The
four
areas of business
A good business plan lays out what you want to do
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A better plan details how you will do it
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A great plan explains why
While there are some things about your business and its environment that you cannot influence through your business decision making, there are others that you can influence. The current rates and availability of financing, industry pricing, and the competitive environment are things that you have to adjust to as a participant in the market. These are in fact your parameters in the business planning process. Only in the rare cases that you actually have a controlling influence in the market as one of a few market leaders do your decisions impact these areas.
So, given that there are some parameters that you have to identify first; what can you do? The business decisions generally fall into one of the four areas of a business: 1) Its customers, 2) its financials, 3) its product and services, and 4) its organization. In general, all your business decisions fall into one of these categories, and all of your planning activities deal with at least one of these categories. While business strategies can emanate from external or internal reasons, they will impact all parts of your business.
Your business plan should therefore carefully consider the interconnectedness of these four areas, as each major strategy and action impacts all four areas. For example, if you consider increasing your marketing efforts to gain more customers, you have to be certain that you have adequate scalability in your products and services, that you have the required financing and the organization to handle the marketing push. Likewise, if you want to develop a new technology into a product, you have to be sure that it's something that organizations and individuals want to buy, that you have the financing to do it, and that you have an adequate skill-set and available capabilities in your organization.
One important purpose of a business plan is to reduce the risk of failure. whether you want to commercialize a new technology, start a new business, or increase your existing market share, the risks are high. If you spend some time and effort working out what the consequences of your plans are on these four areas of your business, in addition to complying with external requirements that you cannot control, you can avoid costly mistakes once you are in the middle of executing your strategies.
Customers are the most important drivers of your business and the formation of your business strategies. You can consider customers in terms of aggregate market demand segmented by location, industry, type of organization or other segmentation principles that you might find useful. You should also consider customers in terms of a sample customer for each major market segment that you go after to look at typical needs and wants as well as affiliation with competitors. In looking at customers, you should try to ascertain what the key drivers are in the market place, and the types of needs that your customers have, and to what extent this need is currently met.
Strategies that relate to customers include your marketing programs and sales programs, your pricing, and your distribution.
Products and services are your offerings to your customers and should be considered in terms of their physical makeup and in terms of the value propositions. Your products and services strategies can include any intellectual property rights associated with your products and services as well as the core technologies and skill sets that are important in their design and delivery.
Financials covers your needs in terms of financing, your profitability and the rewards to those that participate in fulfilling your business plan.
Organization includes the employees, your management team, its relation to other affiliate organizations and partners, and its interrelations. You can consider your organization in terms of its effectiveness, its reputation, and its stability. Other factors to consider are your ability to maintain an effective organization in terms of recruitment of personnel and in attracting management and partners.
