Many business plan writers and entrepreneurs have engaged in heated debates as to whether a business plan should include both a SWOT and risk analysis. The SWOT tool assesses the strengths, weaknesses, opportunities, and threats of your new or existing businesses, whereas the risk analysis looks at the risks faced by your venture and how you intend to overcome those obstacles. When looking at the entire business plan, the competitive overview, competitive advantages (of your business), risk analysis, and SWOT analysis seem too much of the same thing. This begs the question, how redundant should business plans be?

As a business plan writer and editor, I argue that is critical to demonstrate your knowledge of competition and what your businesses will or does face in the marketplace with regard to threats and how your advantages will supersede any barriers that may exist. When writing a business plan, I make it a priority to recognize the risks in the marketplace concerning such topics as the political, operational, technical, procedural, and technical areas surrounding your business. A great online tool to guide your risk analysis is Mind Tools.

Considerable time, research, and thought are needed to create the both management tools. SWOT and risk analysis can be thrown in to spruce up the appearance of your plan, but it is pertinent that these are formulated with an ardent knowledge of what your business is truly up against. Whether that means incorporating both management tools in the business plan document, they should only be implemented and put in the plan if redundancy is not a factor. Let’s face it: no one wants to read pages and pages of the same thing.

Every business plan should entail a comprehensive overview of your business’ marketplace competition. Any business that provides a similar service or product in the same region may be viewed as a primary or secondary competitor. Identified competitors underscore the impetus of expanding your company’s product or service into the selected market. As such, your business needs to highlight and build upon the weaknesses of its competitors to increase its profitability and market share. The following provides a step-by-step process in creating your competitive analysis.

Identifying competitors: To locate competitors, simply use a Google or Yahoo! map. Enter in your business’ proposed or existing address and search nearby businesses of a similar category. For example, if you’re opening a pizzeria, you can search “pizza shops” or “pizzerias” in the same zip code or city. Through this easy task, you’ve identified potential competitors. If your business operates in a niche industry, the best way to identify competitors is to leverage established contacts and web research.

Understanding your competition: Now that you have identified your top competitors (aim to analyze two to three direct competitors), it is necessary to learn everything about these companies. What do I mean? Visit their website; call the business directly to learn more about the way they operate or what they sell; physically go to the competitor’s place of business; and research customer reviews. The latter step can be implemented by simply typing in “customer reviews of XXX” in your online search bar. Also, these reviews usually are posted on websites such as Yelp.com and CitySearch.com.

Pointing out their weaknesses and strengths (eloquently): Lesson to be learned – no bashing on competitors; it is unprofessional and makes your business look worse. When I say bashing, I mean using expressions such as “they are bad” or “they have no customer assistance.” Every company has some element of customer service, so a statement like that is literally untrue. Now, the competitor may lack quality customer service, and such an observation would be a much more acceptable approach in pointing out a weakness in a business. When I am writing a competitive analysis, I always include one to two strengths and two to three weaknesses of each competitor.

Your competitive advantages: Ah, finally, we’ve reached the point of emphasizing your strengths. Truly use this section to emphasize why you’re a better business in a bulleted format (preferred) and include a few statements in a paragraph form on how you intend to supersede your competition. Examples include greater industry knowledge, lower prices, friendlier and attentive staff, larger inventory of products, and so forth. Your best bet is to underscore your own unique competitive edge that cannot be argued with, and voila, you’ve completed your competitive analysis.

With the ongoing recession, it is critical for existing and new business owners to carefully analyze the risks prior to entering the marketplace and how they intend to overcome these challenges, or barriers to market. Not every business plan service includes a risk analysis, but as an experienced business plan writer, I argue that it is necessary to acknowledge any risk(s) associated with expanding or commencing a business. The technique of building a risk analysis may cause some business owners to cringe – especially those who are exuberant about their concept and see nothing in the way of jeopardizing their ability to thrive in the marketplace. However, that is not always the case.

Business owners need to be well-prepared to create a contingency plan in case things do not go according to plan. What do I mean? Maintaining a sustainable cash flow, unforeseen market circumstances, fierce competition, utilizing the right marketing methods, etc. To properly mitigate these market risks – the owner must carry out a plan of action based off of the contingency proposal to overcome potential risks that make their business vulnerable.

The risk analysis inserted into a business plan document should include at least three market risks specifically tailored to the business concept emphasized in the plan. It is up to the owner and/or management team to look at the more pressing risks facing their industry entrance. Commonly used risks include lean capitalization, the economic recession (slow times), competition, and the owner’s ability to successfully oversee day-to-day operations. Other risks, for such businesses like retail stores, eating places, and independently owned medical clinics entail obtaining a substantial customer/client base, slow industry traction, and how to advertise to the target audience. When speaking with a client, I ask them questions to engage then with confronting market risks, i.e. “How do you intend to rise above competition?”, “How will you draw in customers?”, and “How do you intend to obtain enough customers to sustain business and generate a strong profit?” Their answers are usually their planned action in overcoming these risks.

According to information submitted by the Small Business Administration, business plans should include a competitive overview, risk assessment (or analysis), and a contingency plan once the writer has collected enough data to possess a more thorough understanding of the business’ position and what it will need to focus on or strive for to supersede its competition in an effort to become a profitable entity.

Having written hundreds of business plans, I’ve found that some of our clients insist upon receiving business plan documents of more than thirty pages, not including financial charts.  The end-result is a document with too many pages of additional market research, a lengthy product and/or service description, and other elements such as company history and client background.

To create a solid, streamlined business plan that speaks of the core components needed in a professional document, I have been taught, by experienced mentors and business planning blog writers (such as Guy Kawasaki) that a business plan should rarely exceed 25 pages.

We aim to earn the satisfaction of every client we work with, but emphasize that less is often more.  From my experience, 20-25 pages is frequently the perfect length; if a concept and its market cannot be explained and demonstrated fairly briefly, then either the writer does not properly understand the product or market, or not enough effort is being spent in the pursuit of brevity.

Major sections of a business plan, excluding financial charts and tables, should include a tailored, non-template executive summary (one page in length, no more), products and services description, a vision or mission statement, market analysis and industry overview, a branding and advertising strategy, ownership and operations, and competition in the marketplace.

Remember: pages and pages of market research only hide what the actual product or service is; thus, if it is needed in the marketplace, a 10-page market analysis is only making the business plan more jumbled and confusing to the reader.  If the product or service is needed, 10 pages of research should not be necessary.

Business plans are the homework that just won’t end. Imagine being in school and being given an assignment to write a term paper. You have an outline of what’s required, a recommended format that you should use, and a timeline in which completing it would be advised. Here’s the rub: what if that assignment is never done. The due date comes and goes and it constantly has to be redone and revised and updated.

The importance of updating a business plan is simple: it creates a long-term strategy for your business, while alleviating the stress and headaches of operating a business if action is continually implemented. There are important factors to consider when revising and updating a business plan. The following outlines the necessary steps in perfecting that business plan you filed away months – or even years ago.

Reminisce: Remember to look back at your initial business plan at least once a year. Perhaps your business’ target market has changed. Maybe your customers are purchasing one particular product or service more than others. And, of course, one must always look at new industry trends – this in itself can have a positive or even devastating effect on a business. Small business owners must continually refresh their business plan by focusing on the aforementioned elements when reevaluating the business plan’s content.

Financial Updates: A financial analysis should be updated monthly. Entrepreneur.com eloquently puts it: “Have a monthly review of the difference between planned results and actual results for your sales, profits, balance and cash.” A solid, well thought out business plans should have monthly milestones, assumptions, and tasks.

Another reason to update a business plan: every small business could use more money at some point. An outdated plan will not convince any borrower – or potential investor – to fund your business. It makes you, as the entrepreneur seem unprepared and unmotivated in staying current with new market trends, financial projections, and customer feedback. Notably, changes to the management team and competition are just as significant. Believe it or not, a business’ competition will at some point increase, decrease, or elevate depending on the climate of the market. Fully evaluating and analyzing competitors is essential to understanding the market and what is needed stay ahead of competition.

Evolution: Finally, if your business is changing, evolving, or adding to its line of services or products, it is absolutely essential to renew the product and services description section of the business plan. With the constant fluctuation of the market, small businesses are adding or taking away products and services in order to meet the needs of their intended market segment.

As the company’s vision continues to evolve, the business plan becomes a reflection of the business’ personnel, mission, and philosophy. However, in order to properly convey a company’s new fangled identity, management team, or other core values, the business plan itself must evolve as the business’ does. Both go hand-in-hand.

Tools: It’s a poor carpenter that blames their tools. Not everyone can feel truly qualified when it comes to writing up their own business plan. There are a few options here to make sure that you’re not going in blind to the formatting, requirements, and structure that may be demanded of your document. Some seek the help of mentors who have written their fair share of business plans to review and advise on the plan that the entrepreneur is writing. Some outsource the entire endeavor to third party firms or even MBA students off of CraigList.org who are looking for a few bucks. The happy medium can sometimes come in the form of tools from companies that offer software solutions.

Business plan updating has become so pertinent to a business’ long-term success that colleges and trade schools are offering courses in this particular subject. Entrepreneurs must recognize that paying close attention – as well as constantly altering and updating the content and past performance or projected financials of a business plan – is vital to not only the company’s future, but ultimately its sustainability and growth in the marketplace.

I shared a podium yesterday with Aldonna Ambler - an award winning entrepreneur and founder of TheGrowthStrategust.com. She has the BEST ADVICE for writing a business plan that I have ever heard. When you start, she said, keep it simple. Before you start answering the questions though she strongly recommended taking a pile of about 10 sticky notes or sticky mailing labels and write DAMNED IF I KNOW on each one. Just write as fast and as much as you can. You CAN DO THIS - it is your business, your dream, your passion. As you are quickly whipping through the questions - when you come to one you can’t answer just stick your Damned If I Know sticker on it and keep going, answering the questions that you can.

Once you finish all the questions with written answers or a Damned If I Know sticker, talk with your accountant or CFO, seek expert advice on the M3 Message board or talk with your coach to help you with those answers. Most of the Damned If I Know questions will probably be financial ones, and that’s OK. You will quickly complete you plan and be ready to learn from the reactions, questions and suggestions you get by showing it to others.

By the way, if you need more than your 10 Damned If I Know stickers you probably need to do more work on your basic business concept, target market and financials before you can move the plan to completion.

Believe in you.

These are difficult economic times that send shivers down the most optimistic entrepreneur’s spine, but there is a silver lining. It is during difficult financial times that the smartest, forward thinking companies rise to the top. The biggest challenge is to survive and the best way to do so is with a good plan.

Often times as sales decrease, the first thing companies cut is their marketing budgets, but in order to maintain or increase sales, it is important to have a strong market presence – keeping your company’s product or service out there and top of mind. That said it is possible to cut back on costs and increase outreach by developing a smart marketing strategy. Just having a good plan can save time, design and printing costs and cut down on waste.

For many a marketing plan may seem overwhelming or unnecessary. For some, when sales really slow, they feel a need just to do something; an ad or a direct mail piece, or some other marketing opportunity – taking a shot gun approach and hoping to hit something. In the end, this approach can be costly and ineffective. So make a plan, it can always be changed if it is not working. Here are some steps to make the process simpler:

To begin, first determine a marketing budget for the year. Depending on the profit margin of your product and service 2% - 5% of gross forecasted sales should be a minimum budget. If you have a high profit margin, you could increase that percentage a bit. If you do not have forecasted sales numbers, focus on a sales goal for the year.

Next, once you have that budget number, begin to divide up the amount by your marketing tactics. I recommend the following tools – collateral, web site, electronic and print advertising, direct mail, events, etc. When looking at these options, also keep in mind your target market and the mediums they respond to the best. Be sure you have a mix of tactics to ensure a solid “cross-media” strategy. If you find your budget is too tight to do all the items you would like, shift more of your budget to areas that offer a higher return on investment or allocate more of your budget to specific times of year which historically have provided better response rates. Build in a mechanism to track response to your marketing efforts. Web and e-marketing will have analytics built in, but just always asking, “How Did You Hear About Us?” is valuable information.

One tactic that should be included as a component in your marketing plan is a loyalty program. During a time when everyone will be reviewing their spending, customer loyalty is very important. It is easier and less costly to keep a customer than to get a new one. Service is a big part of loyalty, but special programs, deals and communication to your “regulars” will go a long way in keeping them. Plus, they will be the best source of referrals and viral marketing.

Finally, remember to review your plan throughout the year. Re-evalutate, look at actual sales vs. forecasted sales and adjust your budget numbers appropriately. Also, you should check to make sure you are getting the greatest return on investment (ROI) for each tactic you use. When one tactic out performs another, than you should shift dollars to increase the effectiveness, cutting out what does not work. Marketing methods are always changing, new markets open up, and technology is playing a greater role every day so try some new things too! Good luck.

Over my next posts, I’m going to share with you some important things that I’ve learned over 26 years of business experience from some of the most successful investors, investment and venture capital firms in the world about how they read business plans and what they look for in them.

First some basic advice: With business plans, size does not matter.

Let me say that again.

Size does not matter.

Never lard up a business plan just to make it a hefty read, thinking to “wow” people based on its bulk. That does not impress experienced business people, knowledgeable investors and funding sources.

Experienced and successful business professionals know this and focus their business plan to make it concise and succinct; one that hits all the “hot buttons” but does not say more than it should.

If you use a template to create your business plan, use it as a guide only and modify extensively to give it its own distinct identity. Strip out and replace any “boiler-plate” language that is not necessary and put in only the important things you need to convey (read on to learn what that consists of).

If you hire a business plan writer (who may write well but does not have a great deal of business experience), be sure not to just accept what they give you as being the best for you. Make sure it answers the five most important things (we’re getting to them shortly) that investors and funding sources look for … no more … no less.

What to leave out of your business plan is just as important as what to put in!

• With business plans, telling them you graduated from John Smith high school, love cats and your hobbies are snorkeling and bear wrestling do not matter.
• Telling about your dream to own your own business does not matter.
• Telling them any thing not directly related to the business or your capability to run that business, does not matter – leave it out. Let that simple rule govern what you put into your plan.

You get the idea without me having to add more bullet points (see … less is more!).

What does matter?

I’ll get to that in my next post, because if your business plan does not have what matters most – and you’ve filled it with things that don’t – you have wasted your time and more importantly someone else’s time (and from the all important point of attracting an investor or funding source that is a death blow).

You get one shot at a first impression. Don’t blow it!

Be sure to watch for:

The 5 Most Important Things Your Business Plan Should Contain (that investors want to read about)

Until then best wishes and good fortune to you (and fortune favors the prepared),

Dennis Lowery
Adducent, Inc.

When you started your business, you likely had a plan. I am a fan of the one found here on Resource Nation.

You were eager, enthusiastic, and couldn’t wait to change the world! The business owners you met were as eager, enthusiastic and inspired as you were. You were thinking “business ownership must be amazing! Why didn’t I do this sooner?”

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As time went on, you put your plan in a drawer (or another similar place that you don’t reference often enough) and continued running your business. You knew what you wanted and where you wanted to go – you had your plan in mind, and were plugging right along.

Things went along fine. The business was functioning, money was coming in and work was getting done. Over time, you were so busy running your business that your wants, dreams and desires went on the back burner (I mean, seriously – how would you have time for yourself and to run your business?).

But that was ok, because the small business owners met were as tired, overwhelmed and disillusioned as you were. You were thinking “business ownership isn’t all it’s cracked up to be. Why did I do this?”

Sound familiar? Are you nodding along as you read, identifying fully with this scenario?

I am amazed at how many business owners know things aren’t working – they know it in their head, or maybe in their gut – but they don’t do anything about it. The result? Poor team morale, low productivity, unsatisfied customers. Not to mention the affect on the business owner, which can range from poor physical health to personal relationships that are deteriorating.

Here’s the Million Dollar Question – what are you doing about it? Here are some tips:

1. Go back to your plan. Remind yourself of the passion you once had. Find that old feeling that got stuffed in the drawer with the plan.
2. Write a new plan. What parts of the original plan are still working, and what parts need to be shifted? No, I don’t mean what parts should be changed to justify your current business situation.
3. Identify where things went off track. Be honest – you know where it happened. You felt it in your gut, but passed that feeling off as too much coffee.
4. List the things in your business that aren’t working. It’s okay to admit your baby isn’t as cute as you think. If you don’t acknowledge the areas that aren’t working, you can’t fix them.
5. Find support. A mastermind group, a trusted colleague, even better would be a business coach. It should be somebody who will hold you to task and support you through the changes you know you need to make. Even the best business owners/mentors/athletes have their own coaches. How do you think they stay at the top of their game?

Don’t bury your head in the sand. Don’t be afraid of the tough questions, of seeing your business for what it is, of having the difficult conversations and doing the hard work.

Get real – get to it. I know there is nothing you can’t do. Remember, you started a business and you loved it. You can again.