Do Business Well

It’s great to identify the benefits you can offer a growing andreceptive market, but you have to keep in mind that you won’tbe operating in a vacuum There’s almost certainly competition for the market you’ve targeted. If there isn’t, don’t necessarily take that as a good sign. It may mean that the market isn’t as receptive to your product or service as you think.

Entrepreneurs often take the competition too lightly. They assume that their own product or service is so much better than the competition’s that there’s no way customers won’t make the obvious choice. The truth is that there are reasons that the competition is there and doing well, and you may not understand all those reasons.

Sometimes entrepreneurs think there’s no competition, because they haven’t looked deeply enough. The owner of a large brokerage service specializing in selling small businesses once observed, “Do you know who my biggest competitor is? It’s FOSBY. That’s ‘for sale by owner.’ ” In other words, the competitor wasn’t another business, but another means of doing business. For sellers of business services like graphic design, technical writing, and consulting, the real competition may be the preference of many companies to use in-house staff to perform the service.

Whatever the situation, the business plan should explicitly take account of the competition—listing competitors and explaining their strengths and weaknesses.

In addition, the business plan should explain what the company will do to exceed and stay ahead of the competition. Will the company provide faster turnaround times? Offer higher- quality materials? Sell the same services at a lower price via use of new technology? Offer new services? In other words, how will the company go about achieving and maintaining what is sometimes referred to as a competitive advantage?

In a global economy, competitive advantages are more important than ever. You never know where new competitors will come from. Only one thing is certain: they will continually crop up. Part of your job in the business plan is to make a case for your company to stay a step ahead of the competition.

Putting the Marketing Planto Paper: TheBen & Jerry’sModel

Once you have taken the steps described in this articleyou should be able to make a convincing case for the marketyou have chosen—convincing to you and to potential investors,executives, and others. Clearly, if your company is well established, you’ll have an easier time making your case because youwill know which market segments have bought most and which least. But even with such experience, you must still make projections for the future_; that can be as tricky for an established business as for a start-up.

The section of Ben & Jerry’s business plan describing the market for its two products—packaged ice cream and ice cream shops (referred to as scoop shops)—illustrates the kind of data that should be included in the marketing plan. It begins by describing the size of the American ice cream market and its growth rate. It then shows that the superpremium ice cream market segment is growing at a significantly faster rate than the total market, having risen from 11 % to 20% of the market in one year.

This description of the market helps explain the more than 100% annual growth of Ben & Jerry’s in the New England market, as discussed in the second paragraph. There’s no need to begin explaining the customer benefit because, clearly, that’s coming across to buyers.

Ben & Jerry’s next demonstrates that demand is so intense—for both new scoop shops and franchises—that the company has been turning away business. This information helps justify the need for investment funds so that the company can expand to accommodate the demand—which is the purpose of the plan.

The plan next describes negotiations for both scoop shops and franchises. This information shows that the company is taking advantage of whatever growth potential is allowable within its existing financial constraints.

Assessing the Competition: The Pizza Hut Model

Of all the business plans I examined, Pizza Hut’s contained the most extensive analysis of the competition. The plan points out that the company’s competition extends beyond other pizza chains to “all grocery stores and/or outlets where food away from home may be purchased.” It next assesses the number of outlets and sales performance of eating places falling into its segment of outlets—those doing $100,000 to $300,000 in annual business each.

Finally, it briefly discusses four of its major competitors, noting the strength of Pizza Inn and the weaknesses of the others. Even executives as savvy as those at Pizza Hut aren’t infallible, though. Note the mention of Domino’s as one of several showing “little overt activity in 1975.” That’s one competitor that didn’t get as much attention as it should have.

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