It is silly fiddling about with logos etc if the business's basic product or
service is weak or unrealistic. Your product and service is what you are trading
with. Product and service design determines the nature of your
operation - the premises, the machines, the supplies and raw materials, your
routines, pressures, staff and costs (fixed and variable).
You may be generating the product or service yourself, making to order or making to stock. You may be buying in components to assemble into finished product or do more work to (added value). You may be merely distributing someone else's product. A kitchen installer will be doing all these things. Remember most manufacturing operations have an element of service. Most services offer products.
Your business plan must do this. People will not invest in your business if you cannot excite them about your product or service.
Product and service descriptions are needed, diagrams, illustrations, mock-ups of the product (representations of the service environment and methods/literature). Describe the unique selling points (USPs) of your product/service concept. How is it different to anything else on the market? Compare it to competitor products/services. Why will customers want this more than anything else? What is your market niche? This must link to your market research findings.
Product and service descriptions will explain not only physical attributes (dimensions, colour, composition, features) but also its quality (aesthetic, social/pychological attractions, value for money, safety, desireablility, uniqueness, reliability, conformance to specification).
What will be the degree of product standardisation or variability? What design work is needed each time the product/service is delivered and who will do it? These things will point to the type of operation that delivers the product or service and the costs. What premises are needed? What fixtures and fittings? What front office/back office? Is the product/service under-priced, too costly? Does it require expensive, highly skilled staff? What methods and technology will produce the goods/services? Are these available and reliable? What are the sources of supply? Are these guaranteed and can steady supplies be guaranteed? What stocks will be needed? How much work-in-progress will build? This has implications in relation to cash flow and overdrafts? How often will your be purchasing goods and services?
If the product or service involves and invention or a totally new concept - then you need to protect against theft of intellectual property by
Each of these adds to your start up costs.
Imagine the development of your product/service from conception to launch, from becoming established in the market, to diversification and possible death - the original concept is obsolete, the market has moved on. What will be the scope for
The concept of the product life cycle is an important one. A product/service must be
researched and developed
expensive, all cost, no income
introduced/launched on the market
expensive, all cost, no income (except from first sales)
sales need to grow
can be slower than you think and more expensive to get through to customers. You
face a constant negative cash flow until your sales build up. Costs pile up as
you seek to achieve volume sales. You are unlikely to be in profit very quickly -
quite the contrary as you have to pay off all your start up debts and cdover your
fixed costs whilst at the same time find cash to cover your operating expenses
(variable costs).
the product/service will mature
becoming established still requires constant vigilance with attention to quality,
product/service development, nurturing of your customer base and
costminimisation. You will still need to invest in the maintenance of your assets
and operation. There will be a tendency to decay unless you keep your
product/service up to date. You will be keeping an eye open for new competitors.
the product may decline
How might the product/service become obsolete. Might the market changed. Have
you lost energy? Is it time to pull out or turn the business round with new
energy and investment in a revitalised or new product?
Difficult to do before you fully comprehend your operation and evaluate the costs and potential revenues. Precise objectives become clearer after market research and towards the conclusion of your business plan. They become painfully clear as you become embroiled in your operation.
At the planning stage you still need a general but critical and realistic overview of your objectives. What might these be?
Identify short term objectives (within the quarter/year). Be realistic especially with regard to profit and sales targets. Generating sales may involve lots more expenditure on marketing and advertising. The enthusiasm of business start-up will often lead to over-estimating revenues and under-estimating costs - be very careful and if you build in contingency funds - treble them!
Project objectives into the medium term - over two years. This planning needs to be informed and as detailed as possible bedded on your manufacturing/service concept and your budgets/cash flow forecasts. But this is the problem - these are not yet implemented. Nevertheless informed, critical planning although time consuming enables you to imagine as many of the problems and contingencies that may arise. beyond one year - much is crystal-ball gazing stuff but you must identify and anticipate major events such as the next business/operational stage, seasons that must be navigated etc.
Long-term objectives are long. Anything more than three years may be a pipe-dream. recognise this but keep your vision intact. This vision will be important whenever and opportunity presents itself.
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