A key component of your business plan is your business concept and value proposition, which is the clear articulation of why customers should choose your solution over that of your competitors.
This section of the plan for developing your business concept and positioning your value proposition follows the executive summary and company history, so readers should already have a general idea of what your company does, who it's for, and what your long-term goals are for the business.
The business concept comprises your vision of the company, explaining the value your product or service will bring to the customer, why you are especially qualified to offer it, as well describing your offering's uniqueness and growth potential within your industry.
This section enables you, as well as interested parties and potential investors, to research and analyze the concept for feasibility, both from a market and financial perspective. Keep in mind that everything in your business plan must relate back to the value and benefits your product or service provides to your target customers.
The Feasibility Test
Think of a feasibility test as a reality check for your business idea. The goal of conducting a feasibility test is to prove to yourself and your team or investors the probability of your product or service being successful within your industry.
A feasibility test should be as low-cost as possible and should revolve around creating a Minimum Viable Product (MVP) or simple proof of concept, which communicates the most simple, basic value propositions of your future product or service.
According to Entrepreneurship For Dummies, by Kathleen Allen, a feasibility test weighs the validity of your business concept by examining four main points:
- The product your firm will offer.
- The customer you will target.
- Your value proposition.
- How you will get the product to its intended users.
By this stage in your business plan, you should have a firm grasp on what product or service you intend to offer, as well as who you believe will be your primary customer. The final item requires weighing various distribution channels, but, again, should be answerable with a little legwork.
The Value Proposition
Your value proposition is what makes customers choose you instead of the competition. It's part marketing, part operations, and part strategy; your value proposition is the foundation of your competitive advantage.
On a subconscious level, customers will compare the value proposition of your company against those of your competitors when deciding where to take their business. With that in mind, here are a few things to remember when writing your value proposition:
- Keep it short and uncluttered. Your value proposition explains why customers should buy from you. If you can't sum it up in 10 words or less, chances are you won't be able to execute it, either.
- Be precise. Your customers have specific needs; your value proposition should offer targeted solutions
- It is about your customer, not you. Your value proposition should discuss only what matters to your customers and the value you can bring to them.
- Value comes in numerous forms. Money, time, convenience and superior service are a few of the ways you can help deliver value to your customers.
After you've validated your business idea with a small group of paying customers, the last part of the business concept is to determine how you will deliver your product to your customers at scale. Taking a manual approach to reaching your first customers is necessary, but won't work as you grow your business. Are you going to sell directly to consumers? Through strategic partnerships? Retail distributors?
Consider these several factors when planning the distribution strategy for your business:
- Will you set up a brick-and-mortar shop or office, sell online, or both?
- What unique obstacles exist for your company in these two different channels?
- If your company sells a product, will you have the space to keep enough inventory on hand, or will customers have to agree to waiting periods?
- Can you strike exclusive deals with any particular distributor or retailer? Do your competitors have any such deals that hinder your operation?
Vision is important if your business is going to grow. The more focus your business concept has in terms of clear solutions for a like-minded niche group of people, the greater the likelihood that you'll attract the best investors and customers.