Is there a good reason why no one else is doing it?
The smart thing to do is ask yourself, “Why isn’t anyone else doing it?”
It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, do your market research. If you determine that you’ve got customers out there, you’re in good shape.
But that still doesn’t mean there’s no competition.
How are customers getting their needs met?
There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now.
It doesn’t have to be an exact match to be a competitor
Don’t think of competition as only other businesses who do exactly what you do. Think about what currently exists on the market that your product would displace.
It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.
Sometimes you have to think outside of the box when planning your business. Chances are, if you’ve got a product or service that appears to have no competition, you’ve already got a talent for thinking differently. Be sure to put that talent to use.
I used SWOT sessions every few months to gather my team leaders and engage in brainstorming discussion about our business situation.
We divided the discussion into four parts, opened it up, set the tone as brainstorming—no bad ideas, and no taboos—and had good discussions about all four elements: strengths, weaknesses, opportunities, and threats, as they related to our financials and key metrics, the business climate in our industry, and the work we were doing together to grow our business.
Our SWOT sessions took only an hour or two. We used a whiteboard and worked on bullet points. Just like the Lean Planning approach to business planning, less is more. You don’t need to generate a 40-page report.
The goal of a SWOT analysis is to develop actionable insights—you want to catch opportunities and pitfalls sooner. It’s one way to minimize risk when you’re starting and growing your business.
Engage your whole team on your strategy and goals
Thinking in SWOT terms put everybody on the team into engagement with the whole business, the broad view of strategy, market, and goals. It seemed automatic to me—the topics themselves, in standard brainstorming mode, invited us all in.
Your business plan should be a roadmap that guides the strategic course of your business. Use SWOT analysis to help people understand how their work translates to the goals and milestones you’re laying out in your business plan.
Gain real, actionable business insights
The SWOT analysis provided a lot of insight.
It was in one of these sessions that somebody suggested that I should change my focus a bit and deal more with the large picture than the specific code. It was also in a SWOT session that we realized we needed to make our product downloadable on the web (back in 1998, when we were among the first). In another session, we realized, as a group, that our key differentiator was the know-how and how-to built into our software.
If you haven’t done this type of analysis before, check out our SWOT analysis examples article for some tips on how to use it to develop actionable strategies.
SWOT gets people committed, not just involved
In breakfast, the chicken is involved, the pig is committed.
In the business planning process, commitment is essential. Plans need to be implemented, and implementation means commitment. There has to be accountability and peer pressure. You have to follow up on what was planned to make sure that it was actually carried out.
Here are some ways to develop commitment within your team:
You can use the SWOT analysis to bring team members into the strategic discussion—not just the most senior level leaders. Your managers have to be part of the team that discusses the strategy early on, as the first stage of every strategy review and revision.
As you do your SWOT, even if it’s just you, and better yet if it’s with a team, there is an automatic process of moving away from the details and looking at the business in larger, more strategic terms.
I can’t cite research on that, but I can say that I’ve seen that happen dozens of times in my career, first hand, first as a consultant and then later as founder growing my business with a team. People like strategy. They like to be included. And SWOT puts strategy front and center, without requiring lots of buzzwords or windows dressing.
It’s a good strategy summary
The SWOT analysis in your business plan makes a perfect first step of the regular plan review every good business should be doing once a month.
Either by yourself, if it’s just you, or with your team, take a good look at the SWOT. Ask what’s changed in your business.
Normally strengths and weaknesses are long-term, inherent qualities of a business, which can change, but only slowly. Opportunities and threats, on the other hand, are normally external to the business, out in the market and the world. They can change fast. Opportunities come and go, and threats can appear very quickly.
SWOT belongs in your business plan
The bottom line here is that the planning process, for both startups and for growing companies, is about the people more than the plan. Your business plan is there to guide execution. It needs a strategic component like a SWOT analysis, and it should be reviewed and revised regularly.
One of the most powerful tools of small business marketing strategy is defining and addressing your target market—the audience that you think is most likely to buy your product or service. The key to identifying this customer base is market segmentation, or figuring out the demographics of your specific market.
Common sense makes it seem obvious from afar. You can’t (and shouldn’t) try to sell your product to everyone in the world. You’d waste a lot of money and resources very quickly.
But how do you figure out who your target audience is? Who or what should it be? How would you know? Here are five tips to help you figure it out.
Pleasing customers 40 to 75 years old, wealthy, much more concerned with healthy eating than cheap eating, appreciating seafood and poultry, liking a quiet atmosphere.
Pleasing customers 15 to 30 years old, with limited budgets, who like a loud place with low prices and fast food.
I really hope you chose one of the first two, and not the third. This is the essence of target marketing—divide and conquer. Different groups of people have different pain points and different desires. Most of the time, efforts to please everyone end up pleasing no one.
2. Learn market segmentation
It’s about segments, like pie segments or orange segments—except that in this case, it’s segments of a total market, or TAM.
In my “divide and conquer” example above in the first point, the specific age ranges, wealth, and atmosphere preferences describe particular market segments.
In the illustration here below, U.S. census data divides the population into demographic segments. Demographics are the old standards like age, gender, and so on.
U.S. census data divides into demographic segments.
You’ve seen market segmentations referred to frequently in business articles, interviews, and discussions. People will appeal to certain age groups, genders, income levels, and so forth. Divide and conquer is a simple concept; market segmentation is how you make it practical for your business.
Let’s say you think your target market is age 40 to 75 years old, wealthy, and interested in healthy eating. How do you validate your assumption that that demographic will be your ideal target customers? That’s where market research comes it. Talking to customers and potential customers is one of the best ways to do this kind of research, but there are many approaches.
3. Use segmentation creatively
Don’t limit your target market strategy for market segmentation by age, gender, and economic level.
For example, when I was consulting for Apple Computer, we divided the market into user groups:
I also liked a shopping center segmentation that divided its market into so-called psychographic market segmentation:
Kids and cul-de-sacs were affluent upscale suburban families, “a noisy medley of bikes, dogs, carpools, rock music, and sports.”
Winner’s circle were wealthy suburban executives, “well-educated, mobile executives and professionals with teen-aged families. Big producers, prolific spenders, and global travelers.”
Gen X and babies were upper-middle income, young, white-collar suburbanites.
Country squires were wealthy elite ex-urbanites, “where the wealthy have escaped urban stress to live in rustic luxury. Affluence, big bucks in the boondocks.”
I knew a business that segmented its business customers into decision-process types as well:
Decision by committee
Decision by functional manager
Decision by owner
And I call this final example, for lack of a formal definition, strategic intersection.
In the diagram here, the social media services that Have Presence offers are targeted to small business owners who:
Want outside help with their social media; and
Value business social media; and
Have a budget to pay for the service.
Any of these creative segmentations can help you set a target market, and can also be a jumping off point for putting together a user or buyer persona—another useful tool for understanding your target audience and developing better marketing messaging.
4. Consider your own unique identity too
Your business probably reflects who you are and what you like to do, as well as what you do best. Marketing to people you like as the target market is an advantage. If you like the feel of small business better than the big corporate giants, then you’re probably better off setting the small business as a target market.
As Palo Alto Software, the host of Bplans, grew up and grew our business plan software, its founder (that would be me) was more comfortable with the do-it-yourself entrepreneur and business owner than the high-end consultants, so we ended up targeting the do-it-yourselfers in business.
So, somebody who loves fine food, tastefully prepared and served, is probably more comfortable with an upscale target market than with price-sensitive young families.
5. Define your target market early and revise as needed
Do it well as soon as you can, and keep reviewing and refreshing as you go along. You shouldn’t think of your target market as set in stone. As you learn more about your customers, how you define your target market will probably change.
The right target market increases your chances of success because you can communicate better with a well-defined group, and that holds expenses down and makes results better. If you’re learning about defining your target market because you’re writing a business plan, or if you’re looking for ways to improve your marketing messaging and strategies, check out these resources on target marketing and doing market research.
As you look back over this year, how happy are you with your business’s performance? Are you patting yourself on the back, having nailed every goal? Smiling as you look over your long list of milestones achieved? Resting on your laurels?
If the answer is no, then you’re like many business owners who have trouble hitting their business targets. You know exactly what you want—a bigger business, larger per-customer sales, more leads, higher profits—but you struggle to meet your goals.
At Phorest Salon Software, we provide advice to salon businesses on our blog, from setting targets, to financing, managing staff, marketing strategies, and more.
In this article, we’ll show you how to set clear, actionable goals for your business, and how to make the changes you need to power your way through them. Let’s make this the year you hit every business target you set.
1. Get clear on the goals you want to prioritize
One of the biggest challenges in any business is that everything needs to be done at the same time. You need to find new clients, keep your existing clients happy, manage your finances, streamline your processes, and motivate your employees—all at the same time.
When it comes to setting your big, overarching company goals for the year, you must know what your top priorities are.
A SWOT analysis is a fantastic way to be crystal clear about what needs to be addressed first. It analyzes your business’s strengths, weaknesses, opportunities, and threats.
Let’s take the example of a beauty salon. You sit down to do a SWOT analysis and identify the following:
Now we can see how to use this SWOT analysis to set priorities. Don’t choose too many goals or you risk spreading yourself too thin.
Based on the SWOT analysis, pick three priorities to create goals for:
Increase revenue from existing clients by selling them new products
Increase client base and revenue by creating targeted marketing for workers in new office buildings
Use Instagram to market your business and build upon your great reputation
If you’ve never done a SWOT analysis before or could use a refresher, you can find a useful template to follow here, and check out the video below.
Please note: These aren’t actually goals yet! They are your key areas to focus on. After you’ve discussed them with your team—which we’ll cover next—you’ll be turning them into SMART goals (specific, measurable goals) to make sure that you’ll take action on them.
2. Review these goals with your team
Every successful business owner knows that the people who work for you are your most valuable asset. This is never truer than when you are defining your business goals.
Your team is out there every day, working on your products or talking to clients. They are the people who can tell you what’s working and what’s not, what’s holding your business back, and where you should be focusing your efforts and setting your business goals for the year ahead.
So, once you’ve completed your SWOT analysis and selected what you think should be the top goals for your business, sit down with your employees and get their feedback. They may agree, or they may have useful insights which you haven’t thought of.
Even more importantly, involving your staff in the creation of your business strategy will motivate and inspire them to reach those goals.
As Dale Carnegie put it,
“People support a world they help create.”
By involving your employees in the goal-setting process, you make them feel valued and engaged, while at the same time making sure your goals are realistic and achievable.
3. Make your goals SMART
O.K., so you’ve decided on your three to five business goals. Now it’s time to develop them from the idea stage to the action stage, and create SMART goals:
Specific: What exactly are you going to do?
Measurable: How will you know if you are succeeding?
Achievable: How will you implement the goal?
Relevant: Does the goal connect to your overall objectives?
Timely: When will you achieve the goal by?
Let’s take one of the salon business goals we decided on, and turn it into a SMART goal—say, for instance, our plan to increase our client base and revenue by creating targeted marketing for workers in the new office buildings.
Specific: Gain 10 new customers for the salon from the new office building.
Measurable: Measure progress by tracking the number of new customers won and profits made, while maintaining our existing customer base.
Achievable: We will do this by creating a customized sales promotion, which we will publicize via leaflets and flyers in the office building.
Relevant: This will help us to increase the number of new customers, and thus grow the salon business and profits.
Timely: We will achieve this by the end of Q2 2019.
4. Set your KPIs
Now that you’ve built your goals with your team and converted them into SMART goals, you need to think about implementing two aspects: measuring your goals and setting timelines.
Remember, as Bill Hewlett put it:
“You cannot manage what you cannot measure…and what gets measured gets done.”
The most common way of measuring whether or not you’re on track to achieve a business goal is to set KPIs.
KPIs (or “key performance indicators”) are numbers you can track that show if you are making progress with your goals or not. They are also great motivators. You’ll already have established the KPIs you need to measure when you’ve ensured your goals are SMART.
To take our example above, a KPI would be the number of new clients won from the office building (which means we’d need to make sure we have a way of keeping track of where our clients were coming from). We might also want to consider setting KPIs for how many flyers we hand out, how many calls we received as a result of the flyers, how much each new customer spent, and whether or not they came back to the salon.
You will also have different KPIs for the business as a whole, such as overall monthly sales targets, as well as setting individual KPIs for every staff member. We have encouraged our clients to set staff targets on the Phorest blog as an important way to motivate your staff to meet company goals.
Research suggests that companies that align individual goals to company objectives have a much higher rate of success.
In our salon example, our company goal is to increase our client base and revenue from a specific target market.
However, this goal might translate into different KPIs for an individual hair stylist, for instance:
Customer satisfaction (to retain the new customers)
Amount spent per customer (maximize profitability)
5. Build good business habits to help reach your goals
For a business owner, as in life, if you want to make something happen, you need to create a schedule and build good habits around it.
If you want to lose weight, you know you need to include exercise on your schedule, plan time to cook healthy meals, and so on. If you want to achieve your business goals, you need to think about them in the same way. The actions that will achieve those KPIs need to be scheduled.
Automate as much as possible. Use a calendar for both you and your staff, and add reminders. Use online to do list software like ToodleDo to organize tasks, set deadlines, and prompt you for repeat actions. Put key goals on your office wall or in the staff meeting room to keep them visible.
And, crucially, regularly review and analyze your progress, and resolve any issues; review if you have the right KPIs in place, and constantly optimize your processes to improve them, if applicable.
It’s a great idea to put regular (possibly quarterly) business plan review meetings on your company calendar now, so you can prioritize time to review your goals and milestones regularly, not just once a year. This will help you set specific goals and objectives, both short-term and long-term, and revisit them regularly to make sure your KPIs are on the right track.
This might all sound a little overwhelming, but it’s much less overwhelming than the feeling that you’re drowning in work and are nowhere near to achieving your goals.
By identifying and reviewing your key focus areas, setting SMART goals, defining KPIs to track your company and individual progress, and putting systems in place to make sure you are sticking to the schedule, you’ll put yourself in the best position to make 2019 the year your business really starts to shine.
Editor’s note: This article was originally published in 2017. It was revised in 2018.
Jennifer is an online content executive for Phorest Salon Software. She manages content across several regions, and provides helpful advice and tips for small businesses trying to build their company and become more productive and efficient to grow in a competitive industry.
The best and most useful kind of business planning is not just a use-once business plan, but rather a continuous process.
The first business plan is just the first step. For the rest of your business’s life, you review the plan once a month. Compare actual results to what you had planned, determine what steps to take to optimize, and revise the plan.
You’ll find that continuous business planning helps in many ways:
It helps maintain focus
You’ll be able to align the team with priorities
You can address changes in the marketplace as they happen
It helps you tune strategy and tactics to what’s working and what’s not working
It starts with knowing what happened
Review means comparing what actually happened to what you expected. Business plans are always wrong, so there will always be a difference between the plan and the actual results.
For the actual business numbers, such as sales, expenses, and such, accountants call the difference between the estimates in the plan and the actual results variance. Variance analysis looks at these differences to determine where the numbers are different, and in what direction.
You can do variance analysis on the numbers with a spreadsheet, or with accounting software. LivePlan can link to your accounting software and deliver automatic dashboard comparisons between actual results and the plan, and between actual results and previous results.
What’s important here is not the accounting or the calculations, but rather the resulting management. You look for indications of problems or unexpected positives, so you can react.
In the illustration above, revenue is lower than planned and expenses are higher. Operating income is less than planned. Cash and cash flow are improving, which is good news. However, that may be because this company is stretching out its payments, averaging about six months, which is seven times more than in their plan. So accounts payable is 25 percent higher than planned. That’s good because it’s helping with financing and keeping money in the bank, but may also be bad because it could be spoiling reputation and relations with vendors.
The point is the management, not the hard numbers. What should be done, given these results, to make the company better?
The monthly review meeting
The monthly review meeting is absolutely essential to real business planning—Lean Planning. The real value of business planning is the decisions it causes, and the management that results; and for that, you need not just a plan but a regular monthly review to track results and revise as necessary.
And the toughest part of the review meeting is this crucial question: Do we stick to the plan, or do we change it?
The arguments for staying the course with your plan
I consider this an awkward, difficult fact about business strategy:
It’s better to have a mediocre strategy consistently applied over three or more years, than a series of brilliant strategies, each applied for six months or so.
Too often, management teams get bored with strategy before it’s had a chance to be effective. I was consulting with Apple Computers during the 1980s when the Macintosh platform became the foundation for what we now call “desktop publishing.” We take it for granted today, but back in 1985 when the first laser printers came out, it was like magic. Suddenly, a single person in a home office could produce documents that looked professional.
What I saw in Apple at that time was smart young managers getting bored with desktop publishing long before the market even understood what it was. They started looking at multimedia instead. They were attracted to new technologies and innovation. As a result, they lost the concentration on desktop publishing and lost a lot of market potential as Windows vendors moved in with competitive products.
That argues for staying the course. Strategy takes time.
The arguments for revising the plan
On the other hand, this is also true:
There is no virtue in sticking to the plan for its own stake. Nobody wants the futility of trying to implement a flawed plan.
Generally accepted best practices have changed over the three decades I’ve been focusing on business planning.
Back in the 80s, business timeframes stretched longer and many business leaders recommended sticking to the plan. But times have changed. You’ve probably dealt with the problem of people doing something “because that’s the plan” when in fact it just isn’t working. I certainly have. That kind of thinking is one reason why some web companies survived the first dotcom boom and others didn’t. It also explains why some business experts question the value of the business plan.
This is sloppy thinking, in my opinion—confusing the value of the planning with the mistake of implementing a plan without change or review, just because it’s the plan.
How to decide: Stay the course, or revise the plan?
This consistency versus revision dilemma is one of the best and most obvious reasons for having people—owners and managers—run the business planning, rather than algorithms or artificial intelligence. It takes people to deal with this critical judgment.
One good way to deal with it is by focusing on the assumptions. Identify the key assumptions and whether or not they’ve changed. When assumptions have changed, there is no virtue whatsoever in sticking to the plan you built on top of them.
Use your common sense. Were you wrong about the whole thing, or just about timing? Has something else happened, like market problems, disruptive technology, or new competition, that has changed your basic assumptions?
Do not revise your plan glibly. Remember that some of the best strategies take longer to implement. Remember also that you’re living with it every day; it is naturally going to seem old and boring to you long before the target audience gets it. But do revise your plan if it is out of date, inaccurate, or based on false assumptions.
That’s why you have the plan in the first place: to manage your business better.
Note: Some of this material is taken from my latest book, Lean Business Planning, published by Motivational Press in 2015. A LivePlan version of it is available for download free at this link.
This article was originally published in 2015. It was revised in 2018.