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Leading By The Numbers: Critical Numbers for a Competitive Business Plan (Part I)
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One of the key components of a competitive business plan in today’s market is the inclusion of key reports. Three key ingredients that can strengthen any business plan are Financials, Projections and Market Research. For many business owner the idea of including even one of these sections is an overwhelming prospect and you may find yourself wondering, “What if I’m not a numbers person?” or “Can’t I just hire someone to do this?”

In today’s commerce, hard numbers provide valuable information about the health of your business and there’s just no getting around it. Not to worry, this doesn’t mean you should start hiring a team of quants that your business can’t afford. Start by thinking about the ins and outs of your business and you may discover you already have the data to calculate the numbers without hiring outside help. Even if you aren’t completely comfortable working with numbers, the goal is to learn how to measure and quantify your business and it’s not a long road if you start with the basics.

A good starting point is to carefully consider the following questions and devising an honest answer:

  • What information do I need to create my company’s financials?
  • How far into the future do I need to factor into my projection?
  • What is my target market or industry?
  • Does my business currently operate in this market or do we need to change our operations to do so?

This post can help you answer these questions about your business and get you to start thinking about your business plan strategically. You will also learn the answer to the more fundamental question, “What are financials, projections, and market research?”

Financials

Financials generally refer to financial statements used by large corporations to report on the financial health of the company to shareholders. Financials have become such a staple in business that nearly every business, including sole proprietorships, are expected to produce financials at the close of each fiscal year.

There are three main statements that make up the financial statement: (1) balance sheets, (2) income statement, and (3) cash flow statement.

  • Balance sheets present a snapshot that shows what a company owns and what it owes as of a single date, most often the last day of a quarter or year. It accounts for the company’s assets, liabilities and shareholder’s equity as of that date.
  • Income statements, also known as the Statement of Profit and Loss or P&L Statement, show the revenue a company made and the expenses generated over a period of time.
  • Cash flow statements show the activities that affected cash and an analysis of the impact made by operations, financing and investments.

If you are a new start up, your business plan may include just the balance statement with a record of any initial purchases made for your business. As a more established business, you may already have financial statements or a tax return that can be used to create one.

Projections

Financial projections can help you plan ahead for your business and determine a strategy for the future. It can help you determine:

  • How many new employees you need to hire over the next few months as your business grows?
  • How much cash flow will be required to keep your business running?
  • How much (and when) you plan to spend on marketing campaigns to increase sales?

If you’re interested in obtaining funding, projections can give potential investors a “big picture” about the ROI that can be expected by investing in your company.

Market Research

Market research involves gathering information to identify and analyze the market need, market size and main competitors. It can provide an overview of your industry and identify the position of your business within the larger framework. For a competitive business plan, include a complete analysis of your key competitors and don’t forget to include critical numbers about competing businesses, such as their pricing model, the percentage of their market share, and the size of their business.

Even if you have already written a business plan, keep in mind that market research can become outdated and your business plan may not be considered competitive over time. To curtail this issue, take another look at the market research section and determine whether this information needs to be updated. Begin by evaluating the strength of the research, especially how much data you have in support of your business. Good questions to consider are:

  • Has the industry changed since the last time you reviewed your business plan?
  • Is there enough quantitative data, such as statistics or metrics, about the market?
  • Are the most recent projections for your industry included?
Jennifer ShinFounder and Principal Consultant, 8 Path Solutions LLC
Jennifer is the Founder & Principal Consultant of 8 Path Solutions LLC, a NYC based management consultancy and data science startup that aims to bridge the gap between science, technology and industry and tackle real world challenges.
www.8PathSolutions.com | @8PathSolutions | Facebook |More from Jennifer

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Discussion (2) Comment


  1. Maria D. SolaitaVisitor

    How do I go about doing the market research and study the competition with out intruding . Business are pretty secretive now a days, so how do you really study the competition. And get a real picture of what’s out there. I have had a small business for few years but I don’t have a business plan and probably the reason why my business does not grow. Thanks Maria


    • Jennifer ShinVisitor

      That’s a great question. There are several ways that your business can do market research and the method you choose will probably be dependent on how important it is to your business and how much you want to spend on it.

      Some of my clients will hire my company to conduct market research, but hiring a consultant can be costly and probably no in your budget if you’re a small business owner.

      First, let me start by answering the question “where can I get information regarding my competition?” For one thing, you can start by talking to current clients, prospective clients, or anyone who you know has hired your competition.

      To find out how your stacks up next to the competition, you can send out a survey to see how your business and your competitors are viewed by potential or current clients.

      Also check with your local librarian to see what information is available on competitors in your area and try asking industry trade associations to refer you to companies in your industry and market that may be willing to share information with you.

      There are some great resources online that you can use to get started. SCORE offers several resources that can also help you get started:

      - 5 Tips on Simple Market Research: http://www.score.org/resources/5-tips/simple-market-research

      - The Market Research Guide gives you a very general overview of market research: http://www.score.org/resources/market-research-guide

      - You can also learn how about low cost ways to do market research using SCORE’s Marketing Research on a Shoestring for Small Business: http://www.score.org/resources/marketing-research-shoestring-small-business

      SBA is another great resource for learning about how to conduct market research. One place you can start is SBA’s guide on market research: http://www.sba.gov/content/do-your-market-research.

      If you’re interested in finding hard numbers and statistics about your market and industry, SBA provides a list of resources that can get you started: http://www.sba.gov/content/understand-your-market-and-economic-conditions

 

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