Business Solutions

Everyday I speak with Entrepreneurs about their business, whether they are in the process of starting, buying, expanding their existing, or trying to survive the current economy, and I marvel at the Entrepreneurs that are able to understand the fundamentals of the industry their business are classified as a part of, but I am also dismayed at the Entrepreneurs that tend to overlook or ignore the importance of staying current with their industries trends, new technology, and shifting markets, especially the importance of gathering the most current Industry information as part of the Business Plan process.

The service industry fundamentally sells units of time or labor, and a service is therefore perishable since it is directly linked to time, and any excess labor capacity cannot be stored for later use as it must be used now or forever lost, a fact that is true because production and consumption cannot be separated.

Another strategic issue of a service based business involves the variation in quality that exists through the delivery of the service itself, since unlike a product where manufacturing processes can be tightly controlled to ensure certain tolerances of quality, and a service is based on the “difficult to standardize” nature of human behavior.

The last major attribute that makes service based businesses unique, is their intangibility since there are little if any physical characteristics to the output, which causes many marketing professionals to call this problem “selling the invisible.” Of course, there are many ways to make a service tangible with a little marketing imagination.

For a service based business plan you need to focus heavily on the issues including minimizing the problem of excess capacity and perish ability, determining the staffing levels you need to deliver your service, maximizing their delivery capacity, developing processes to minimize service variations and maximize service quality levels, determining how you will market your service effectively, since it can’t be pictured in an advertisement or displayed in a store, and determining which tangible cues will you use.

A retailer is an organization that purchases products for the purpose of reselling them ultimately to consumers, and the many times location may be the single most important factor in the consideration of what makes a successful retail business, since as they say in the retail industry, “location, location, location.” A business plan for a retail business must contain a thorough location analysis covering such issues as selling square footage, access, visibility, signage, costs, renovations, lease terms, available parking, traffic counts, area demographics, and so forth.

Emergence of new types of stores and expansion of product offerings by traditional stores have intensified retailing competition, and retail positioning involves identifying an under served market niche and serving the through a strategy that distinguishes the retailer from others in the mind of the consumer, and a retail business plan should thoroughly discuss its positioning strategy in the market place.

Store image refers to the physical elements in a store’s design that appeal to consumers’ emotions and encouragement to buy, while merchandising refers to the inventory mix a store will provide and how it is displayed out across the store’s floor plan, and the marketing section of a retail plan needs to discuss both the image and merchandising strategies that will be employed.

The last critical consideration a retail business plan should address is the inventory requirements, and you should detail how much inventory you have or will require in both cost and retail dollars. The retail industry usually works on several key inventory metrics including sales per square foot and inventory turns, which is the number of times the inventory walks off of the shelf in a year, and you should be aware of such metrics and how they are presented and in your business plan, since most trade associations collect and report such data.

In the manufacturing industry a supply chain is all the organizations that are responsible for bringing your products to market, and it might be shallow to say when a supplier sells raw material to a manufacturer which then sells direct to a consumer, or it may be deep to say when a sub-supplier provides a prime supplier with the parts who then sells to a manufacturer, to a wholesaler/distributor, to a retailer and so on. Understand that your business plan should discuss in detail, both your supply chain and any coordination and communication issues related to its management.

The competitive environment in manufacturing has made high product quality essential to success, and you should discuss any quality processes, programs, or certifications that you have or require, in order to successfully compete in the global market place.

With regard to materials and labor you should present a discussion in your plan about its supply and availability as well as how the cost will be controlled, and you should also present some details about what margins you are expecting, which is the calculation of taking price minus cost of producing your product.

Finally, how you sell your products and take them to market is obviously as important as how you make them, and be sure and don’t skimp on the marketing section and present only product production and manufacturing processes, as your discussion should include your sales and distribution strategy through such channels as sales agents, sales representatives, direct marketing tactics, distributors, or retailers. Make sure your plan discusses the pricing expectations that each channel member expects to realize, along with the associated costs, as the channels move from your business toward the consumer, and remember during the process that you are not only creating the information for potential lenders or investors, but for yourself as well, since it will be the beginning of your detailed operations and management procedures, and the information must be clear, concise and focused to increase the changes of achieving the goals you will set in the financial projections and feasibility section of the Business Plan.