Building Your Business Plan: Part 1 – Introduction
Building Your Business Plan: Part 2 – Business Overview
Building Your Business Plan: Part 3 – Products and Services
Building Your Business Plan: Part 4 – Studying the Market
Building Your Business Plan: Part 5 – Identify Your Market
Building Your Business Plan: Part 6 – Competition and Industry SWOT
Building Your Business Plan: Part 7 – Business Environment
This article is written to provide you with the tools required to assist with developing your Business Plan as it relates to studying the market your business is in.
In part 3 of this series, we discussed products and services, summarizing why it is important to accurately describe what products or services your business provides to the public. In this part of the series, we are going to discuss why studying the market is a key component to understanding what obstacles you may encounter which could impact the successes of your business.
Please keep in mind while you are completing the downloadable form found below that you are not restricted by the size of the box that you are able to write in, each box in the template can be readjusted to fit the size you need.
Section 3. Study the Market
When you are building your business plan and laying out your proposal, it is beneficial to study the market to determine the viability of your business. By studying the market, you will grow your business acumen and be more informed around what you may need to do to set your business apart from its competitors.
Building a successful business plan involves asking tough questions, having an open mind, and remaining curious about the outcomes. This planning process is not always going to be a walk in the park, but it has BIG value.
As you continue through the development of your plan and completing the template, keep in mind that tough questions often lead to positive results and boosts in critical thinking.
A. What is the Market Potential of your Business Idea, Products, or Services?
When researching potential business success, it is beneficial to understand what your geographical demographics are. You can begin your search by using the Government of Saskatchewan website where you will find Economic, and Demographic information, as well as downloadable Factsheets reports and information.
Another great resource to look for local development information you desire your business to operate in is searching for the city or town’s main website business development page such as the City of Saskatoon. Or visiting IBISWorld to research on the marketplace, which is an online membership based resource who have been around for 50 years providing trusted industry research.
These questions are intended to increase your business acumen and comfortability with conducting research.
B. What is Your Business’s Competitive Advantage?
When considering starting your business in your desired geographical location, it is crucial to know how many businesses with your idea, product, or service are already established. Here is where you will review local, provincial, national, and/or global markets.
This search can be as easy as Googling particulars in your geographical location. For example: “Pizzerias in Saskatoon,” “Mechanical Shops in Regina,” “Beauty and Spa in Central Saskatchewan,” etc.
If your business’s concept is similar to others, you might not have a competitive advantage. If this is the case, it might be worth exploring ways to increase your competitive advantage amongst other businesses. For more information on this, we recommend reading our article on Unique Selling Propositions (USP).
C. What is the Demand for Your Business’s Idea, Products, or Services?
Once you have expanded your knowledge on marketplace potentials, the demand for your business’s concept in the geographical location will be understood better.
Understanding the law of supply and demand plays a key role in answering this question. If the supply is high, the demand for your business is low, and this may prevent your business from being as fruitful as planned. On the reverse, if supply is low, the demand for your business will be high! This is why it is important to understand the market potentials and competitive advantage.
You can source this information through online research on geographical demographics, Labour Markets in Saskatchewan, and Business and Industry Markets in Saskatchewan. When researching, try to think outside of the box and try a variety of sources!
Pro Tip: When researching, thinking outside of the box is crucial. This can be accomplished by not limiting yourself to the provincial marketplace. When you look into other provincial marketplaces, you may get new ideas and bring fresh ones into your provincial marketplace.
Try reaching out to other business owners or industry experts on LinkedIn, Forums, or stopover in-person at business locations to have a discussion with the owners to get a personal opinion on what the environment is like. You might discover what you could do differently to increase your competitive advantage.
Each question is intended to develop your analytical reasoning, which will boost your curiosity and interest to gain deeper insight to the marketplace.
D. Who Will be Your Customers?
When you understand the marketplace’s demographics, you will have a better idea on who your potential customers are going to be and how you can market to attract them to your business. The information you have gained through research will support you in answering this question.
You want to increase the potential for your business’s survival, which begins with understanding the demand for your business concept and customer demographics in the market.
Potential Profit Levels
The next set of questions are intended to expose you to the potential levels of profit that exist in the marketplace by acquiring data that is present.
When you have determined what the demographics are, who your competitors are, and the demand for your business in the geographical location, it is crucial to explore and understand the maximum and minimum prices you can charge consumers, as well as the quantity you can sell in the current market.
E. How Much Can You potentially Sell in the Market?
Your answer to this question will support Questions F and G. You can determine what quantity you can sell by using the data you have gathered relating to the demand for a product or service within the geographical location. There is further opportunity to dig deeper by conducting a survey to gauge the general public’s opinion of your business’s products or services.
F. What is the Maximum You can Charge in the Geographical Marketplace?
Dedicate time to research how much your competitors are charging their consumers, which can be done simply by visiting their website or having an in-person discussion.
Pro Tip: There are many available resources for data, so when conducting an analysis, it is always best to compare data between 3-5 different sources to build a solid resource report.
G. What is the Minimum You can Charge to be Competitive, yet Sustainable?
Often, to be competitive within the marketplace, businesses compete with one another by providing the same services as the other but at a lower price. Generally, consumers will want to obtain a product or service at a lower price but will want the same product or service quality.
Keep in mind that the minimum charge may only be a temporary solution until you get a hold on consumers, and this approach requires you to be open to the impact it can have on revenue.
When you are considering what the maximum and minimum prices are to charge consumers, you will need to conduct a cost analysis and calculate the maximum and minimum revenue values.
- Cost Analysis refers to the total summed incurred costs for running a business such as salary & wages, rent, insurance, benefits, utilities, equipment purchase or rentals, taxes, professional fees, maintenance, etc. These costs might be actuals or estimations, depending on whether your business is existing or not. If your business is non-existing you may need to use the data from the quotes provided to you.
- Revenue Values refer to the optimal price to charge and optimal quantity to sell for each of your products and services in order to reasonably maximize revenue. The formula is Revenue = Price x Quantity, R=PxQ. With each product and service calculated, you will need to sum the totals together to determine what the overall Total Gross Revenue is.
Once you have completed your cost analysis and revenue values, you will subtract the Cost Analysis Total from the Total Gross Revenue to get the New Gross Revenue. From there, you can begin to play with the numbers to determine the minimum price you can charge to be competitive yet remain sustainable.
Throughout your planning process, know that you can seek outside sources, potential customers, and other businesses who are in the market. With their support, you will be exposed to important perspectives of what your business needs to do in order to succeed.
There are many publications and databases with facts and figures about the various markets made available online such as SquareOne, which will also aid you in assessing the potential levels of profit that exist in the market, as well as determining how you will get your products or services out to the market.
H. How will Your Business’s Products and Services be Delivered to the Market?
Answering this question takes shipping, receiving, and other courier availabilities within the geographical location into account. You may want to consider what the best option would be for your business to deliver its products and services to the market. There is no right or wrong answer, however, it would be beneficial to benchmark your business delivering concept(s) based on what other businesses are doing.
I. How Much will it Cost to Deliver Your Business’s Products and Services to the Market?
Answering this question considers the costs for delivering your products and services to the market which may include packaging, retail space, shipping, receiving, and other courier or professional services costs.
J. What Will the Profits Look Like After? Will it be Worth the Investment of Energy and Time?
Here is where you will subtract the Delivery Method costs from the potential Total Net Revenue from above to get the overall Total Profit Forecast.
With all the questions you have answered, as they relate to your business, by studying the market and conducting thorough research; you will have a great indication of what areas of your business plan are sustainable and what areas might need to be adjusted.
Now that you have studied the market and understand what is involved in the process of building a successful business plan, please stay tuned for part 5 of this series when we discuss Describing the Market.