Preparing The Business Plan – Product & Market Analysis

No business can expect to be successful unless the founders and managers understand the relevant markets and develop a strategy for reaching potential users and educating them about the value of the company’s products or services.  Presumably, serious consideration of a new business would not be undertaken unless the founders have some sense that a market will exist for the company’s products and services.  However, a mere “gut feeling” is not enough, and the preliminary planning for the new business must include a comprehensive and candid analysis of market characteristics and opportunities.  In particular, the founders should be able to provide clear and substantiated answers to each of the following questions:

• Who will be the likely customers for the company’s products and services?
• What are the important benefits of the products or services and what specific needs will the company’s offerings meet in the marketplace?
• What is the proposed pricing structure for the product or service?
• What methods should be used for distribution of the company’s products to its identified customers?
• What marketing and promotional strategies will be needed in order to reach the potential customers, including advertising campaigns and public relations efforts?
• What ancillary products or services will (or should) the company be offering in connection with its core products and services?  For example, does the company expect to take on any warranty or service obligations with respect to its products?
• What intellectual property rights are involved with the company’s products or services?  If intellectual property rights are essential to the company’s business, what steps have been (or can be) taken to protect the company’s position?
• What are the critical stages of developing and selling the company’s products and services?  Are there any processes in this cycle that have not yet been completed?  If so, is there a clear strategy for getting the job done, including raising sufficient capital and recruiting the necessary personnel or business partners?
• What procedures should be implemented for tracking the success of the company’s marketing plan and insuring continuous improvement in its products and services?

Studies have shown that successful technology-based firms demonstrate a discernable strategic focus with respect to the mode of market entry and product positioning.  In most cases, successful firms opted for exploitation of a niche market that promised sufficient returns and was perceived as being defensible and/or of less interest to major competitors.  Successful firms also selected markets that were both large and growing.  Ideally, the selected markets would be capable of rapidly embracing products and processes that provided substantial “added value” or contributed to rapid innovation in manufacturing techniques.