, whether expanding existing operations or
launching a new one, wants to know the answers to questions like:
 What is the opportunity (market analysis)?
 What is the competitive landscape (competitor analysis)?
 How good is the project (opportunity analysis)?
 How are we doing (profitability analysis)?
While a gut‐feel answer might not be wrong, it will definitely present an incomplete and
distorted picture, without any numbers or any evidence to support it. But the answers to these
questions need not be elusive. You can arrive at an accurate evaluation of your strategy by
conducting an industry analysis. The success of most ventures depends on the accuracy and
extent of the analysis, and hardly any CEO today would put money into projects without a
comprehensive industry analysis.

Background Information
Conducting an industry analysis and understanding industry drivers can be an onerous task.
Before proceeding further, analyze where your company and industry are in terms of their
lifecycles. This is crucial to figuring out the possible impact of any decision on your business.
For example, if you operate in a mature industry, spending a lot of money on untested
technology may not be a sound business decision. On the other hand, a company in a young
and rapidly developing industry may want to take the risk on untested technology with the
potential payoff coming in the form of exponential growth.

A Possible Industry Analysis Action Plan

1. Tap sources of information.
Before you begin an industry analysis, you must realize that the biggest obstacle is to get
accurate and up‐to‐date inputs. If you have o ther managers in your company, tap into the
information that they have about your industry. Being familiar with financial statements is a
good place to start since these metrics will tell you a lot about your industry and where your
company fits.
2. Define the industry.
Understanding your industry and its key success factors (KSFs) is essential to determining
how to enter an industry with a new business. It will also help you to select the right
technologies.

Answering the following questions is an excellent starting point to understanding your industry.
Note: If the company competes in several different industries, then it may be helpful to
prioritize each industry on the basis of profitability, growth prospects, and strategic
importance.
 In what industry (or industries) do you operate?
 How large is the industry and what role does your company play in it?
 Is the industry dynamic and quick to change, or is it a traditional industry where things have
been essentially the same for the last 20 years?
 If the company operates in multiple industries, what are the KSFs for each, as they relate to
information technology?
3. Define the opportunity.
This step involves clearly identifying the need to acquire new technology. A lot of
competitive and market information is required, and fact‐finding surveys from prospective
users will become indispensable tools for this stage. The analysis involves answering four
basic questions to identify the KSFs behind the proposed IT project:
 Identify the market size in terms of number of buyers. Will the proposed project increase
the number of buyers or the share‐of‐wallet of existing buyers?
 Gather information on the demographic and psychographic profiles on the buyers and end‐
users to assess their buying behavior. How will the IT project help in analyzing this
information and implementing the decisions?
 Analyze logistics, marketing, and distribution channels. How important are these factors to
the firm's bottom‐line and to what extent will the proposed IT project improve these?
4. Conduct a PESTEL Analysis.
Conduct an analysis of existing and potential Political, Economic, Social, Technological,
Environmental, and Legal (PESTEL) factors for each industry in which the company competes. It
is very important to keep an eye on some of the high level issues and trends that can affect the
future of your company.

It is also important to understand how these factors help or hinder the business, and how
competitors are using technology to mitigate these uncertainties or exploit any opportunities.
2.2 KEY QUESTIONS TO ASK ABOUT YOUR COMPETITORS
By finding out what your competition is doing and how they are doing it you will be
positioned to do it better. Understanding your competition is all about helping you to
determine what will set you apart from similar businesses.

WHY BOTHER TO ANALYZE COMPETITORS?

Some businesses think it is best to get on with their own plans and ignore the competition.
Others become obsessed with tracking the actions of competitors (often using unethical or
illegal methods). Many businesses are happy simply to track the competition, copying their
moves and reacting to changes.

Competitor analysis has several important roles in business planning.

It can:
 Help management understand their competitive advantages/disadvantages relative to
competitors.
 Generate an understanding of competitors’ past, present (and most importantly) future
strategies.
 Provide an informed basis to develop strategies to achieve competitive advantage in the
future.

Help forecast the returns that may be made from future investments (e.g. how will competitors
respond to a new product or pricing strategy?).

KEY QUESTIONS TO ASK ABOUT YOUR COMPETITORS

What questions should you ask when undertaking competitor analysis? The following is a useful
list to bear in mind:
 Who are our competitors?
 What threats do they pose?
 What is the profile of our competitors?
 What are the objectives of our competitors?
 What strategies are our competitors pursuing and how successful are these strategies?
 What are the strengths and weaknesses of our competitors?
 How are our competitors likely to respond to any changes to the way we do business?

SOME SOURCES OF INFORMATION FOR COMPETITOR ANALYSIS

Davidson (in Keegan, 2003) described how the sources of competitor information can be neatly
grouped into three categories:
 Recorded data: this is easily available in published form either internally or externally. Good
examples include competitor annual reports and product brochures;
 Observable data: this has to be actively sought and often assembled from several sources.
A good example is competitor pricing;
 Opportunistic data: to get hold of this kind of data requires a lot of planning and
organisation. Much of it is “anecdotal”, coming from discussions with suppliers, customers
and, perhaps, previous management of competitors.

The table below lists possible sources of competitor data using Davidson’s categorisation:

Recorded Data Observable Data Opportunistic Data Annual report & accounts
Recorded Data Observable Data Opportunistic Data
Annual report and Meetings with suppliers
accounts Pricing / price lists
Press releases Advertising campaigns Trade Trade shows
shows
Newspaper articles Promotions Sales Sales force meetings
Analysts’ reports Tenders/RFPs Seminars conferences
Regulatory reports Patent applications Recruiting ex‐employees
Government reports Discussion with shared
Presentations / speeches Social contacts with
In his excellent book Even More Offensive Marketing, Davidson (1998) likens the process of
gathering competitive data to a jigsaw puzzle. Each individual piece of data does not have much
value. The important skill is to collect as many of the pieces as possible and to assemble them
into an overall picture of the competitor. This enables you to identify any missing pieces and to
take the necessary steps to collect them.

WHAT BUSINESSES NEED TO KNOW ABOUT THEIR COMPETITORS

There is a wide range of competitor information that will help you to complete a high quality
competitor analysis.

You can probably think of many more pieces of information about a competitor that would be
useful. However, an important challenge in competitor analysis is working out how to obtain
competitor information that is reliable, up‐to‐date and available from a legal perspective.
Here is a list of what businesses probably already know about their competitors.
 Overall sales and profits
 Sales and profits by market
 Sales by main brand
 Cost structure
 Market share (revenue and volumes)
 Organization structure
 Distribution structure
 Identity and profile of senior management
 Customer or consumer profile and attitudes
 Customer retention levels

And here is a list of what businesses would really like to know about their competitors.
 Sales and profits by product
 Relative costs
 Customer satisfaction and service levels
 Customer retention levels
 Distribution costs
 New product strategies
 Size and quality of customer databases
 Advertising effectiveness
 Future investment strategy
 Contractual terms with key suppliers
 Terms of strategic partnerships

2.3 COMPETITOR ANALYSIS FRAMEWORK

Before you can analyze your competitors, you have to find out information about them.
Specifically you will want to know about the markets or market segments your competitors
serve, the benefits your competition offers, why customers buy from them, and their products,
services, pricing and promotion approaches.

GATHERING INFORMATION ABOUT COMPETITORS

A visit is still the most obvious starting point ‐ either to the actual bricks and mortar store, or to
the company's web site (if they have one). You can learn a lot about your competitor's products
and services, pricing, and even promotion strategies by visiting their business site, and may
even be able to deduce quite a bit about the benefits your competitor offers. Go there, once or
several times, and look around. Watch how customers are treated. Check out the prices. You
can also learn a fair bit about your competitors from talking to their customers and/or clients ‐
if you know who they are. With a bricks and mortar local competitor, you might be able to find
out about the reasons customers buy from them by canvassing friends and acquaintances
locally.

Other good "live" sources of information about competitors include a company's vendors or
suppliers, and a company's employees. They may or may not be willing to talk to you, but it is
worth seeking them out and asking. Watch for trade shows that your competitors may be
attending. Businesses are there to disseminate information about and sell their products or
services; attending and visiting their booths may be an excellent way to find out about your
competitors.
You will also want to search for the publicly available information about your competitors.
Newspapers, magazines, and online publications may all have information about the company
you're investigating for your competitive analysis. Press releases may be particularly useful.
Once you have compiled the information about your competitors, you're ready to analyze it.

Tips and instructions for analyzing the competition are on the following page.

ANALYZING THE COMPETITION

The competitive analysis section of the business plan is not just a list of information about your
competitors. It is the analysis of the information that is important. Study the information you
have gathered about each of your competitors and ask yourself this primary question:

How are you going to compete with Company X? Company Y?

For many small businesses, the key to competing successfully is to identify a market niche
where they can capture a specific target market whose needs are not being met. Is there a
particular segment of the market that your competition has overlooked? For example, if you
hope to start a book store, and your competitor sells all kinds of books to all kinds of people,
might you be able to specialize in children's books, or educational books and supplies?

Is there a service that customers or clients want that your competitor does not supply?
What if you want to start a business offering computer repairs and you discover that none of
the other computer repair businesses in town offer home service? Computer owners may have
a desire for in‐home repair services that you could meet.

The goal of your competitive analysis is to identify and expand upon your competitive
advantage ‐ the benefits that your proposed business can offer the customer or client that your
competition can't or won't supply.

2.4 THE STRATEGIC FORCE FIELD MODEL

Kurt Lewin wrote that "An issue is held in balance by the interaction of two opposing sets of
forces ‐ those seeking to promote change (driving forces) and those attempting to maintain the
status quo (restraining forces)". Let’s now take a look at the objectives for this topic.
A BRIEF INTRODUCTION TO LEWIN’S FORCE FIELD MODEL
As an introduction, let us start with a simple illustration that will outline the basics of Lewin’s
Force Field Theory. Gravity is a force of nature that affects all of us. For example, if you sit in a
chair, gravity is pushing you down into the chair (it could be considered a driving force). The
chair is also exerting a force in the opposite direction which balances the force of gravity.
This situation is one that is considered in equilibrium. Two forces keep you in equilibrium.
Gravity pushes down, keeping you in the chair, and the chair resists this, stopping you from
falling to the ground.

In Lewin’s terms there are two equal forces, a driving force and a resisting or restraining force,
working to keep the equilibrium or status quo. Lewin applied this thinking to his theory of
change within social situations among people.

This is much the same as the experiment we just did and is summarized in the diagram below.

So before change the force field is in equilibrium between forces favourable to change and
those resisting it. Lewin spoke about the existence of a quasi‐stationary social equilibrium. For
change to happen the status quo, or equilibrium must be upset – either by adding conditions
favourable to the change or by reducing resisting forces. What Kurt Lewin proposes is that
whenever driving forces are stronger than restraining forces, the status quo or equilibrium will
change. Now that's useful. Especially if we apply this to understanding how people move
through change and why they resist change.

There will always be driving forces that make change attractive to people, and restraining
forces that work to keep things as they are. Successful change is achieved by either
strengthening the driving forces or weakening the restraining forces. The force field analysis
integrates with Lewin’s three stage theory of change as you work towards unfreezing the
existing equilibrium, moving towards the desired change, and then freezing the change at the
new level so that a new equilibrium exists that resists further change.

APPLYING LEWIN’S FORCE FIELD MODEL TO FACTORS AFFECTING YOUR BUSINESS

Lewin’s force field analysis can also be used to determine which factors within a business drive
a person towards or away from a desired stated (such as a purchase of goods or services) , and
which factors oppose these driving forces. These forces can be analyzed and used to inform
business decisions. To understand what makes people resist or accept change we need to
understand their values and experiences or those of the group that they belong to. The
behaviour of others (in this case that of customers) will alert you to the forces that are at work
(either driving or resisting forces).

Here is a step‐by‐step guide to using a force‐field analysis in your business.

1. Define the change that you want to see. Write down your thoughts concerning a desired
future state. You can also use this step to help understand the present (status quo or
equilibrium state).
2. Brainstorm or mind‐map the driving forces (You have been presented with brainstorming
techniques earlier in this course and in the Business Environment course that you took earlier in
this program). The driving forces are those that are favourable to change. Record these drivers
on a force field diagram.
3. Brainstorm or mind‐map the restraining forces. Rate each force from 1 (weak) to 5 (strong).
This helps to provide you with a relative value of each of the forces (i.e. which are the ones that
you need to pay most attention to).
4. Review the forces and decide which ones have some flexibility (i.e. which ones can be
influenced).
5. Create a strategy. Look at the forces and determine how the driving forces can be
strengthened and the restraining forces weakened.
6. Create an action plan. Write down the action steps that you can take to achieve the
greatest impact. Identify the resources (human and capital) that you will need and
write down how you will implement the actions you have outlined.
On the next page, you will see a field force diagram for a business. This analysis shows that the
business has three forces that will help or facilitate change:
 Its strategic plan
 Changes that it intends to implement through its budget plan
 And growing pains that it is feeling (i.e. it is growing fast – a good thing and something that
can be used to its advantage)

There are also a number of restraining forces that are hindering change for this business. These
are:
 Economic turbulence (the economy is in the doldrums).
 There are new competitors in the market.
 The company`s business model doesn`t work anymore.
 The company`s technology plan is dated.
 The company`s policies need to be renewed.
 Employee workspaces need to be updated.
 Accounting processes need to be improved.
 Staff need to become more engaged.
The greater the degree to which the forces facilitating change (on the left) can be maximized
while reducing the forces that hinder change (on the right), the greater the likelihood that this
company can move toward the future and away from its current reality.

3.0 UNIT THREE : CUSTOMER PROFILE

It is important to have a solid understanding of your competitors. Equally important is having a
good understanding of your customers or potential customers.

3.1 THE COMPONENTS OF A CUSTOMER PROFILE

Understanding your customers is a critical for the development of a successful business (big or
small). Creating a profile of customers who will want to buy your product or service is an
important activity for any business since it will help the business to define its marketing
approach and help to refine its products and services to meet customer needs.

DEMOGRAPHICS
The demographic breakdown of a population can help you describe potential customers in
terms of their age, gender, household size, income, occupation, education and location. For
example, the demographics of a customer who buys a particular product may be female, age
30‐ 45 years, employed in a white collar occupation, with a household income greater than
$75,000 and who lives in an urban centre

A Sample Graph Illustrating Gender Differences in Buying Behaviour

There are many websites including government websites that are good sources of information.
These sites can be used to find out more about the demographics of the
customers who live in the areas in which your business competes.

GEOGRAPHY
Location or geography also influences the buying behaviours and patterns of individuals. There
are distinct differences between urban and non‐urban (rural) buying trends when it comes to
the purchase of both goods and services. Understanding the geographic trends will help you to
make decisions concerning the location of a retail outlet or the marketing strategies that you
are going to use to reach a particular market.
Consumer Behaviour and Marketing
As can be seen in the diagram to the right, consumer behaviour is both influenced by marketing
actions that businesses take in terms of how they position their products in the market, price
them, where they distribute them and how they promote them. Consumer behaviour also
influences these actions.

PSYCHOGRAPHICS
Psychographics is the analysis of consumer lifestyle choices. It is used by businesses to help
create a detailed customer profile. Market researchers create customer profile information by
asking consumers to agree or disagree with questions about their activities and interests.
When combined with demographic and geographic information, psychographic information
helps to create a ‘life‐like’ portrait of a targeted customer segment. For example using, a
psychographic approach you can describe your customers in terms of:
Their interests – the key social interests your customers engage in (e.g. sports, family activities).
 The general personality characteristics of your customers (e.g. conservative, outgoing,
introvert, extrovert).
 The places on and offline where they network or socialize. If you know your customer’s
psychographics you can tailor promotional activities, sales campaigns and communication
messages that appeal to their specific interests and lifestyles.

Some of the kinds of questions that you can use to gather this information from consumers are:
 What do they like about your product?
 What do they like about your competitor's product?
 What made them decide to buy your product?
 Did they know which brand they were buying before they purchased it?
 What advertising messages had they seen prior to buying?
 How much disposable or discretionary income is available for this type of purchase?
 What are their hobbies?
 What emotional aspects impact their purchase?
 Who is the actual decision‐maker for this type of purchase?
 What values and attitudes play a part in this type of purchase?
 Who do they look to when making purchasing decisions?

ATTITUDES
Customers’ attitudes can have a profound effect on their buying behaviour. In the simplest
terms, attitude refers to what a person feels or believes about something, in this case about a
consumer product or service. Customers’ attitudes will play out when they act on their beliefs.
If a customer has a negative attitude towards a product or service it will take considerable
effort to change what they believe is true.
This has significant implications for the way in which companies market their products and
services. This type of situation (i.e. trying to overcome a negative impression) often occurs
when companies are competing against strong rivals with loyal consumers. In these cases, it is
important to try to understand why consumers feel positive about a particular brand and then
try to beat the competitor on these issues.

BUYING BEHAVIOUR
Buying behaviour relates to how your customers behave when deciding to buy your product or
service over those provided by your competitors. Buying motives and influences may vary by
customer group and will always include both rational and emotional reasons. Rational reasons
include the location of the business, convenience factors, customer service, image (i.e. they like
the image that the brand portrays), range (i.e. the number of options), and promotional offers.
Consumers will also have emotional reasons for making a purchase such as “it makes me feel
good”, or “it gives me confidence” or a feeling of importance.

The more you know about your current and potential customers the easier it is to communicate
with them and the more effective your marketing and promotion efforts will

3.2 CREATING A CUSTOMER PROFILE FOR THE IDEAL CUSTOMER

Knowing who your ideal customer is will help you to define marketing strategies and reach
those customers that are prepared to pay top dollar for your products or services and who will
do so with a minimum of effort on your part.

THE IDEAL CUSTOMER – WHERE TO BEGIN

Because potential customers come in all sizes, shapes, and spending profiles — and because
ideal customers don't come with their profiles stapled to their heads — your very difficult job is
to first identify your customers to figure out which ones are the most likely to become your
best customers and then to figure out how to attract and reach them.
WHAT DOES YOUR IDEAL CUSTOMER LOOK LIKE?
There are many definitions for what an ideal customer looks like. Here is one way to describe an
ideal customer (Godin, 1999). An ideal customer is one who:
 wants your product
 has the ability to pay for your product
 has the authority to purchase your product

Let us review each of these qualities.

 A customer who wants your product. Many business leaders say that "everyone needs" their
product. But marketing to everyone is prohibitively expensive and nearly always leads to
failure. What you are looking for is specific group who have specific needs that you can
appeal to. The greater your understanding of customer needs and wants the more effective
your marketing program will be.
 A customer who has the ability to pay for your product. Many businesses look internally at
their marketing, their tagline, or their sales messaging. But in reality, they are selling to the
wrong people. Too often they think "Our product is so valuable, people will come up with
the money to pay for it." This can leave a business owner stuck with inventory that they
 cannot sell because the customer they are targeting doesn’t have the ability to pay for what
they are offering.
 A customer who has the authority to buy your product. This is the area that many business
owners and sales people tend to overlook. Experienced sales people recognize that there are
individuals who may love a particular product but they have no authority to buy it. You can
waste a lot of time and energy (and money) on trying to convince customers who will never
be able to make a decision to buy what you are selling. Recognizing who has the authority to
purchase is critical to your success.

CREATING AN IDEAL CUSTOMER PROFILE

Before you begin to create your ideal customer profile, consider the following questions:
 Who do you think your best customers will be?
 Are they individuals or businesses?
 If they're individuals, what do they like and what don't they like?
 What are their needs and problems?
 How will those needs and problems be best addressed?
 What's most important to your best customers?

What is least important to them?

 How will you provide more of the former and less of the latter?

One way to create an ideal customer profile is to use these questions or similar ones to develop a
written description of your ideal customer. After you have done this have some of your
customers review it to validate it or to suggest changes. Here is a very simple description of the
ideal customer for a pet‐sitting service.

In summary, when you’re creating an ideal customer profile for a product you need to consider
both the physical and emotional characteristics of the customer. Physical characteristics (i.e.
demographic information) include age, marital status, gender, occupation, employment status,
income, and education level.

By knowing your customers physical characteristics you can focus certain parts of your
marketing approach to them based on that information. Emotional (i.e. psychographic)
characteristics include things like values, hobbies, fears, goals, desires, and interests. These
characteristics are going to give you an idea about what your customer cares about, about their
concerns, and about how they make decisions. All of which help you in marketing to them.

In Appendix 1 you will find a worksheet that you can use to create an ideal customer profile. The
worksheet can be used for each product or service that your new business is going to offer. You
should use the information on the worksheet to inform your marketing and promotional
campaigns for your products and services.

PET SITTING SERVICE: IDEAL CUSTOMER PROFILE

My ideal customer is:
A single, working adult with one or more pets including dogs, cats, or birds that require daily
care and attention. My ideal customer often travels, has sufficient income ($50,000 or more per
year) to afford to hire a pet sitter, and prefers to keep his or her pet in its home environment
rather than in a kennel or other offsite care situation. My ideal customer loves his or her pets and
wants to give them the best care possible. Customer profile information can help you to easily
figure out which marketing approaches (direct mail, web site, radio and TV ads, search engine
listings, advertisement, etc.) has the highest probability of not only reaching your best customers,
but also motivating them towant to find out more about what you've got to offer.

You can also use your ideal customer profiles when writing product and service descriptions,
when searching for keywords used to find your product, in answering questions that customers
may have, and in pricing your products and services. Now, take a moment to reflect on what you
have learned in this topic of the course

Self‐Reflection Questions
For the small business that you are thinking about starting, are any of your customers other
businesses? If they are, how do you plan on finding out who has the authority to make buying
decisions? If not, how would you go about finding out if an individual has the ability to buy your
product or service?

Write your answers in your personal journal.

4.0 UNIT 4: BUSINESS PLANNING
4.1 THE IMPORTANCE OF THE FINANCIAL PLAN
In this topic you will learn about how to build an income statement for your business and create
other financial reports such as a balance sheet and a cash flow statement. You will also learn
about revenue generation models and how they apply to your business ideas and the importance
of financial forecasting and growth projections

BUILDING AN INCOME STATEMENT

The income statement is one of the three financial statements (the others are the balance sheet
and cash flow statement) that investors will consider and evaluate when looking at your business
plan.
The income statement summarizes a company's sales (revenues) and expenses quarterly and
annually for its fiscal year. The final total net figure (along with others in the statement) is of
major interest to potential investors. Like any other discipline, financial accounting has a lot of
jargon that can be confusing. Sometimes the term income statement is referred to as a statement
of income or a statement of earnings, a statement of operations or a statement of operating
results. These all mean the same thing. Similarly, the terms profits, earnings, and income all
mean the same thing and are used interchangeably.

While the income statement can take more than one form, the simplest form is presented here.
This form of the statement includes lines for gross revenue (sales), cost of sales, expenses (fixed
and variable), taxes, and net income. On the next page you will find a sample of an income
statement in a spreadsheet. Using a spreadsheet is the easiest and most convenient way to
produce financial statements. If you do not have access to a spreadsheet program or computer
you can still do this manually. Take a moment to review the spreadsheet and consider the
categories of revenues and costs and how the income statement is structured. This example also
includes a sample of revenue and expenditures that was used to produce the 2011 totals. This
information does not necessarily have to be included in an income statement

Income Statement

Income Statement
2011
Sep ‐ 11 Oct ‐ 11 Nov ‐ 11 Dec ‐ 11 Total
Product 1 70,000 250,000 60,000 100,000 480,000
Service 1 15,000 25,000 40,000
Service 1 15,000 15,000 15,000 45,000
Service 2 15,000 15,000 30,000
Total Revenue(Gross) 85,000 265,000 105,000 140,000 595,000

Cost of Revenue(Cost of Sales)

Product development 73,000 35,000 125,000 30,000 263,000
Product research 7,500 7,500
Customer service (contracted) 5,000 5,000 5,000 5,000 20,000

Expenses
Salaries 20,000 20,000 20,000 20,000 80,000
20,000
80,000
Rent 5,000 5,000 5,000 5,000 20,00
 Technology (leased printer, internet access) 1,000 1,000 1,000 1,000 4,000

Total Cost of Revenue 104,000 66,000 156,000 68,500 394,500

Net Income (before taxes) 19,000 199,000 ‐51,000 71,500 200,500

Taxes(assume 15% on first $300,000) 30,075

Net Income (after taxes) 170,425

It is also important to point out that the income statement recognizes revenues when they are
realized (that is, when they are received). Take some time now to think about the following
questions.
Self‐Reflection Questions
For your small business, what are the revenue sources? What are the cost categories that you
need to consider accounting for in your income statement? What expenses do you have that
you need to
list?

CREATING A CASH FLOW STATEMENT

Essentially cash flow is the actual money that collected from sales and the actual money that is
paid out for expenses on a monthly basis. Cash flow helps you to determine whether your
business is viable and if you can draw funds from the business.
Cash flow also provides a sense of reality in that it helps you to make the day to day decisions
related to purchasing and staffing that you need to make. It will also help you to determine if
you need to seek funding from an investor or through a loan or line of credit. The reason
potential investors are so interested in cash flow is because the most important indicator of a
company's financial well being. Evaluating a company on a cash basis has a great deal of appeal
to the financial community.

A Simple Cash Flow Approach

In this course we are going to assume that you are just starting your business and that your
opening cash position (prior to loans and investments) is essentially zero.
A simple approach to creating a cash flow statement includes the following elements:
 Sources of cash – do these come from sales, loans, investments?
 Uses of cash – what expenses do you have to pay? What are your start‐up costs?
 Balance – monthly receipts less monthly disbursements.

An example of a cash flow statement for a three month period is provided on the following
page. As you can see, both cash receipts and expenses vary from month to month. The total
cash available to the company owners at the end of three months is $164,000 which puts the
company in a positive cash flow situation. If the company has to upgrade, for example,
production equipment to achieve higher sales and needs to spend month to do so, it now has a
basis for making that decision.

Self‐Reflection Questions
For your small business, what are the sources of cash flow? What expenses do you have to pay
for on a regular basis out of your cash flow?
.
CREATING A BALANCE SHEET
A balance sheet is also known as a "statement of financial position". It shows a company's
assets, liabilities, and an owners' equity (net worth). The balance sheet, together with the
income statement and cash flow statement, make up a company's financial statements.
If you are a shareholder of a company, it is important that you understand how the balance
sheet is structured, how to analyze it and how to read it.

HOW A BALANCE SHEET WORKS

A balance sheet is divided into two parts that, based on the following equation, must equal
each other, or balance each other out. The main formula behind a balance sheet is:
ASSETS = LIABILITIES + SHAREHOLDER EQUITY

This means that assets, or the means used to operate the company, are balanced by a
company's financial obligations along with the equity investment brought into the company and
its retained earnings. Assets are what a company uses to operate its business, while its liabilities
and equity are two sources that support these assets. Owners' equity is the amount of money
initially invested into the company plus any retained earnings, and it represents a source of
funding for the business. It is important to note that a balance sheet is a snapshot of the
company’s financial position at a single point in time.
A typical balance sheet has two sides:

Cash Flow Statement

Because your time and marketing dollars are limited, the best use of your money is to target
your efforts to specific people (i.e. to the people most likely to buy your products and services).
Instead of running expensive radio or newspaper advertisements day after day, hoping to get
the attention of the customers you seek, you may find that indentifying customers and using
targeted advertising in a specific magazine or website delivers a much greater payoff.

In summary, profiling your ideal customer helps you to simplify your marketing efforts, identify
who your customers are and who they aren’t, and give your insights into your customers. This
information enables you to understand how to deliver value to the customer.

Current Assets Current Liabilities

Fixed Assets Long Term Liabilities
Other Assets Shareholder equity

ASSETS
Current Assets
Current assets have a life span of one year or less, meaning they can be converted easily into
cash. Such assets classes include cash and accounts receivable and any inventory that is on
hand. Cash also includes cash retained in bank accounts.
Accounts receivables consist of the short‐term obligations owed to the company by its
clients based on outstanding invoices or purchase orders. Inventory represents the company’s
finished goods (either ‘on the shelf’ or in progress). The makeup of a retailer's
inventory typically consists of goods purchased from manufacturers and wholesalers.
Fixed Assets
Fixed assets are assets that cannot be turned into cash easily. They can refer to assets such
as machinery, computers, buildings and land.

They can also refer to copyrighted intellectual property owned by the company, patents or
other intangible assets. Another asset that is intangible but may have considerable value is the
company brand. Depreciation is usually calculated on these assets since their value over time
typically decreases.

LIABILITIES
Current Liabilities
On the other side of the balance sheet are the liabilities. These are the financial obligations a
company owes to outside parties and can take several forms. Long term liabilities include debts
and other financial obligations which are due at some point in the future (usually at least one
year out from the date of the balance sheet). Current liabilities are those liabilities that are due
or must be paid within one year. This might include a short‐term loan, accounts payable to
vendors and suppliers, or payments on longer term loans. Shareholders' Equity Initial
investments made by owners are typically referred to as shareholders’ equity Shareholders'
equity is the initial amount of money invested into a business. If, at the end of the fiscal year, a
company decides to reinvest its net earnings into the company (after taxes), these retained
earnings will be transferred from the income statement onto the balance sheet into the
shareholder’s equity account. This account represents a company's total net worth. In order for
the balance sheet to balance, total assets on one side have to equal total liabilities plus
shareholders' equity on the other.
Here is an example of a balance sheet for a large corporation which will serve as an example.

The balance sheet for your small business will likely not have as many categories and will
therefore be less complicated.
An example of what a Balance Sheet for your business might include is provided below.

The balance sheet, along with the income and cash flow statements, is an important tool for
potential investors to gain insight into a company and its operations. The balance sheet is a
snapshot at a single point in time of the company’s accounts ‐ covering its assets, liabilities and
shareholders’ equity. The purpose of the balance sheet is to give users an idea of the
company’s financial position along with displaying what the company owns and owes.

REVENUE GENERATION MODELS

Determining your revenue model is a critical part of commercializing new products and
technologies. The revenue model you choose will impact marketing decisions as well as
customer service decisions, and ultimately the viability of your overall business model. For
example, if you advertise that your product is the highest quality in its category, you must price
your product to align with this claim. Similarly, if your product is extremely costly, you may
need to alter the manner in which you receive revenue in order to attract customers who
cannot afford a large cash outlay all at once. Licensing your product means that you will need a
store of cash on hand to pay for business operations until you have sufficient customers, since
each one will only pay a small recurring fee and it will take time to accumulate income. The
implications of revenue model decisions are complex and have a fundamental impact on how
your business operates.

The following four revenue types, presented from most to least desirable, provide a basis for
most revenue models:

Recurring Revenue
The best revenue models create the conditions for continuous, recurring revenue based on a
one‐time deliverable. Companies require more time and capital to implement recurring
revenue schemes, but the economics are ultimately much more attractive than other models.
In its early days, IBM was an excellent example of a company founded on the recurring revenue
model.
It performed a one‐time installation and implementation of their clients’ computing hardware,
and thereafter binds them to long‐term service contracts that include relatively non‐labour‐
intensive software updates, system maintenance and support. IBM has since moved to more of
a service‐based revenue model and moved away from proving computer hardware.

Transactional Revenue
Transactional revenue models are based on predictable sales of goods. Transactional revenue
models are less attractive than recurring revenue because a company has to “do” something
anew for every sale (produce and ship goods). Toothpaste and printer toner provide good
examples of transactional‐revenue products.
One‐Time Project Revenue
For many companies one‐time projects generate significant amounts of revenue but are
unpredictable in terms of their value and timing. Companies that rely on project revenue have
limited opportunity to build scale economies, face sporadic income and must expend resources
to maintain relationships. They also need to continuously prove themselves to clients and
prepare bids (RFQs, RFPs) for subsequent projects. With a project‐based
revenue model, companies may have many repeating customers, but they have no real means
of knowing when the next sale might occur.

Services Revenue
The least attractive revenue model is services revenue. While the previous three business
models sell goods, possibly in combination with service, the services revenue model essentially
sells time. Time is easy to compete on, easy to negotiate down and cannot be leveraged. By
implementing a services‐based revenue model, a company’s income stream will tend to be
highly uneven, and may also remain low compared to other models.

FINANCIAL FORECASTING AND GROWTH PROJECTIONS

For a business to grow and survive in today’s dynamic environment where profit margins are
squeezed and companies are forced to operate with lower cost, budgeting and forecasting are
important financial disciplines for business success
Not only does the challenge lie in drafting the budget, the challenge lies in operating within the
constraints of the budget and to generate income which achieves a revenue forecast. While
many people use the terms budget and forecast to mean the same thing, these definitions may
help:
Budget – a detailed projection of expenses for a fixed period (often 12 months) set before the
start of the period. Budgets are based on a range of assumptions about external market
conditions and internal performance. A reasonable budget allows you to use your resources
where they're most needed, so your business will head in the right direction. Creating a
financial plan lets you control your business's cash flow instead of it controlling you.
Forecast – a conservative estimate of how much sales revenue you will have next year
(sometimes also referred to as a sales funnel). A forecast involves looking at what you made last
year, and extrapolating or forecasting from that.

In effect, budgets and forecasts are the detailed financial extensions to the business plan. They
set out the financial expectations of the business. They also guide decision‐making and where
the business will invest its resources (inventory, staff, plant and equipment) and predicts
business results.
Here are some budgeting and forecasting tips to consider:
 Make sure your budget and forecast makes sense (not only to you but to others who will
read them).
 Revenues need to match expenses in terms of timing.
 Creating a good budget or forecast needs to be systematic so work on one type of expense
or revenue at a time.
 Document assumptions and special entries thoroughly.
 Regularly compare the budget or forecast to actual data.

A REVIEW OF THE BUSINESS PLAN COMPONENTS

Having a solid business plan is an important part of starting and running a business. It helps you
to think long term and about the big picture rather than focusing only on the immediate issues
associated with starting a business. A business plan also will help you to determine if your
business idea is viable and sustainable over the longer term.
If you require financing to start your business, you will need a robust business plan to attract
the attention of potential funders (i.e. banks and other investors). In addition, a business plan
can help you to remain focused on what you have set out to accomplish with your new venture
and provide you with guidance along the way.

Writing a good business plan can be a time consuming and challenging activity. Having an
outline for the plan is a good starting point. Here is an outline that can be used to help you get
started with the business plan writing process:
1. Table of Contents
Although this may be self‐explanatory it is often overlooked by authors of business plans.
Having a detailed table of contents will enable readers to quick turn to the section of the plan
that are of greatest interest. Making it easy for the reader is important especially if that reader
is a prospective investor.
2. Executive Summary
The Executive Summary is a concise overview of the business opportunity that covers all of the
important components of the plan. This summary should be no more than two pages in length,
is future oriented and designed to demonstrate that you understand the business you are
launching and that investment in the business will result in a good return. Since the Executive
Summary is likely the first impression that the reader will have of your business opportunity, it
is important to capture the attention and interest of the reader. Often investors will read the
Executive Summary to determine if they should read the rest of the plan so it is important to
spend time on creating an effective and engaging summary.
3. Company Profile
This is a snapshot of your business including who is involved, your advisors (lawyers,
accountants), and a description of your business, its location, and the date that you started
your business.
4. Marketing Plan
The marketing plan includes an overview of the industry that your business operates in and the
trends in that industry. Industry trends help you to identify opportunities to create products or
services that will help satisfy a particular customer need.
Knowledge of these trends will help your business to be more competitive and provide you with
direction for future growth. It is also important to know where the product or service you are
planning on introducing to the market fits on the industry life cycle. If you are early to market
then you may have a long life cycle for your product or service. On the other hand if you are
late to market your product or service may have a very short time where it is attractive to
customers.
The marketing plan should also include background information on your service or product
offering, the target market that you are trying to reach, a competitive analysis, and a
description of the marketing mix (i.e. the promotion, place, price, and product – the 4 P’s of
marketing). Here is an illustration of a breakdown of the target market based on what you think
your business can achieve in relation to other competitors. Including this type of analysis in
your business plan is very important.
5. Operational Plan
This part of the business plan provides the reader with details about your business’ suppliers,
any manufacturing plans that the business has for products, the business’ operating
requirements, and a human resources plan which includes a staffing plan, descriptions of roles
and responsibilities and job descriptions of key staff.
6. Financial Plan
The financial plan includes an overview of start‐up costs (if these apply) and the basic financial
statements (i.e. cash flow, income, and balance sheet).
7. Appendices (as needed)
Typically, appendices are included if there is too much detail than can be accommodated
within the main body of the business plan.

WRITING THE PLAN

Often the most difficult part of writing a plan is getting started. With this brief review of the
business plan components in mind here is some advice about writing your business
plan.
 Break down the work into small chunks so that you don’t see it as an onerous task.
 Use the assets of your management team (if you have one) to help with the writing task.
Assign each of them a section.
 Set aside a specific time each day to write a few paragraphs or pages.
 As you write, continue to do more research and add information that you might have
missed previously.
 Keep an open mind. Not every piece of research you find will support your idea. When the
research presents alternative perspectives, include them in your narrative. These divergent
ideas might modify your business plan and make it more viable. Remind yourself that good
 business plans can take some time to complete. A business plan is not a static document. It
should evolve and grow as you deepen your understanding of the business environment.
 Avoid highly technical terms and diagrams that the reader may not understand or be
familiar with.
 Write the plan in a way that assumes that the reader knows nothing about the business that
you are starting.
 Your business plan is a sales document. It must convince you and your readers that your
venture has the potential to be successful. It must come across as enthusiastic and
confident.
 Remember not to omit or ignore any risk factors since these are a part of every business
venture.

TOPIC SUMMARY
In this topic you have refreshed your memory about the basic elements of a good business
plan. You have also received some advice on how to go about writing your plan and some
things to avoid. It is now time to complete the major assignment for this unit and this course.
Go to the next page to read the assignment and answer the questions that are outlined.
Self‐Reflection Questions
Two sample business plans are provided in Appendices 3 and 4. Read each of the plans and
then answer the following questions.
If you were an investor, which of the plans do you think you would be prepared to fu? Why?
What parts of each plan were done well in your opinion? Justify your answer by referring to

specific sections of each plan.