BUSINESS PLANS FEASIBILITY PLANS Feasibility Plan is a

BUSINESS PLANS & FEASIBILITY PLANS Feasibility Plan is a decision document • Will my idea work? Business Plan is a pitch for support and a “roadmap” towards success for the firm • Targeted toward investors, key employees and strategic partners

PLANS ARE PACKAGES • Narrative • Work in progress; “living document” • Expect to make changes as business conditions change • Should be regularly updated to reflect new strategies • Supporting materials • Competitive landscape / industry analysis

PLANS ARE FOR AUDIENCES Who is your audience? • Venture capitalist? Potential executive? Yourself? What is important to them? • ROI? Exciting work & control? Careful planning? Why might they be interested in your idea? What is the goal of your pitch? • A second meeting? A referral? Buy-in? Leads? • MONEY?

BUSINESS PLAN CHECKLIST ü ü ü What does your business do? What is the opportunity? How big is the opportunity? How will you address the opportunity? What is the competitive situation? How is the competitive situation shaped by industry trends? What are your key & sustainable advantages/defenses? What is your business model? How will you turn a service or product into profit? Do you have the team to execute your plan? How will you use the investment? What return on investment do you offer?

BUSINESS PLAN OUTLINE • Executive Summary • Company Description • • Including product/service & • technology/core knowledge • • Industry Analysis & Trends • • Target Market • Competition • Strategy/Business Model • Marketing and Sales Plan • • Production/Operations Plan Technology Plan Management & Organization Social Responsibility Development & Milestones Financials • Including Capital Requirements & Financial Statements Appendix

MARKET vs. INDUSTRY • MARKET: The organized exchange of goods, services, or resources between buyers and sellers within a specific geographic area and during a given period of time. • A buyer gives up money and gets a good, while a seller gives up a good and gets money • INDUSTRY: One or more business firms that produce similar products

MATCHING PRODUCTS & SERVIVES WITH CUSTOMERS ENVIRONMENTAL TRENDS MARKET • Customer & Benefits • Segment, Size Channels • Perceptual Space • Value Proposition INDUSTRY • Industry Structure • Competitive Space • Competitive Dynamics • Positioning

REMEMBER WHO PAYS! • The key to success is falling in love with your customers You must know them, study them, honor them, serve them… • The single most crucial step towards starting a successful business is discovering and articulating what you can provide that your customers want enough to pay for

KNOW YOUR CUSTOMERS! 1. Why do your customers want your product or service? • • • What do you provide? What are your customers really buying? How much will they pay? 2. Who, exactly, are your customers? 3. How do your customers buy? • • • When do they buy? Where do they buy? What rules or expectations govern their buying?

REMEMBERING THAT… • There can be many that influence purchasing decisions • The people who use or consume the product may not be the one who actually makes the purchase • Especially true in business and in families

EXERCISE WHY PEOPLE AND BUSINESS BUY… • ALCOHOL • PUBLIC RELATIONS SERVICES

WHY CUSTOMERS BUY • People and businesses have different requirements • Both people and businesses buy benefits They buy solutions to their problems and satisfaction of their needs and wants • People and businesses do not buy features Like torque or braking power or acceleration • Products or services are a means to an end And people or businesses may not buy what you think you sell

WHY CUSTOMERS BUY • • Meet biological needs Increase security Gain status or recognition – to belong Live out fantasies Reduce anxiety or other strong emotions Save time or money Solve problems Can be irrational, more emotional

WHY BUSINESSES BUY • Provide their own goods or services more cost effectively • Save money • Cement relationships • Position themselves strategically • Improve public relations • Solve problems • More rational, logical

WHAT DO BUSINESSES CARE ABOUT? • • Quality Dependability Cost Customization Market exclusivity Delivery schedules Guarantees Strategic relationships

FORCES THAT AFFECT BUYING BEHAVIOR • Demographics • Social Change • Economics • Politics/ Regulations • Technology • Environmental Change CUSTOMERS *Each arrow is a force, with lengths indicating relative strength

BUYERS BUY BENEFITS • A benefit is the value a customer places on a function and/or feeling the product produces through its features • Identify - through testing - the few, crucial benefits that will affect customers’ buying decisions. . . • Use these to drive marketing strategy, packaging, pricing, branding, and sales plans

FEATURES SPORT BENEFITS • Features are what make up the product’s or service’s ability to perform functions for customers • Some features are more equal than others: Of the dozens of features an i. Phone may have, perhaps only two or three – such as a high res camera or downloadable apps – might be important to customers • Which differentiate you from the competition? Are they protected or protectable by copyrights, patents or trademarks?

EXERCISE COMMUNICATE BENEFITS BENEFIT FEATURES THAT SUPPORT BENEFIT METHOD TO COMMUNICATE BENEFIT 1. 2. 3.

KNOW YOUR CUSTOMERS! 1. Why do your customers want your product or service? • • • What do you provide? What are your customers really buying? How much will they pay? 2. Who, exactly, are your customers? 3. How do your customers buy? • • • When do they buy? Where do they buy? What rules or expectations govern their buying?

WHO WANTS YOUR PRODUCT OR SERVICE? • Develop an intimate knowledge of who buys • Customers’ behavior • Personal and institutional motivations • The key words, concepts, associations that trigger behavior • Segment who buys • Identifiable, organized, or organize-able & reachable subgroups of customers. • Marked by demographics, behaviors, location, interests

CONSUMER COSTUMER PROFILE Describe your ideal customer or client by answering the questions below. The questions take you from specific characteristics to a definition of a market or market segment: How will they use your product or service? Why might they buy it? What will they pay for it? Are they men, women, or both? What is their age group? What is their approximate average income? What is their employment type (blue-collar, white-collar, managerial, professional, homemaker, etc. )? • What is their lifestyle (personality, self-image , etc. )? • •

CONSUMER COSTUMER PROFILE • • • Where are they (local, state, national and globally)? How many of them are there? How many do you expect to get as customers? What percentage of the market do you expect to get? What’s the growth trend of your target market? What are their buying habits? What magazines do they read? What organizations do they belong to? What conventions or events do they attend? Is there a directory that lists them? Are there mailing lists of them available? What is the best way to reach them?

BUSINESS CUSTOMER PROFILE Describe your ideal customer or client by answering the questions below. The questions take you from specific characteristics to a definition of a market or market segment: • How will the firm benefit from buying your product or service? • How much are the benefits worth to them – in savings, increased market share, profile, etc. • Who buys? Who influences? Who facilitates? Who decides? What buying procedures are in place? What controls? • What level of service to they expect? • How are they used to buying? Salesperson? Directly? Other?

BUSINESS CUSTOMER PROFILE • How is the transaction started, facilitated, completed? • What industry norms govern the transaction? Discounts, payment terms, warranties, types of contracts. • Where are they located ? • What piece of the market are you aiming for? • How many of target firms are there? • How many do you expect to get as customers? • What’s the growth trend of your target market? • What are their buying habits? • What organizations do they belong to? • What conventions or events do they attend? • Is there a directory that lists them? • Are there mailing lists of them available? • What is the best way to reach them?

SEGMENT ANALYSIS • Talk to customers! Interviews & surveys • Observe customers using/buying similar items Read what they read, go where they go • Talk to others who serve the same customers How do they segment, communicate, etc? • Examine how competitors’ segment • Define segments and estimate size

WHAT IS MARKET SEGMENTATION? Process of dividing a market into subsets of consumers with common needs or characteristics

TARGET SEGMENTS [ CONSUMERS ] • DEMOGRAPHIC: o o o o Age Gender Marital Status Income Level Occupation Education www. demographics. co m • GEOGRAPHIC: Country Region State County City/Town Size of Population Climate Population Density www. census. gov www. oscda. missouri. ui c. uicapps. xtabs 3. html o www. geocode. com/ea gle. html-ssi o o o o o

TARGET SEGMENTS [ CONSUMERS ] • PSYCHOGRAPHIC o Leader or follower o Extrovert or introvert o Achievement-oriented or content with status quo o Independent or Dependent o Conservative or liberal o Traditional or experimental o Socially-conscious or selfcentered • BEHAVIORAL o o o Rate of usage Benefits sought Methods of usage Frequency of purchase Travel patterns

TARGET SEGMENTS [ CONSUMERS ] • SOCIOCULTURAL • USE-RELATED o Cultures (Chinese, Spanish, Brazilian) o Religion (Moslem, Catholic, etc. ) o Subcultures (African American, Asian, Caucasian) o Social class (lower, middle, upper) o Family life cycle (single, young marrieds, empty nesters) o Usage rate o Awareness status o Brand loyalty

MORE MARKET SEGMENTATION • Use-Situation Time, objective, location & person • Benefit Segmentation Convenience, social acceptance, value, economy • Hybrid Segmentation • Demographic/psychographic • Geodemographics www. claritas. com, PRIZM • SRI VALS – Innovators, thinkers, believer, achievers, strivers, experiencers, makers survivors

TARGET SEGMENTS [ BUSINESSES ] • BUSINESS MARKETS o Type of business (manufacturer, retail, wholesale, service) o SIC / NAICS Code o Size of Business o Financial Strength o Number of Employees o Location o Structure o Sales Level o Special Requirements o Distribution Pattern o www. imarketinc. com, www. findsvp. com, Lexis/Nexis, Business Source Premier, Business and Company Resource Center, Business Industry Database

EXERCISE CUSTOMER PROFILE • Define your customer • Define his/her segment • What channels would you use to reach your customer?

KNOW YOUR CUSTOMERS! 1. Why do your customers want your product or service? • • • What do you provide? What are your customers really buying? How much will they pay? 2. Who, exactly, are your customers? 3. How do your customers buy? • • • When do they buy? Where do they buy? What rules or expectations govern their buying?

EXCHANGE ANALYSIS • What changes hands? • Why? What is the value proposition to the buyer? What dimensions of value matter? • Who sells? Who buys? Who influences? Who facilitates? Who holds the most power? • When does the exchange happen? How long is the sales cycle? • How are transactions started, facilitated, completed? • What rules, regulations, norms shape the exchange? • What norms govern the exchanges? – Discounts & payment terms, warranties, types of contracts, style & culture

PERCEPTUAL SPACE • How does your product or service stack up against competitors? • What mind space do you occupy? • What unique value can you offer? • What will be your unique selling proposition?

PRODUCT COMPARISON CHART • List competitive products/services – the from customers’ point of view • Note crucial dimensions of value Price Quality Segment Channel Product 1 $$$ Sales H A Product 2 $ Web L B Product 3 Direct M C $$ Substitute 1 $ Sales L D Shows $ M E Substitute 2 Notes

PRODUCT COMPETITIVE ANALYSIS: OFFERINGS MATRIX COMPETITIVE Differentiation L H Attractiveness H L Product B Product Y Product C Product Z Product A Product X

PRODUCT COMPETITIVE ANALYSIS: MAP PERCEPTUAL Quality Cost Map key products or services along dimensions most important to buyers & influencers

WHAT IS A VALUE PROPOSITION? • Or “unique selling proposition” • One of two essential elements for effective positioning (communicating benefits is the other) • Distinct benefit or point of difference for the product or service • Consequences of poor/ineffective value proposition? • Little or no market uptake = failure • Perception of product or service as “me too”

“WHAT’S IN IT FOR ME? ”- CUSTOMER SEGMENTATION MARKET PSYCHOLOGICAL POSITION TARGET SEGMENT VALUE PROPOSITION

VALUE PROPOSITION • Define what you provide/will provide • As simply and concretely as possible, emphasizing function, not form • Describe your customer • As precisely as possible, emphasizing why they care, i. e. , the type and magnitude of the problem they have that you solve • Define precisely the value you provide to your customer in terms of benefits they will receive • Quantifying you claim when possible, especially for businesses, and supporting it with testimony

VALUE PROPOSITION [ EXAMPLES ] • i. Pod: “best digital jukebox” • Lexus: “quality, zero defects” • Dell: “customized PCs made quickly and sold economically” • Southwest: “friendly, fun customer service at economical prices” • Gap: “wearable, affordable, hip American style”

WHAT’S THE VALUE PROPOSITION? • Dove Soap • V-8 Juice • Mc. Donald’s Happy Meal

EXERCISE WRITE YOUR VALUE PROPOSITION “Our company provides x that does y (solves y problem) for z in a way that. . ” “Automsoft’s Rapid. Pharma provides 100% accurate and reproducible data at the finest level to help pharmaceutical firms bring new production processes to scale, while providing batch assurance and full compliance with CFR Chapter 21 Part 11. ”

BIBLIOGRAPHY Matching Products & Services with Markets • Tony di. Bennedetto lectures • Jaine Lucas lectures • Jeffrey Dobkin, How to Market a Product for under $500!, (Danielle Adeams Publishing Company, 1995). • Craig Fleisher & Babette Bensoussan, Strategic and Competitive Analysis (Prentice-Hall, 2003). • TL Hill lectures • Jill Kapron, Biz. Plan Express, (South-Western College Publishing Company, 1998). • Philip Kotler, Marketing Management, 9 th Edition, (Prentice-Hall, 1997). • Small Business Development Center business planning program – 2000. • Barbara Wright presentations

SOURCES OF CONSUMER DATA • www. fedstats. gov – economy, business and all demographics of US population • www. census. gov – data on age, education, income and occupation of US residents by state and region • World Fact Book – key stats on any country worldwide www. cia. gov. publications. factbook • Claritas – demographic and lifestyle profiles • Yankelovich – consumer lifestyles and consumption patterns • Mediamark Research – segmentation studies of consumers’ leisure activities and buying cycles

BUSINESS PLAN WORKSHOPS THURSDAYS [ 4: 30 - 6 PM ] September 16 September 23 September 30 October 7 October 14 October 21 October 28 November 4 November 11 November 18 Overview of Business Planning Legal 101 for Entrepreneurs Idea Creation & Opportunity Assessment Matching Products & Services with Markets Competitive Analysis Strategy & Business Model Sales & Marketing Management & Ownership Financial Forecasting for Start-Ups Investment Pitches for Emerging Firms