Importance of a business plan (fourth part)

By Raúl Gorrín.-  When starting a new business, it is necessary to show that a detailed investigation of the subject has been carried out, in order to cover all the flanks when establishing your business. Now you have to determine the size of your market, determine who your main competitors will be and how you can create a niche market for your company to make it. Take a look of these tips:

·         Investigate how many potential customers exist in the market for your business.

·         You should estimate the volume of your winnings. This will be instrumental in attracting the attention of people who read your business plan.

·         Among the general categories that will allow you to move in the right direction are: Free online resources, government resources, trade associations, financial services firms, online data providers.

·         Determine the strengths of your industry and trends. This is something that should be done taking into account in all angles, so that potential investors understand and can see the convenience or not to start a business in that sector.

·         PEST (Political Economic Social Technological) analysis is a good strategy for this. This will facilitate the identification of the factors of the general environment will affect your company. This analysis is carried out prior to the SWOT analysis (Strengths Opportunities Weaknesses and Threats).

     Besides this, to do the PEST analysis you should consider: 

Political factors: determine the role that the government will play in its industry. Economic factors: establish the economic situation both local and national. 

Social factors: indicate the relevant changes in lifestyle trends, demographic, consumer attitudes, buying behavior patterns and opinions that will generate your industry. Technological factors: specify the impact of changes in technology trends in your industry.

     Porter analysis is another tool that will be useful to you during the research process on your industry. This analysis deals with the five forces that are:

1. Threat of new competitors: The idea is to establish how easy or difficult it is to enter into the business proposed by you. The ability will be indicative that there are many competitors who are struggling to make a profit. On the contrary, if it becomes very difficult, we may be in the presence of a competitive advantage.

2. Threat of substitute products or services: Here it is necessary to determine if another product or service can reduce the demand of it or if it can completely move it of the industry.

3. Bargaining power of buyers: Here you have to inquire about the purchasing power of your potential customers, their level of organization to exercise their purchasing power or if their competition can persuade and set free a price war between suppliers.

4. Power of negotiation with suppliers: It is necessary to specify how much depends on a particular supplier so that your business can operate.

5. Rivalry between competitors: Depending on the first four forces you can get a good understanding of the market, as well as establish how good an idea is to enter the market, how long it can last in the industry and what means and will allow you to make space in it. 

     Well, after giving the analyst of your business plan an idea of ​​market trends and changes in the industry model, you have to work on identifying your main competitors. This should be seen not only direct to your competition, but also in those with similar offers and indirect competition. The SWOT analysis we have talked about on many times can help you in this regard. Finally, it is necessary to establish the generic competitive strategy, which has three routes to excel in the competition:

1. Leadership cost: Refers to the ability to grow operations to offer lower prices than other competitors.

2. Differentiation: Specify where your product or service offers something different than the competition.

3. Segmentation: It is a question of focusing on the specific "niche" in the market, for which one has to build a relationship with a smaller audience, then move on to bigger clients.

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