There’s so much to consider when you’re starting or leading a company. Unless you’ve already earned a degree in business, a lot of it sounds similar and can be very confusing. Three terms that commonly trip-up beginners are: Business Model, Marketing Plan and Business Plan. For this post we’re going to take a closer look at each and explain how they fit together and why you need all of them.
After you’ve had your new product or business idea and know you want to start a company, creating a Business Model is the very first thing you should explore. A Business Model is important because it illustrates the way profits will be generated for your company. It is simply how your business makes a profit. It is crucial to success for all companies so there’s no skipping this step. If you can’t figure a way to generate profits, then your business is in trouble before you’ve even opened it. If you can’t find a way to make your idea profitable, then you may decide that you don’t have a feasible proposition and perhaps you won’t move forward with that particular idea. You will save yourself a lot of time and cash if you know up-front how you plan to earn money.
Examples of Business Models for Internet Companies:
* Subscription Model – customers subscribe for the online product or services – example: Netflix or Microsoft Office.
* Freemium Model – the is a basic service that is free but extras or a premium level of service are charged for – example: MailChimp or Hootsuite.
* Direct Sales Model – products/services are sold directly online – example: Amazon or Alibaba.
* Pay-per-click Model – paid for clicks onto an advertiser’s link – example: Google or Bing.
This is a tool that enables a company to showcase the best use of its limited marketing resources in order to achieve the business goals (including taking a company or product/service to market). Your Marketing Plan should be a clear statement of how the company intends to achieve specific business goals for things like production targets, financial targets and personal targets. No other plans can be completed without the information that is found in the Marketing Plan and that is why it should be created as the next step after you have identified your Business Model. To be clear: a Business Plan is created after the Marketing Plan using data from the Marketing Plan. It is never written first. For example, expected orders and sales budgets are part of the Marketing Plan but they will not only later feature on the Business Plan, but drive it.
The process of preparing a Marketing Plan makes a founder or manager evaluate the marketplace and how it affects the business. The plan itself helps establish, direct, and coordinate all marketing programmes and activities across a company over a specific period of time. It also helps managers plan for and keep an organisation aligned to the customer by looking at customer touchpoints across your entire business; in human resources, accounts and operations. It also documents a benchmark to be used later for evaluations to measure the success of marketing activities.
A Marketing Plan can be Used to:
* map the way to take a new company or product/service to market,
* refresh the approach for existing products and services,
* outline details that will be used in the company’s business plan,
* a good marketing plan can also be an important asset used to attract investment.
Basic Elements in a Marketing Plan:
There are basic elements that are usually always included in Marketing Plans. We’ll get into this in more detail in a blog dedicated just to Marketing Plan outlines but for now, here’s a brief look at some of them:
* Executive Summary
* Mission statement and Objectives
* Market Trends and Dynamics
* Target Market Description
* The Marketing Mix
Your company’s Corporate or Business Plan, runs the business. A Marketing Plan (as described above) is an element included in a Business Plan. Your Business Model underpins the Business Plan and absolutely must be developed before you configure your Marketing Plan and draw up a Business Plan.
A Business Plan is a formal written document that sets out what your company seeks to achieve and just how it will go about it. While the most obvious reason a start-up might want to do these processes immediately involve needing them on paper to be able to open a business bank account or secure funding, developing your Business Model and writing a Business Plan also allows you to crystallise your business idea and to think systematically through the challenges you will face before you have to deal with them. It allows you to look at strategies and options that should improve your chances of success. Business Plans should be tailored for the scale of the specific start-up and for the audience it is aimed at. For example you might send it to your business bank manager for an account opening application, a venture capitalist for an investment application, to an accelerator for a placement application, perhaps use it to apply for a desk in an incubator or use it to compete in a start-up business competition for cash prizes and so on.
“What is the right plan? It’s the one that helps you identify what you need to ensure success. It’s the one that rallies our employees around a few common goals – and motivates them to achieve them. It’s the one that involves your customers’ goals and suppliers’ goals and brings them all together in a unified focus.”
– Michael Dell, Founder, Dell Corporation (1999) from Direct from Dell: Strategies that Revolutionised an Industry, New York: Harper Business
Business Plan Structure:
Here’s an example for the structure and content for a business plan intended for external use:
* Tablet of Contents
* Executive Summary
* Key Business Details Summary
* Industry and Market Analysis
* Customers and Value Proposition
* Marketing Strategy
* Operations Plan
* Management Team plus Company Structure
* Resources and Financing
* Financial Projections
* Potential Risks and Strategic Options
* Key Milestones
* Appendices (Attachment examples include start-up costs, detailed financial projections etc)
Using your Business Plan to secure Finance:
“They’re backing you. You’ve got to convince your investors that you won’t give-up. You’ve got to create a vision for the backers.”
– Martyn Dawes, Founder, Coffee Nation, interview in the Sunday Times, 23 May 2004
As we’ve already mentioned, many banks will require a Business Plan during the application process for a business bank account. If you want to borrow money, you will definately need one. Banks, venture capitalists and angels will all want to see a well written, logical Business Plan. If you’re applying for a bank loan, it’s important to note that a Business Plan presented to a bank for borrowing needs to incorporate how the interest on a loan you’re seeking and the capital will be repaid by the due date. In order for the bank to give you a start-up loan, it is necessary to develop respect in your business ability and gain the trust of the bank manager. Also personal credibility is vital (and most banks will also check the personal credit history of a Company Director before issuing a loan).
And finally, a Business Plan presentation needs to be just as professional as the plan itself. You want to present yourself as credible and experienced in your area of expertise. The purpose of the pitch is to get the interest of the people in the room and engage with them to discuss your venture and its potential.