Write a Business Plan - Parts 5 thru 8

No matter how you write a business plan, you'll need to understand the marketplace well enough to know how to succeed with your small business ideas. This means you have to know your customers; the people who you are going to do business with. These are the focal point for success of your business. Instructions and suggestions for completing business planning Parts 5 through 8 focus on the customers in the marketplace.

Example discussion for XYZ Lawn Care and Landscape Maintenance Service is shown in blue text.

Understanding the Marketplace

Part 5 - Describe the breadth and depth of the marketplace

It's time to estimate in a quantitative (number oriented) or qualitative (description oriented) manner the breadth and depth of the marketplace. This is very important if you are to get an idea of how large you can grow, and how well you can become "planted" in the marketplace.

It also helps you determine the income potential of your business, and how long you can sustain a steady income. Don't get wrapped up in the idea of income just yet. We have to first characterize the marketplace to see if you can "get off the dime".

Let's look at selling homemade crafts. The breadth of the marketplace might include local fairs, a few gift shops in town, and your own gift shop. It might also include internet sales. If so, the breadth of your marketplace is determined by the number of local fairs, shops and internet sites you can identify and build relationships with.

The breadth and depth of your marketplace is also determined in part by what you offer. A more complete offering will not only appeal to a broader market, but it will give customers more items to choose from and more potential for repeat purchases.

The number of people that attend fairs, go to gift shops, and shop online is also a factor that will help determine the depth of the market. Foot traffic in local shops will probably be limited. Internet traffic is nearly without limit, and you can build websites relatively inexpensively and easily, so you can have an influence on market breadth and depth.

As you write a business plan, and consider market breadth and depth, ask yourself the following questions about the marketplace:

  • Is it seasonal or cyclical?
  • Are there age considerations for buyers?
  • Who can afford this?
  • Will people make a one-time or repeat purchase?
  • How often will they buy?
  • Is the marketplace regional, national or world-wide?
  • Are there follow-on product/service sales opportunities?
  • Is my offering timeless or a fad?

Here is an exercise that is easy to do, and will give you lots of insight about the marketplace. Consider the number of people that offer a similar product or service. If it is a new product or service, your competitors will be few. If it is a common product or service, you may have many competitors.

Let's say you have lots of competitors.

I'm going to write a business plan even though I have lots of competitors? Yep! Don't worry, having competitors shows there is a strong market, so look at it as a good thing.

Now ask yourself about how your competitors operate in the marketplace. Is their work:

  • Seasonal?
  • Hit and miss?
  • In demand?
  • Steady?
  • Repeat/recurring?
  • Local, regional, national or international?

By now, you should be getting a better idea of the marketplace for your product or service. You should also be seeing whether the business you are considering is feasible in terms of a good healthy marketplace.

As you write a business plan, you need to accurately characterize the marketplace. Don't just say: "There's lots of work out there." It pays to write a business plan that proves to you and others (potential funding sources) that there is indeed a sufficiently broad and deep marketplace to support your business.

Here at XYZ Lawn Care and Landscape Maintenance Service, we understand the breadth and depth of the marketplace.

The breadth of the marketplace is relatively good with plenty of apartment complexes, schools, one shopping mall and several assisted living centers in the area. In addition, there are other businesses that need lawn care, landscape maintenance and snow removal. In particular, these include numerous banks, strip malls, several office complexes, half a dozen grocery stores, about two dozen restaurants, a small airport, several motels, and a few gas stations.

Most of the potential market shows about the same depth. All would be in need of snow removal and landscape maintenance in addition to lawn care.

Part 6 - Describe saturation of the marketplace for your product or service

Saturation of the marketplace is a way of noting how much of the marketplace is already served. When we write a business plan, we want to capture market saturation so we know some of the challenges that we might face in terms of "breaking in".

In addition to the saturation level, we also want to note the quality of saturation. Perhaps there are sufficient service providers in the general area (a high level of saturation), but if they are not good or preferred service providers, then the marketplace really isn't fully saturated.

As you write a business plan and think about market saturation, think about rain. Moderate and regular rain is hard to beat. No rain for long periods or short and light rains don't amount to much. The same is true for how well your competitors may have saturated the marketplace.

When you write a business plan, consider the following factors as they relate to market saturation:

  • Competitors now.
  • Anticipated competitors.
  • Quality of competitor products and services.
  • Competitor ability to serve customer needs.
  • Customer satisfaction with competitors.
  • National competitors moving into your local market.
  • Emerging customer needs that will be unserved.

As you write a business plan, this exercise may seem a little tedious, but remember, you're building the foundation for a business strategy, so you have to know the marketplace. That's means you need to know about customers and competitors. Your success with small business ideas relies on good planning.

The market seems to be near saturation level. There are a few exceptions, but for the most part the potential market is being served by commercial lawn care services.

Some portions of the market are being served by low performing organizations, and that offers an opportunity to get a foothold in the marketplace.

The community is growing at a good and steady pace, so there will be numerous opportunities to offer services to new customers that are settling into the area. There are numerous businesses that are being created including a new hospital, a couple of schools, several office complexes, several housing developments where homeowner associations are responsible for lawns, and a couple of small strip malls.

Part 7 - Characterize the age and lifespan of the market

Knowing the age and lifespan of the marketplace is a good way to help you determine how long customers might continue to purchase your product or engage your service. It also provides an indicator of how long other businesses have been serving the market.

To some extent, age and lifespan of the marketplace can also suggest a kind of measurement for the potential longevity of your product or service.

Consider the pet rock. It had a short life span of desirability because it was a fad. You could measure the age and lifespan of the market in months, so the peak of customer interest was only a few months. When you write a business plan for something like a pet rock, you'll note that it's not a good business to be in, unless you took the risks and were "the first with the most".

Now let's consider the automobile. It has a very long life span of desirability. Our country is "married to the automobile" according to most experts and casual observers. We have paved over the equivalent of Rhode Island so we can have roads, expressways, highways, freeways and parking lots.

The automobile has been around for about 100 years, and it isn't going away anytime soon. The marketplace for powerful personal transportation is indefinite. In other words, I can't foresee a time when we won't have a desire for powerful personal transportation like the automobile.

We can see from this example that the automobile market is advanced in age, but the market lifespan really can't be estimated. At least I don't see an end to it, so the age of the market doesn't deter us from jumping in for fear of no marketplace to operate in.

The age of the automobile market suggests that since we aren't at the head of the pack, we can't offer "any color, as long as it's black". We better offer something new and exciting to catch the interest of the older (and fully saturated) marketplace. In an aged marketplace of car buyers, we might need to offer:

  • More fuel efficiency.
  • Various fuel capabilities.
  • New gadgets and conveniences.
  • Better warranties.
  • More information for the driver.
  • Longer life products.
  • New styles and colors.
  • Something basic and cheap (to compete with the many used cars on the market).

We'll also be well advised to write a business plan that provides an offering to solve age old problems with automobiles like:

  • Rusted out of body panels.
  • Frequent maintenance.
  • Oil leaks on the drive.
  • Dings on the door.
  • Traction and steering in foul weather.
  • Survivability in a crash.
  • Versatility of a single vehicle.

You see, if we write a business plan and don't consider the age and lifespan of the marketplace, we probably won't offer new and better things that attract and retain customers who have been in the marketplace for longer than we've been in business.

Our community is well established, and yet it is growing. Portions of the market can be characterized as aged, and other portions are very young indeed. The overall market has a long lifespan since it is in a definite growth period that will provide many new customers to serve.

Part 8 - Other factors

Although after you write a business plan, it may not change for a while, you'll want to be mindful of the need for change every now and then. You'll need to update it periodically as you gain more insight through experience, customer feedback, and research.

This portion of small business planning is where you'll do some imagining about other factors that could affect your business. When you write a business plan to consider these "other factors", you'll be better prepared to deal with them.

Let's consider these "other factors" in our small business plans:

  • Additional (and new) competitors entering the marketplace.
  • Mergers of competitors, large and small.
  • Competitors exiting the marketplace as they fail, retire, or sell out.
  • Acquisition of competitors by others.
  • Significant changes in relationships/associations.
  • Alternatives in the marketplace.
  • Marketplace turmoil or unrest.

Let's look at a few examples that might influence how you write a business plan for your venture.

  • The rapidly rising price of gas is "marketplace turmoil" for someone who sells motor homes or large SUVs.
  • Timeshares are "alternatives in the marketplace" for hotels or folks trying to sell vacation property.
  • When Ford and Firestone parted ways, that was a "significant change" in a long standing relationship/association.
  • Cell phones are an "alternative in the marketplace" for home phones.
  • Pre-paid cell phones are "alternatives in the marketplace" for monthly cell phone agreements.

All of these "other factors" have an influence on someone's business. For example, Verizon lost my business to T-Mobile, and I saved over $300 a year in cell phone costs, all without losing any functionality or convenience. I selected an alternative in the marketplace.

When we write a business plan example for the XYZ Lawn Care and Landscape Maintenance Service, we'll note that new businesses and buildings in the community are on the horizon. Newcomers will need to establish business relationships with reliable local service providers. That's a good "other factor" for us at XYZ Lawn Care and Landscape Maintenance Service.

Most certainly this represents an opportunity to get on the ground level, but it also represents a challenge as there is a need to establish relationships before buildings are finished, and most likely as they are in the planning stages. This is important to note as we write a business plan because it will help us form our strategic approach.

If we wait until the building is being finished to offer services, we run the risk of getting into a competitive environment with established lawn care service providers, and possibly others that see the same opportunity as we do to create a new landscape maintenance service for commercial customers.

For purposes of providing you with an sample business plan that discusses these small business ideas, I have completed parts 5 through 8 of the business plan for XYZ Lawn Care and Landscape Maintenance Service. See my example here.

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