A business plan itself is part of a larger strategic planning process. In the previous article, we discussed the first half of your plan, including the following sections:
Now we're ready to draft the remaining sections of the business plan. These include the following:
For this part of your plan, identify and research each of your competitors carefully. What other services out there are similar to your own? When you pitch a project, who do you come up against? If you've targeted new clients, identify who they're buying from now. When you've identified eight to ten competitors, spend time on their Web sites and use search engines to find news articles about them. Research how your competitors have structured their firms, analyze how they promote and price their services, and identify their major accounts. (For more information about competition, positioning, and differentiation, see the earlier article on marketing.)
Keep in mind that you may face a different group of competitors for each type of service that you provide. It's also important to note that if you're launching a new company and you're unable to identify any competitors at all, it's possible that a market does not exist for the service that you want to offer.
When you've gathered detailed information about your competitors, evaluate their strengths and weaknesses and compare them to your own. Be brutally honest. You goal is to be able to explain what's new or different about your services. In what way are yours better than those offered by the competition?
When you've identified your key advantage, describe how you'll be able to sustain it over time. Also think about ways to defend it. Can you put up barriers of any kind to make it harder for others to copy your success? For creative firms, this could include the development and protection of various types of intellectual property. For example, interaction design firms might register utility patents for software applications that they've developed. Another strategy could be to negotiate exclusive relationships with firms that provide services that are synergistic to your own. It's smart to build defensibility into your business model whenever possible.
Also, if you have competitive advantages that can be maintained over time, they may lead to growth opportunities. Think about how your services might evolve. Could they be augmented in some logical way? Could they be expanded into a broader and more comprehensive offer to your clients? If you're interested in increasing the size of your company, that's a very important objective and it must be clearly reflected in your planning.
You've already thought about what you want your target mix of clients and services to be. Now you need to determine the combination of marketing and sales activities most likely to bring in the work that you're hoping for. If you've been in business for a while, you should have a number of loyal client relationships. This means that a portion of your studio's capacity will be filled with repeat business. Beyond that, you need to calculate the amount of new business that must be generated in order to reach your overall goals. Think about what can be accomplished through general promotional activities and what will require personal one-on-one selling. Plan out a promotions program that's as comprehensive as you can make it. This might include such activities as:
These potential components are discussed in more detail in the earlier article on marketing. For each activity, plan a realistic budget and timeline. As a reference for budgeting: in public companies, it's common for ten percent of total annual expenses to be related to marketing and sales.
If your promotions program includes direct mail, you might consider buying mailing lists to identify new prospects. Industry associations often sell lists of their members. Trade publications sell lists of their subscribers. Product companies sometimes offer lists of customers who have submitted warranty registration cards. There are also research companies that sell lists for most industries, based on SIC codes. Buying a list can be expensive, so make sure that it's very targeted and the contact information is as current as possible. One of the leading providers is:
For your marketing plan to be complete, it must address every step in the new business development cycle:
In the long run, you're building relationships rather than just selling. People buy from companies that they like. Clients will place more trust in you if you demonstrate a solid understanding of their issues and an ability to partner with them in a way that makes the most of their internal capabilities. It's smart to view your company as a portfolio of customers. You want to be a proactive marketing partner, not simply a creative vendor. Clients must be able to rely on you for expert insights and brand stewardship, particularly when there is staff turnover on their side of the relationship.
The marketing portion of your business plan must end with a list of action items. For each activity, set a firm deadline and assign personal responsibility to yourself or another member of your new business development team. If accountability is not established at the individual level, it's quite possible that no progress will be made. Beyond accountability for specific activities, you must also think about personal accountability for results. Develop metrics to judge marketing performance. These vary from company to company, so you need to define what's most important for your own firm. Your metrics might include such things as market share, account growth, and client loyalty.
Remember that your marketing plan is not carved in stone. On a regular basis, you need to fine tune it to make sure that each action is helping to accomplish your overall goals. This means that you need to be able to monitor the impact of marketing expenditures on sales results. You need to apply quantitative and analytical skills to make sure that your marketing activities are effective and producing an acceptable return on the time and money being invested in them. Your project tracking and financial management system must give you the ability to match data on past marketing expenditures by creative service or client industry with the related sales and profit results. This lets you analyze the profitability of each component so that you can redirect spending toward opportunities with higher potential.
For this section of your plan, write a general description of your process for producing client work. That is to say, once you land new projects, how do you go about completing them and what controls do you have in place for keeping them on track? There are two aspects to this—an ongoing quality control system for maintaining high creative standards, and a project management system to keep the work on schedule and on budget. Describe the typical size, budget, and duration of projects. How many projects can be done simultaneously? Describe your system for coordinating company-wide workflow and traffic.
If you use a lot of outside resources, explain what you outsource and why. This is a critical issue because it indicates how dependent your success will be on others. Most design firms draw upon a large network of outside services. The quality and reliability of the relationships that you have with freelancers and vendors will shape your business. You must be able to effectively collaborate with synergistic firms and seamlessly tap into their services on an as-needed basis.
Describe the size and structure of your company's staff. List the key skill sets needed for your firm to be successful and the number of people that you currently have in each role. Include a management profile of yourself. Describe your primary role and the relevant skills and qualifications that you bring to it.
Staff recruitment, retention, and advancement are critical issues for your firm. Design is a people business and the quality of your staff is vital to your success. Low skill levels and high turnover would make it hard for your firm to produce good work and provide continuity to client accounts. How will your firm attract the best and brightest and provide an environment where they can realize their potential?
Think about how the firm's staffing needs will change over time as your services evolve. If your plan is for the overall size of the firm to increase, what opportunities will there be for internal advancement? Which future positions are most likely to be filled though outside recruitment? List the sequence of hires and the anticipated salaries. As creative firms grow, it's common for design and production staff to be sorted eventually into teams that provide different services or work with clients in different industries. This expanding staff structure will require effective leaders. Senior employees who grow into leadership roles might even have potential to become the next generation of ownership. It may seem odd to think of this in the early years, but every business owner needs to have a clear exit strategy.
One final note about increased staff size: your human resources plan might include the eventual hire of a new business development person. This raises important issues about incentive compensation, the delegation of key responsibilities, and the changing role of the founder. This transition is discussed in the earlier article on working with a sales rep.
Think about the physical space, equipment, and software needed to produce your work. Describe the size and configuration of the space that your company occupies. Start with the spaces needed for design and production, then factor in conference rooms, a reception area, a kitchen, bathrooms, adequate storage, et cetera. Best case, the space that you occupy should be easy to expand or contract in response to changing business needs. For design firms, another important issue is whether or not the location and condition of the premises project the right image. Do they communicate the right message about your brand and the quality of the services that you provide? Now describe the equipment and software that the company needs for hands-on design and production, and to facilitate collaboration and knowledge sharing. Don't forget the information systems that are needed for overall business and financial management.
The final section of your business plan will consist of detailed projections of income and expenses for the next three years. These must reflect all of the assumptions and decisions that you've made in the preceding pages. If your company is a startup, begin with a detailed budget of the ramp-up expenses. Then, once you're open for business, estimate how much time will pass before the company begins to produce a profit. Together, these indicate how much startup capital will be needed. Don't underestimate. The standard advice for an entrepreneur is that launching a new company will take longer than expected and will require twice as much capital as anticipated. Make sure that every planned expenditure is closely integrated with strategy.
Your financial plan needs to cover three years of operations. If you're already in business, your forward projection should be based on past trends, adjusted to reflect your assumptions of what will change. Prepare detailed projections of sales, costs of sales, overhead, and anticipated net profits. To organize all of these numbers, prepare a spreadsheet that follows the standard format for profit and loss reports as discussed in the earlier article on financial management. In many business plans, the projections are on a quarterly basis. However, they're more useful if they're presented as monthly numbers because that's how the actual activity will eventually be tracked.
Be specific about your monthly sales projections. Don't just drop in arbitrary totals. Develop those totals in a logical way by estimating how many projects of each type will be active in each period. Be specific about labor as well. Since payroll is the largest expense for most design firms, you need to estimate how much of your labor will be project-related and lead to client billings. Under normal circumstances, billable labor will represent roughly two-thirds of the total payroll. The remaining, non-billable portion of your payroll will be absorbed as overhead. (This issue is discussed in more detail in the earlier article on financial management.)
OK, now you have a first draft of your plan. Writing a business plan is always an iterative process. The document will go through several rounds of revisions and refinements. To help with this process, seek out people with more experience to review your draft and provide you with feedback. Develop an informal “business advisory board” that includes your accountant and attorney, and perhaps your banker, insurance agent, and an industry consultant as well.
If you've been in business for a while, you might also want to consider assembling an informal “customer advisory board.” You probably won't share the full document with any of them, but it's smart to speak to key customers individually to gain insights into their needs. Discuss possible ways to tailor your services and resources to better meet those needs.
For additional advice on business planning, take a look at the information available from the following sources:
Writing a business plan document has been the first step in the planning cycle. You've defined your company's vision and mission. You've identified goals and determined the best methods for achieving them. Now you need to implement the wonderful plan that you've developed. Great execution is what makes companies succeed.
Along the way, monitor and measure your progress and update the plan as needed. It's at this step in the process that many firms fall down. It's all too easy to be overwhelmed by daily details and gradually lose sight of the big picture. Revisit the information and assumptions in your plan at least once a year. Make revisions to take advantage of new opportunities and to adjust for changes in your situation. Use and maintain your business plan as a living document.
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