Analyzing Customers in Your Business PlanWritten by Dave Lavinsky
The Customer Analysis section of business plan assesses customer segments that company serves. In it, company must 1) identify its target customers, 2) convey needs of these customers, and 3) show how its products and services satisfy these needs.
The first step of Customer Analysis is to define exactly which customers company is serving. This requires specificity. It is not adequate to say company is targeting small businesses, for example, because there are several million of these types of customers. Rather, plan must identify precisely customers it is serving, such as small businesses with 10 to 50 employees based in large metropolitan cities on West Coast.
Once plan has clearly identified and defined company’s target customers, it is necessary to explain demographics of these customers. Questions to be answered include: 1) how many potential customers fit given definition? is this customer base growing or decreasing? 2) what is average revenues/income of these customers? and 3) where are these customers geographically based?
After explaining customer demographics, plan must detail needs of these customers. Conveying customer needs could take form of past actions (X% have purchased a similar product in past), future projections (when interviewed, X% said that they would purchase product/service Y) and/or implications (because X% use a product/service which our product/service enhances/replaces, then X% need our product/service).
Why You Need a Business Planning System NOT a Business PlanWritten by David Coffman
Copyright 2005 David Coffman
When someone mentions business planning we have been conditioned to think about writing a business plan. There are hundreds of books and articles, tons of software, an army of consultants, and a multitude government programs to help you write a business plan. There are virtually no resources to help you set up what today’s business environment really demands – a continuous, ongoing planning system.
A commonly accepted theory is that for a business to survive and prosper it must be flexible and nimble. It must be able to turn on a dime as conditions warrant. Having a written five-year plan is not part of this picture. In fact, trying to follow a long-term plan during rampant change is not logical. It is applying linear thinking to a non-linear situation. It just doesn’t work.
Having a formal, written business plan is so accepted as being crucial to success that there haven’t been many studies or surveys to test this premise. If business plans were such a wonderful thing, there would be a significant and conclusive difference between businesses that have them and those that don’t. Interviews of 100 founders of companies on 1989s “INC 500” list of fastest growing private companies in U.S. found only 28 percent had “full-blown” business plans. The 1993 AT&T Small Business Study found that 59 percent of small businesses that grew over previous two years used a formal business plan. A 1994 survey of country’s fastest growing companies found 23 percent lacked a business plan. “The Relationship between Written Business Plans and Failure of Small Businesses in U.S.,” by Dr. Stephen Perry, surveyed 152 failed and 152 non-failed small businesses in 1997. He found that 64 percent of non-failed firms had no written business plan. He also found that non-failed firms had more extensive written plans than failed firms, 23 percent compared to 9 percent, respectively.
As you can see results of studies and surveys are all across board and don’t prove anything. Clearly, a significant percentage of successful businesses don’t have written business plans. None of these studies reveal nature of process that created plan. Was it result of an annual process with occasional updates or an ongoing, continual process? As Professor Albert Shapero said, “Companies that plan do better than companies that don’t, but they never follow their plan.”