Business mentor: Get your thoughts down on paper

Q. I want to start a small business. After approaching several business advisory groups, they have all suggested I prepare a business plan. Where should I start?

A. Darrell Wong, Business Development Adviser, Industry New Zealand, replies:

A business plan is a roadmap of where you want to go. It is the action plan for how you will achieve your dreams and goals, just like milestones or landmarks on a map, with definite tasks, a timetable and responsibilities assigned.

The key elements of a business plan, such as business profile, marketing, operations, staff, finance and planning for the future are covered extensively in many good books and publications.

Putting your ideas on to paper will not only clarify thoughts that are running around in your head but also enable others (such as banks, venture capitalists, investors) to understand your vision. This will give you a good head- start to building a successful business.

Critical components of a business plan that are often overlooked are, first, customer feedback, for example, identifying who your potential customers are, conducting market research on your target market and looking at how you will get your product or service to the market (distribution channels) and, secondly, market analysis, for example, threats, opportunities, trends and competitors.

These parts of the business plan are often the least completed section of any business plan. If you want to stay in business you need to be able to answer these kinds of questions:

What do they (your potential customers or distributor) like, what do they dislike? How can things be improved? How much would they pay? How much or how often would they use the product? Who is the key decision-maker for buying that product?

Should items be packaged together? Is after-sales service critical? How will they pay? Eftpos? Terms of trade? Parking? Where do they buy the product? Will the distribution channels support your product? Who are the best channels to distribute your product through?

What support do the distribution channels expect from you? How do you determine if you have got the right distribution agent? Are the channels you are going to distribute through the most appropriate to reach your target customers?

Opportunities you may not have thought of may arise from this process.

You can get this information simply by getting out in the market place and asking potential customers or distributors. This can be achieved by distributing a one-page questionnaire; gathering a number of customers, sitting them down and discussing a range of issues relevant to your business (focus groups) or talking to potential customers individually; or telephoning potential customers.

Other factors affecting market research are: knowing exactly what you want to find out, asking questions in the right way and surveying an adequate number of people.

Market analysis is asking what is happening in the market place. You should keep an eye on:

* Any potential threats, for example, new technologies, large competitors moving into your market, potential changes in legislation, changes in the supply chain.

* Opportunities such as other markets for your products, exports markets, technology which will give you an advantage over your competitor, changes in material, incorporating new ideas from overseas or related industry.

You need to be aware of existing trends and recent shifts in attitudes, what your competitors are doing, their strengths and weaknesses, understand their products and pricing. You can often obtain this from the internet, newspapers, TV, radio or by talking to distributors.

The internet is an excellent way of collecting data and doing some market research. It can throw up great ideas and keep you up to date with both domestic and international trends.

It is a tool which helps you to understand your market and your customers. By understanding your customers and then building a business strategy around their needs, you will greatly improve the likelihood of success for your business.

Industry New Zealand offers an excellent free business planning guide, Planning for Success. It is published as part of the BIZ programme and designed to help small to medium-sized enterprises.

Copies of Planning for Success, a do-it-yourself kit for developing a business plan, can be downloaded from the Industry New Zealand website or by calling BIZ offices on 0800-424-946 or the Industry New Zealand freephone 0800-224-480.