June 29, 2010
3 Questions to Answer in Your BP
A business plan proves to investors that you know your customers, competitors, and your own management team (as well as the management vacancies you may need to fill.)
Most entrepreneurs spends weeks and months on their business plans. However, with the right approach you can finish your plan MUCH faster.
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Here are three of the most important core questions to answer in your business plan.
1. Do you know your customers?
Do you know your target market both generally and specifically? In one or two sentences of the Customer analysis, describe your target market in general terms. Sketch a picture of the average customer, e.g., â€œsoccer moms and dads with a combined annual income of $110,000 and three cars.â€
Then use demographics and psychographics to break down that average customer into â€œsegmentsâ€. A segment of your target market is a smaller, narrower portion that will require different types of marketing to reach. In the foregoing example, there can be a California segment, an urban segment, a Latino segment, and so on along narrower and narrower channels.
Demonstrating an intimate knowledge of your customers, what they need, and how you will deliver your product to them will help you get funding from lenders and investors.
2. Do you know your competitors?
Describe your competitors from the general to the specific. Include full reports on your top competitors. Include their market penetration, operating margins, and head counts. Show where they are weak and strong. Be realistic, and use hard research in the areas of financial data, as well as competitors’ marketing strategies.
Note: A competitor is any entity that could cut into your profits. A competitor need not be a business. If your company manufactures tanning beds, then one of your competitors is the sun.
Understanding your competitors means you can learn from their strengths and exploit their blind spots. It proves to lenders and investors that you understand your place in the higher order of your industry.
3. Do you know your management team?
Who will be the driving force behind the operation of your business in both the short- and long-term? What are their past accomplishments and qualifications as they pertain to your business? Just because a leader has experience, that does not necessarily make him a good candidate to run your company. Explain how exactly your management team is the one to carry out your objectives.
If you need to fill management holes, explain what qualifications you are looking for, and how you will acquire and keep them as human resources.
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