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Business failure is a distinct possibility for many businesses, especially for start-ups during the so-called three-year "valley of death". A key to getting through these years is to avoid the obvious mistakes. Generally speaking, businesses fail for significant and substantial reasons which are often very evident to outsiders. Insiders often fail to see them because of their closeness, determination and so on. Areas where failure is most likely to occur include finance. markets/sales, offerings, management and operations. See a detailed listing of possible reasons for business failure.

Clearly, there are very many reasons as to why businesses fail. The key point is that causes are usually very apparent (especially with hindsight) and the trick is to anticipate them by executing appropriate tactics and strategies from the outset. Three examples:

  • Use market research to confirm demand and assess suitability of proposed offerings.
  • Create a management team to offset any gaps in experience or expertise.
  • Raise equity to reduce exposure to interest rate changes, reduce gearing etc.

Given that reasons for failure are often both simple and clear, it should (in theory) be possible to reduce the possibility of failure through prior experience, forethought and effective planning.

For more information, see Devising Business Strategies, Developing a Strategic Business Plan and Writing a Business Plan. Also look at and/or participate in the online poll on Strengths & Weaknesses of Businesses.

New Business Ideas

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This entry deals with the tricky task of assessing new business ideas.

Having built up a moderate list of ideas, these must be evaluated so that a short-list of preferred options with the greatest potential and lowest risk can be assessed in greater depth.

One way of evaluating ideas would be to use a simple scoring system using gut-feel with a limited number of criteria such as personal fit, degree of risk, funding need and so on - see a comprehensive list of factors at Getting New Business Ideas.

Before scoring individual ideas, run through the criteria and set what you feel should be minimum desirable scores for each. The resultant total could be used as your overall minimum threshold. If some ideas don't achieve satisfactory scores, drop them and look for better ones.

Once your short-list has been developed, you will need to start devoting substantial time to assessment, research, development and planning. For a start, you could pursue the following tasks:

      1. Discuss products/services with prospective customers
      2. Assess the market using desk & field research
      3. Analyze your competition
      4. Consider possible start-up strategies
      5. Set ball-park targets and prepare first-cut financial projections
      6. Prepare a simple action plan
      7. Critically examine ideas from all angles

      For more insights into these tasks, see Getting New Business Ideas.

Bear in mind that the incubation period for a new business can easily last several months or even years. Don't rush into the first feasible idea without letting it incubate or develop in your mind for a reasonable period. There might be a tendency to get all fired up and enthusiastic such that your heart is starting to rule your head. Instead, stand back and think!! Do not be afraid to seek external assistance from professional advisers or from enterprise support organizations which are virtually everywhere. These include SBDCs in the US, Enterprise Agencies & Business Links in the UK, County Enterprise Boards in Ireland, EC BICs throughout the EU and so on......

For help with converting your preferred business idea into a business plan, see How to Write a Business Plan.

When preparing a business plan (or a "standalone" marketing & sales plan), Marketing Strategies, Sales Plans & Projections is a critical section within the overall plan.

In simple terms, marketing and sales plans should cover the 4Ps - Product, Price, Place and Promotion. The following issues need to be considered:

  1. What are the key market entry/development strategies? Explain how your business will continue to market its products/services and sell them to customers.
  2. What are the plans and projected costs for marketing, selling, promotion, advertising, representation etc.? Discuss conversion rates and cost effectiveness.
  3. How will your products be presented to customers? Discuss packaging, physical distribution, sales support and product support and forecast the related costs.
  4. Explain pricing policies and credit terms (be realistic !). What discounts will apply and to whom? Will there be bad debts and what provisions should be made?
  5. What will be the end-user prices for each market and offering?
  6. Assess the competitiveness of your business's offerings in terms of price, quality, features etc. at the level of sales outlets or end-users.
  7. How will you deal with the competitors and how will they respond?
  8. What are your contingency plans in the event of sales targets not being fully realized?

Based on these marketing strategies and plans, you can compile detailed sales (volumes and prices) projections and marketing expenditure forecasts for your various segments and products/services. These projections should be monthly for one year ahead (or longer if the business is seasonal or growing rapidly) and either annual or quarterly (much better) thereafter to cover 3-5 years.

For in-depth help, review Marketing Strategies, Sales Plans & Projections within our Business Plan Guide.

Also check out the Plan Write Market Planner - a software tool to generate a comprehensive marketing plan with examples, checklists and expert advice.

About this Archive

This page is an archive of recent entries in the Market Planning category.

Management is the previous category.

Miscellaneous is the next category.

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