“CREATING A NEW VENTURE”
A GUIDE TO ASSIST CLIENTS IN DEVELOPING A
PLAN FOR SELF EMPLOYMENT
2015 Fall Conference
Oct. 14, 2015
Presented by:
Larry B. Swain Ph.D
524 Telluride Lane
Brookings, SD 57006
Phone 605-695-5336
e-mail: larrybswain@msn.com
INTRODUCTION
This material is written to allow you to assist others in exploring the possibilities of being an
entrepreneur. Much of the material covered has come from the experiences of Dr. Larry Swain
as he has been starting and selling businesses for the past fifty five years. In addition, Dr. Swain
has spent eight years as a corporate executive and has over twenty five years experience as a
University Professor at three Division One University campuses. Dr. Swain has had the
opportunity to work with entrepreneurs all around the United States and in twenty-six other
countries. Those experiences have given him unique abilities to help others become successful.
At completion of this course you should feel more competent in establishing a potential business
opportunity and have the ability to develop a business plan to be a guide in becoming successful
as an entrepreneur. The skills and abilities learned in this course will help individuals be more
successful in whatever career of business that they pursue. The knowledge attained will also be
successful for those that want to work for companies or corporations.
If you are going to be an entrepreneur, it is essential that you develop the strategic skills to
investigate and plan the business. It is also important that you develop a harvest or exit plan for
the business as you develop the business. With the 18 businesses I have started I have had an
exit or sales plan for the business before I started it. This is an important part of the success of
those who are starting new businesses.
A business plan is a very useful strategic plan for success in what-ever you decide to start as an
enterprise. Again, those skills will help you in whatever you decide to do for a career or job.
This country was founded and made successful by entrepreneurs who developed the huge
economy we now have.
My goal as author of this material is to create economic development one job at a time. In order
to do that, many skills need to be developed to improve your chances of success. First, in\ order
to be successful as an entrepreneur, you must have a business plan and marketing strategy with
clear goals and a solid fiscal plan. Without that, success might simply be luck---and luck just
doesn’t work most of the time. Along with all of this you must have confidence in yourself and
be able to promote yourself and your company. .
Being a successful entrepreneur depends on the ability to see change happening and determine
how to take advantage of that change to make a successful and profitable business. Completing
the information presented in this session will significantly increase the probability of success.
A COMPLETED BUSINESS PLAN HAS THE FOLLOWING:
1.
A COVER PAGE – You can put pictures if you like, but have the name of the
company, address, contact information and your name.
2.
A TABLE OF CONTENTS – listing what is on the various pages
3. EXECUTIVE SUMMARY – no more than one page
4. DESCRIPTION OF THE COMPANY - including products/services, customer needs,
how you know what they want, and the geographic area you plan to serve.
5. COMPETITIVE ANALYSIS – including what they do best, their weaknesses and
what you are particularly good and what your niche will be.
6. YOUR VISION FOR THE COMPANY -
AND YOUR MISSION STATEMENT.
7. THE BUSINESS ENVIRONMENT IN YOUR GEOGRAPHIC AREA – the results of your
SWOT analysis (3 strengths, 3 weaknesses, 3 opportunities, and 3 threats)
8. WHAT ARE THE MARKET POTENTIALS IN YOUR GEOGRAPHIC TRADE TERRITORY?
Demographics, consumptions, other potentials.
9. GOALS AND OBJECTIVES FOR THE BUSINESS – include 3 long term goals with 3
short term goals for each. Make sure each has a measurement and time factor.
These are the key mile-stones in establishing your business. (Short term goals)
10. MARKETING PLAN FOR THE BUSINESS – products/services, pricing, place,
promotion
11. FINANCIAL PLANS – one year of P&L, Balance Sheets, Cash Flow
12. MANAGEMENT AND ORGANIZATION OF THE BUSINESS – your resume and info
on the rest of your organization ( why your organization can make this work)
13. EXIT OR HARVEST PLAN FOR THE BUSINESS – how are you going to get out of
this business and transfer it to others, etc.
A BUSINESS PLAN DOESN’T NEED TO BE
MORE THAN TEN PAGES LONG AND SHOULD
BE IN THIS ORDER
SHORT BUSINESS PLAN
Cover Sheet, Table of Contents, Executive Summary (completed after the rest of the plan is
finished.)
1. Describe the business (products, services, the opportunity, why)
2. Describe the products/services that your customers need or want. (how do your know?)
3. What geographic area do you plan to serve?
4. Who are your competitors?
a. What do they do best?
b. What are their weaknesses?
c. What are you particularly good at and how does fit into a niche?
5. What is your vision for your future for this business? (5-10 years in the future)
a. What is your mission statement to achieve your vision? (eight words or less)
6. What is the business environment like in your geographic area? What is the state of the
general economy in the region?
SWOT Analysis – Strengths, Weaknesses, Opportunities, Threats
7. What are the market potentials in your geographic trade territory? (demographics,
consumptions, etc.)
8. What are your goals and objectives for the business? (Long term and short term)
9. Describe your marketing plan, include advertising, promotions, pricing, strategies,
products, and places.
10. Financial Plans – include Pro Forma P&L, Cash Flow, Balance Sheets, Break Even.
11. Management and organization of the business. (include info on management, employees,
schedules and responsibilities).
12. Explain your exit plan from this business. How will you harvest this business? It might be
by transfer, sale, or any other means to exit the business.
ARE BUSINESS PLANS A WASTE OF TIME?
1. Arguments against doing a business plan.
2. Arguments for doing a business plan.
3. Your conclusions about the value of doing a business plan.
HERE ARE SOME MORE DETAILS TO DEVELOPING THAT
TEN PAGE BUSINESS PLAN
MARKETING DEFINITION – What business are you really in?
A. Describe your business.
1. What do you do? Where do you do it? How do you do it?
2. What industry is your business part of? Are you a retailer, a service firm, a
manufacturer, a wholesaler, or a combination of these?
B. What types of goods/services do you provide?
Are they convenience goods? These are goods like food, toiletries, etc. that are
purchased often and usually close to the consumer’s home.
Shopper goods? Merchandise which is sold to a wider market area (such as
furniture and clothing) where customers are willing to travel further and do more
comparison of quality, features and price.
Services to the General Public? (Insurance, dry cleaning, etc.)
Services to Other Businesses? (Bookkeeping, wholesaling, etc.)
C. Where are your customers?
This is called geographic market definition or trade area mapping. While you may
have a general idea of where your customers come from, it is often useful to draw a
map of your trade area to see if there are certain portions from which you are not
drawing customers at all or if all of your trade is concentrated in a few spots on the
map.
GEOGRAPHIC MAP OF LOCAL TRADE AREA FOR
YOUR BUSINESS
(THIS IS WHERE YOU WOULD PUT A MAP OR PICTURE OF THE
GEOGRAPHIC AREA THAT YOU WILL OPERATING YOUR
BUSINESS)
D. Who are your customers, if you have customers now?
1. Are your current customers of a particular age group? Do they have
children? What levels of income do they earn? Are they two wage-earner
families? What percentage of your customers are farmers? These are just a
few of the ways that your customers can be differentiated. This differentiation
is called market segmentation by marketing professionals and is the first step
in targeting your advertising to the right audience. Check with your
instructors for those ways in which markets can be segmented.
Describe your current customers below:
2. Assuming you would like to attract more customers in the future, what age
groups, income groups, occupational groups, etc. would you like to add?
Describe some groups of potential customers below:
3. Develop the demographic data for the geographic area where you will
market.
E. What do your customers need? In answering this question, try to put yourself in
the customer’s place. If most of your customers are women who work outside
the home, for example, they might consider ease of preparation to be their first
priority concerning food items.
Ask yourself, are my customers’ tastes changing? Are they changing their
lifestyles? What is happening in their lives that might affect what they see as their
priority needs?
1. List five or more of your current customers’ needs below:
2. List at least two needs for each group of potential customers (identified under
question D2 above) here:
ANALYSIS OF EXTERNAL ENVIRONMENT
It’s no secret to business owners that what’s happening in the external
environment has an effect on business in your home community. During the early
1970’s, the large increases in the price of oil on world markets affected consumer
demand for automobiles, appliances, and other items that use energy. For the last few
years, a slowdown in the agricultural economy has been affecting demand for farm
equipment. The fact that the U.S. population is steadily getting “older” is having an
effect on demands for health care and housing. While these changes may be results of
events and decisions made far from South Dakota, they have had very real effects on
businesses. Recent economic downturns may affect what and how much customers use
or purchase.
Obviously, as small business owners, you don’t control what happens in foreign
markets, birthrates, or the U.S. economy. The trick, however, is to periodically examine
changes in the larger environment and anticipate the effects they might have on your
business. If you get in the habit of doing this, you’ll often uncover new business
opportunities as well as identifying possible threats to your business while you still have
time to take action to reduce them.
As you can see from the following worksheet, environmental analysis covers a lot
of territory; from world economic and social trends down to the actions of competitors
and customer opinions in your own trade area. The worksheet is meant to give you a
general overview of such analysis, but the areas that are most important for you to
examine will depend on the type of business you are conducting and your local business
economy. Discuss those with your business partners and your instructors.
Worksheet Instructions:
On the following pages, identify which of the events listed represent
opportunities and threats for your business. It would be beneficial to have family
members or business partners do a worksheet on their own and then compare ideas.
Wherever possible, write down a few words that describe that opportunity or threat in
the space provided. Feel free to add additional events where appropriate.
Note that a single event can be both a threat and an opportunity for your
operation. While anticipating and reducing threats to your business is of great
importance, and even more beneficial aspect of this exercise is identification of
additional business opportunities.
External Environment Worksheet
Label OPPORTUNITIES and THREATS to your business.
Opportunity
Threat
General conditions outside the firm –
general state, national, and world conditions
that affect the firm.
Overall economic conditions
(inflation, interest rates, demand, etc.)
______
______
Government regulation or deregulation
(OSHA, EPA, Wage and Hour, etc.)
______
______
Customer attitudes toward your industry
______
______
Export conditions
______
______
(value of dollar, trade agreements, boycotts, etc.)
Demographic trends
______
(age of customers, changes in personal income
levels, lifestyle changes, population shifts, etc.)
______
Other (explain)
______
______
Opportunity
Threat
Local conditions outside the firm –
Conditions in local market place where the firm operates
Reasons why customers buy products and services
______ ______
Suppliers
(availability of high quality products at a
competitive price)
______
______
Transportation
(rail, truck, barge, roadways)
______
______
Customers the firm serves
______
______
(farmers, non-farm businesses, individuals, etc.)
Customer attitudes toward your firm
______
______
Opportunity
Threat
Local competitive situation –
Competitive conditions in the local market
Products and services that are or are not
offered by competitors
______
______
Market share of products and services offered
by competitors
______
______
Price-quality position of your business
(e.g. high price and quality or medium price
and quality, etc.)
______
______
Customer attitudes toward the competition
______
______
Competition and effectiveness of competitors
(competitors strengths and weaknesses)
Financial
______
______
Personnel
______
______
Facilities
______
______
Product Line
______
______
Location
______
______
Other (explain)
______
______
Summary of Opportunities and Threats
Write at least three key opportunities of your business below.
Write at least three key threats to your business below.
ANALYSIS OF THE INTERNAL ORGANIZATION
You now have a list of both threats and opportunities that face your
business. It’s likely that it’s a fairly lengthy one. It’s equally likely that there is
just not enough time, money, and people to address all those issues at once. So,
which threats do you tackle and which opportunities do you go after?
One tried and true method of deciding is to assess the strengths and
weaknesses that your business already has. After having done that, you can
pinpoint those events that threaten your business where it is most vulnerable
and likewise identify the opportunities that build on your strengths. This method,
used by large corporations and other organizations for years, is referred to as
SWOT analysis (for strengths, weaknesses, opportunities, and threats). Like any
tool, SWOT analysis is no magic wand, it’s merely a way of organizing your
thoughts that’s based on good common sense. Use it as it benefits you.
Instructions for Internal Analysis Worksheet
First, go through the entire worksheet identifying each of the areas as a
particular strength or weakness of your own business. If you have several family
members, key employees or business partners involved in the same business,
make copies of the worksheets and let each person do their own before you
come together and talk about them. After having done that, identify the three or
more key strengths and weaknesses of your business and write them in the
summary area provided at the end of the worksheet.
INTERNAL ANALYSIS WORKSHEET
Assess your business (Strengths/Weaknesses)
Strength
Weakness
Experience level of management
______
______
Depth
(back up personnel for general manager
______
______
A. Management and Personnel
and department heads)
Development programs
______
______
(training programs for managers and
employees)
Employees
(productivity, knowledge, potential for
advancement)
______
______
Other (explain)
______
______
Sales programs from suppliers
______
______
Image of company’s products and services
(low or high cost; low, medium, or high
quality, dependability of service, etc.)
______
______
Volume of business
(discounts for volume purchases, inventory
turnover)
______
______
Trade territory
(size, production levels, ability to serve,
market share)
______
______
Other (explain)
_____
_____
______
______
B. Marketing
Strength
Weakness
C. Production and Distribution
Systems for handling supplies
(warehouse and/or storage space)
Processing, checkout, serving
(number of stations, capacity, technology)
______
______
Efficiency and effectiveness of services
(cost per unit, labor per dollars of sales)
______
______
Other (explain)
______
______
Sales
(growth potential, past growth, number
of units currently being sold)
______
______
Leverage
(debt load vs. owner equity)
______
______
Profitability
(growth in past, current conditions)
______
______
Borrowing capacity
(high or low)
______
______
Other (explain)
______
______
D. Finance
E. Summary
Write at least three key strengths of your business below.
Write at least three key weaknesses of your business below.
COMPETITIVE ANALYSIS
Knowledge of your chief competitors and what marketing strategies they are
using is critical in designing effective marketing for your own business. This doesn’t
mean you have to spend a disproportionate amount of time investigating or worrying
about your competitors, however. You can generally get a good enough impression
from your competitors’ advertising, newspaper articles on competitors, industry or
trade organization statistics, personal observations and/or talking with employees,
friends, and relatives.
The purpose of gathering information on the competition is to get a more
objective idea of how well your business stacks up in comparison with the alternatives
available to your customers. While there are any number of comparisons that can be
made between competitors, we’ll stick to a few of the more readily observable ones to
avoid doing a lot of extra research.
One particularly useful observation to make about competitors is what “position”
they are taking in the market you share. Do they advertise themselves as providing high
quality, top-of-the-line goods and services? If so, they will naturally have somewhat
higher prices, an emphasis on service, and be seeking higher income customers. Many
retail businesses in rural communities are competing primarily with retail discount
stores whose advertising stresses low price and who provide a limited selection of
goods and little service. Position is basically determined by the unique mixture of
pricing policy, services provided, and product line found in each business.
Some of the more specific factors that might be examined in regard to your
competition are: credit policies, inventory, store appearance, product and brand
selection, purchasing ability, number of locations, etc.
Any of these areas in which your competitors are particularly strong are ones in which
you might want to avoid head-on competition. For example, if your strongest
competitors are discount houses, you might de-emphasize price in your advertising and
instead focus on product quality, durability, or service. Conversely, of course, those
areas in which your competitors are weak represent opportunities for you.
Use the following worksheet to analyze at least your top three competitors. If you
wish, do additional competitors on another sheet.
COMPETITIVE ANALYSIS WORKSHEET
1. Analyze each competitor in relation to your business in terms of the five
marketing elements listed below:
Competitor
Name
Price
Product
Promotion
Image
Location
2. Analyze the competitor’s strengths and weaknesses.
Competitor ___________________
Strengths:
Weaknesses:
Competitor ___________________
Strengths:
Weaknesses:
Competitor ___________________
Strengths:
Weaknesses:
DEVELOPING A MARKETING PLAN FOR YOUR BUSINESS
FOUR PRIMARY FACTORS IN A MARKETING PLAN
PRODUCT, PRICE, PLACE, AND PROMOTION
 PRODUCT OR SERVICE
 Should meet a customer need
 Includes packaging of the product or service
 What are you selling?
 A product is something that is tangible
 A product has physical attributes and is a “total” bundle that people buy
 Service is intangible such as work, skills, and expertise in exchange for a fee
The selection of your product or service and its branding will be a critical part of your
marketing mix.
1. Focus your brand on primary benefits of your products or services.
a. Focus your marketing so customers have your products or services in
their minds.
2.
Build your brand.
a. Choose a name that is easy to remember, describes your business and
establishes a mindshare.
b. Create a logo that symbolizes your business to the customer.
c. Develop a good reputation.
d. Create a brand personality.
e. Communicate your brand to your target market.
3.
Build and maintain your brand and its reputation.
a. Provide a high quality product or service.
b. Maintain the highest ethical standards.
c. Define your products or services clearly—focus.
d. Treat your employees well.
e. Make all your advertisements positive and informative.
f. Associate your company with a charity.
g. Become actively involved with your community.
PRICE: A CREATIVE BLEND OF ART AND SCIENCE – Challenging but
often is the most important decision you make.
 Factors to consider about proper pricing
 Total cost associated with the product or service
 Target customers and their characteristics
 Current market supply and demand issues
 Pricing strategies of competitors
 Volume of your business and its effect on price
 Image you desire for the company
 Normal cycles of seasonality
 Customers sensitivity to price changes
 Psychological factors that affect customers
 Substitute products or services
 Credit terms expected and discounts needed
 Three powerful pricing forces
 Price conveys image
 Competition and prices
 Focus on value – two aspects of value
 Objective value – if customer understands the value to them
 Perceived value – value in the customers mind without using
objective measures
 Three pricing objectives
 Get the products or services accepted – must be acceptable to
customers
 Maintain market share as competition grows
 Earn a profit – do not introduce a product at below cost. It is much
easier to lower prices than to raise them.
 Pricing techniques for Retailers
 Markup
 Dollar mark up
 Percentage (of retail price) mark up
 Percentage (of cost) mark up
 Pricing techniques for Manufacturers
 Cost plus pricing - adds a profit on top of all costs to get a desired
profit margin
 Need to be able to determine all costs
 Must be able to compute a breakeven selling price
Pricing for Service businesses
 Usually an hourly rate
 Must know the cost of material, amount of hours needed and labor
costs
 Add a profit margin to the costs to determine the hourly rate
 Can also bid a job with a total price
 Impact of credit on pricing
 Credit cards held by nearly 150 million people with average of 4 cards with interest rate
over 19%.
 14% of Americans have 10 or more cards to purchase $1.8 trillion per year.
 Cost of 1-6% plus a transaction cost for each use.
 All of the credit uses cost money so it must be built into the cost of products and services.
PLACE – Where to locate the business.
 Location for retail and service businesses
 Where are the largest concentration of potential customers who fit your target market
located?
 Where are your competition the weakest?
 What is the cost of the location options?
 What are the long term prospects for the locations?
 Are there physical or psychological barriers to operating in certain sites?
 What is the trade territory size?
 How big is the area to draw customers?
 What is the buying power of customers in the area?
 What is the degree of competition?
 Are there political barriers present?
 Location for Manufacturing operations
 Foreign trade zones if you are importing or exporting.
 Enterprise empowerment zones for tax breaks.
 Business incubators
 In the country outside municipalities may be cheaper
 Industrial parks
 Business parks
 Location for Internet Businesses
 Most anywhere
 Use suppliers for warehousing
 May only need an office in a home
PROMOTIONAL PLAN
1. What measurable objective do you want your advertising to accomplish? (If you presently
have a less than desirable share of the market for your products/services a particular increase in
that percentage might be your objective.)
2. Who and where are your target audience?
-
Trade Area
-
Demographic description of customers (age, income level, family size, etc.)
-
Occupations of customers
-
Interests and lifestyles of customers (working women, gardeners, country/western
music fans, etc.)
3. Promotional Plan
- Methods or media to be used. (Direct mailings, radio ads, flyers, etc.)
- Frequency (Weekly newspaper ads, radio 3 times a day, etc.)
- Cost (total cost and cost per customer contact)
- Creative Production Needed (artwork, audio production, etc.)
- Timing (on-going, before special sales, etc.)
4. Evaluation of Advertising (Was objective met? Do changes in media, frequency, timing, etc.
need to be made?)
ADVERTISING AND PROMOTION
Select from the following list the three best alternatives for your business.
POSSIBILITY
DON’T USE
1. Daily Newspaper
___________
_________
2. Weekly Newspaper
___________
_________
3. Local Radio Station
___________
_________
4. Extended Range Radio Station
___________
_________
5. Word of Mouth
___________
_________
6. Direct Mail Advertising
___________
_________
7. Customer Coupons
___________
_________
8. Television/Cable T.V.
___________
_________
9. Internet Marketing
___________
_________
a. Facebook
___________
_________
b. Twitter
___________
_________
c. Web Page
___________
_________
___________
_________
____________________
___________
_________
____________________
___________
_________
____________________
___________
_________
10. Other (Specify)