(Note: I posted this on my Planning Startups Stories blog yesterday, and I'm crossposting it here because it's so directly related to business planning. Tim)
Think of it as the heart of the business, like the heart of the artichoke: it's a group of three core concepts that can't be separated. Market, identity, and focus. Don't pull them apart. It's the interrelationship between them that drives your business.
I've been working on this in the context of business planning, particularly the "just enough" planning I've been writing about lately, which I've also called the "not so big" business plan. Somebody I know and respect suggested that the heart of a business plan is the marketing plan, and that led me to thinking about the heart of the artichoke.
Like the leaves of the artichoke, the rest of the plan is vital and it surrounds the heart. The rest of the plan is a matter of metrics, milestones, assumptions, responsibility and accountability, dates, deadlines, budgets, and of course financial projections to support cash flow. The heart of it, however, is that trio.
And I realize that it goes beyond business planning. The heart of the planning is the heart of the business itself. The trio at the core is what drives the business.
The market is about knowing and understanding your customers. John Jantsch, of Duct Tape Marketing, starts with the profile of the ideal customer. Give your ideal buyer gender, age, family status, economic status, and you can begin to predict what media she reads, what message will reach him, etc. That's true as well for companies and businesses as buyers.
I've emphasized what I call "the essential why they buy." For example, famous marketing guru Theodore Leavitt pointed out that people don't buy drills because they want drills; they want holes. Some people choose a restaurant for convenience, some for price, some for special occasions, Some want loud, some want quiet. My company sells business plan software to people who want the planning, not the software.
All of this is about understanding the market. You want to know as much as you can about what your potential buyers are like, where they are, what they do, why they want you, and how many of them are there. You have to know your customer and why they buy, you have to understand that in order to build the right messaging, and you have to get the right message to them. You also want a reality check, asking yourself if there are really buyers out there. Will people spend money for what you offer? Where are they spending that money now? Who else offers them competing solutions?
Ideally you want to know your market well enough to do some numbers and forecasts. This is particularly important for a new business, and even more so when you need to convince investors or bankers to believe in your business. For the small startup, you may not have to demonstrate market to outsiders, as long as you're sure of it yourself and prepared to bet your startup on it, that's enough.
Another of the three is about you, your business, what I call your identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals? Let's think of restaurants again for examples. Some restaurants are particularly good at menus and food quality, some at health items, some live off of a great location. Maybe it's ample parking. Some of the well-known restaurants on Fisherman's Wharf in San Francisco survive on reputation more than anything else. What are the strengths of an airport restaurant? More important, what are your company's strengths? What do you do really well?
Part of your identity is what you want from your business. Some businesses are about your lifestyle, or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are very happy to work with investors as owners. Other folks want to own their own business, even if it has to grow slower for lack of working capital. What's your case? If you're committed to a second income in a home office, incorporate that into your identity. Don't look for generalized formulae, let your business be unique and individual.
You can't do everything. In restaurants, you can't credibly offer great food at bargain prices with great atmosphere. If you say you do, nobody believes you anyhow. So you have to focus. Make this focus intertwine and mesh with your choice of key target customer and your own business identity. All three concepts have to work together.
Seth Godin's book The Dip is about being the best at one thing. That's the point of your focus. Since you can't do everything and if you ever could, your customers wouldn't believe you anyhow, then you need to focus on something that you do well, that people want. Be the cheap and practical bars of soap that sell in volume in the big chain stores, or be a finely packaged and expensive and sweet-smelling soap that sells in boutiques. Don't try to be both.
Understand the principal of displacement: whatever you do in a business rules out something else that you don't do. You can't succeed trying to do everything, so you have to focus. Bill Cosby once said: "I don't know the secret to success, but I do know that the secret to failure is trying to please everybody."
Roll Them Up Together
These three things are the heart of your business. Don't pull them apart. Don't take them one at a time. Don't ever stop thinking about them. Remember, in planning as well as in all of business, things change. Keep watching.