Monday, November 06, 2006

The Marketing Plan – Define your general market

The Marketing Plan is probably one of the most important parts of any business plan. There is a very good and simple reason for this. While a company can look at procedures and find ways to increase productivity one of the things it cannot do internally is increase sales. The most efficient business will fail if it is unable to sell its products. For some reason it is rare, even in publicly traded companies to find a good sales and marketing plan. Usually it says something like, “there are 10 million users and we will take 10% in the first year,” or “The average return per advertising dollar is 12 x 1000, we intend to spend 1 million $ in advertising.”

These are not marketing plans. The mean absolutely nothing and will result in a negative opinion from most due diligence teams. Investors do not want to throw their money at advertising. They do want to see sequential growth, usually based on some historic data tied to different, well documented, plans. They want to know the business environment. Yes it is important to know how big the addressable market is but it is more important to understand how your company has acquired clients in the past, how much it cost to acquire each client and how your company intends to ramp up future acquisitions.

It is also important that your information be very product oriented. If you are selling in Atlanta, it is not important to say that the worldwide market is 100 times larger. It is important that you give a clear vision of how your company will dominate the market it is currently working in. It is also important to explain why your company has been successful in getting clients to move away from the competition and why some clients have left you. Finally it is important to understand the churn, that is the number of clients you lose in normal business and whether or not you can continue to acquire more clients than you lose.

The overview must explain who your client is, what are his revenues or disposable income, what is the current environment, if the current economic environment in your market changes how will that influence your client’s spending and decision making processes. It should also take into account how your differentiating factor will be influenced if general economic conditions change. It is not sufficient just to state these facts, you must research them and support them with credible, outside sources.

Sounds simple, I know, but this is one of the basic building blocks of any company.

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