Recently, I held a business plan consultation with a client in the food industry, helping them with start-up financing. They needed a loan to purchase vital equipment as well as working capital.
The owners presented me with their business plan draft. Although their concept was sound, I soon realized there were issues that needed to be addressed before they had a consistent and aligned business plan.
Straight away, I honed in on the following aspects of their plan:
- Business concept needed to be more defined
- Too broad definition of target market
- Limited marketing plan, based mostly on social media
- High expenses for staff, and
- Forecasted revenues too high for a start-up
During our business plan consultation process, I explained the problems they faced and their path toward solving them. This consultation allows me to have a frank discussion about a business plan’s strengths and weaknesses, allowing a client to make important decisions with more clarity and more chance of success.
Here are some of the aspects of their business plan we looked at:
It’s tricky as a business owner to have your concept questioned by an outsider, but it’s one of the most valuable interactions you can have in the pre-start-up phase. I had to be clear and direct with them regarding their concept and why it needed more work. Above all else, the concept was confusing and lacked clarity.
If I, as a Business Plan Advisor, have difficulty in clearly understanding their concept (after reading the business plan), will their customers be able to understand it? And how can a business succeed in a competitive market when it has not differentiated itself from competitors with a strong and clear concept?
First, they needed to define what their business was all about; a strong concept communicated clearly is vital for this as it allows the target market to understand and relate to it. It is not enough to be a “jack of all trades”, owners need to really drill down into specifically what they want their business to be.
The concept discussion directed our conversation to their target market. If they didn’t have a fully fleshed out concept, how could they hope to attract the right customers to their business? Entrepreneurs need to learn that not everyone will be their client, nor will they be interested in what they are offering. They needed to be honest and focus on a few specific segments of the population and define those segments as detailed as they could in terms of demographics, psycho-graphic and behaviors. This allows the business to deliver a clear message that resonates with their target market, matching their needs and wants.
The Marketing Plan
Marketing is an imprecise science and it pays to approach it from many different directions. My clients had identified social media as their main marketing channel. I am always concerned about this. Social media presents a constant level of background noise that it can be hard to get over. I suggested alternative channels as part of their overall marketing strategy. We spoke about using flyers, coupons and discounts, even a grand opening party to generate some buzz. To get even more traditional, local newspaper ads could also work wonders, as well as offering sales promotions to commercial clients that they had close to their business.
My client’s plan predicted higher revenues than industry benchmarks and staff/contractor expenses were much higher as well. Projecting higher sales, apart from providing a wrong growth picture, gives the impression that extra cash will be available, allowing the business to incur higher expenses and potentially getting into financial difficulty as a consequence. Even more, projecting higher staff expenses leaves the business vulnerable to the usual variances of doing business. One poor quarter could leave owners desperately short of cash. When we discussed this issue, my clients understood the issue and revised revenues and staff expenses downward so they’d be more resilient in the face of lean times.
After several revisions, the business plan was ready, and my clients secured start-up financing.
They started operations six months ago, so we decided to follow up to do a review session and plan strategies moving forward.
It was great to catch up with them and to see that their concept was stronger and reflected the positive vibe around their business. Although sales are not as high as initially expected, they know their projected revenues and are working on their plan to increase sales. They also know what kind of clients they need to get into their business and for which kind of offering.
Once again, we talked about their expenses to see how things were progressing. The owners had taken positive actions to reduce salary expenses, going so far as to not pay themselves a salary and keep their current jobs for the time being.
Marketing is another topic that came up for discussion. The owners understand the need for more advertising, promotion and PR. They are planning to print flyers offering discounts and are looking to host a splashy opening party to create awareness. They also have a social media campaign that they plan to launch as soon as possible.
Although starting the business has not been smooth sailing, the owners have a plan and know what needs to be done in the short term. They are focused on their concept and have a clear path laid out to progress along. Our strategy session reassured them of the need for certain plans and the urgency required to take certain actions.
I am certain that by working on their business plan, owners go through a journey of research and analysis that helps them conceptualize their business, understand their industry, plan their foundation, make decisions, set actions and move forward. With analysis and information, business owners can make decisions with more certainty and have higher changes to be more successful!
Even more, regular check-ins and a strategy sessions, once clients have been in business and need to grow, is a great way for taking the time to reflect on successful strategies, review which plans have worked (and have not), analyse financials and evaluate and build new plans for growth based on thorough analysis.
At Small Business BC, we offer the tools and resources you need to get your business off the ground. If you’re crafting a business plan, our expert advisors are ready to help you find the gaps and secure the financing you need.