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Starting your business

Step 1: Make a plan PART 2 OF 6

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Positioning your business is key

A good business plan not only provides direction for the future. It also tells employees and the community what your company is about.

Tony Vogt, director of the Small Business Development Center at the University of Dayton, offers these tips for positioning your business:

• What's your value proposition? A good business plan includes a clear value proposition. The value proposition describes the results your business gets for its customers. It's tangible and considers competition, price sensitivity, need and perception. Many times people build a business in their minds and get caught up in details such as location, signage and advertising. But those aren't results for the customer. I like to begin at the core of the product or service you are building your business on and work outward to develop the value proposition. The value proposition is the key to winning over a potential customer.
• Do you understand the competition? Many people start businesses in a category that already has lots of competitors, since those businesses have already been successful. A better strategy is to figure out why people would choose a new alternative over the existing businesses. What is the primary driving factor behind the purchase decision? Is it price? Is it location or convenience? Is it an improvement in performance? Is it service? The problem with competing in a highly saturated marketplace is it often becomes a price issue, and therefore a commodity item where loyalty is driven simply by discounts or convenience. These are all items that must be clearly identified within your business plan and be conveyed clearly to the reader.
• What if you don't have any competition? New businesses offering a new product or service have a different challenge. You must demonstrate value to a new marketplace or customer. You may have to educate them completely in the usage and utility of your business. Anytime you need to do this, you are going to spend more time and effort in communication of your business to the public and thus may see a slower growth in sales than expected. This usually means higher advertising and promotional costs, which must be part of your business plan financials.