Masaryk University Faculty of Economics and Administration Field of Study: Business management
BUSINESS PLAN
Master Thesis
Thesis Supervisor: Author:
Ing. Petr SMUTNÝ, Ph.D Elvin MANSIMOV, 424211
Brno2017
MASARYK UNIVERSITY
Faculty of Economics and Administration
MASTER’S THESIS DESCRIPTIONAcademic year: 2017/2018
Student: Elvin Mansimov
Field of Study: Business Management (Eng.)
Title of the thesis/dissertation: Business Plan (case study)
Title of the thesis in English: Business Plan (case study)
Thesis objective, procedure and methods used: Goal of the thesis is to create a business plan for a particular businessstart-up.The thesis will consist of two parts. Theoretical part will include re-view of possible methods and their evaluation with respect to toolsand techniques used during the analytical part and proposal part (me-thods used to create a business plan). Advantages and disadvantagesof these methods will be elaborated with the goal of choosing thebest set of tools and techniques to be used to create a viable businessplan.The second part will include analyses needed to gain enough relevantinformation to create a viable business plan for a particular start-upbusiness. The business plan will be created based on results of ana-lyses and will include all standard parts incl. financial and economicalassessment.Self-study and research of suggested as well as other relevant litera-ture and resources will be an integral part of the work process. Authoris expected to define the problem and identify methods to be used toreach the aim of the thesis.
Extent of graphics-related work: According to thesis supervisor’s instructions
Extent of thesis without supplements: 60 – 80 pages
Literature: PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guideto Building a Business and Securing Your Company’s Future. 7th ed.Tustin: Out Of Your Mind ...and into the Marketplace, 2008. 352 s.ISBN 978-0-944205-37-2.
GALAI, Dan, Lior HILLEL and Daphna WIENER. How to cre-ate a successful business plan : for entrepreneurs, scientists, ma-nagers, and students. New Jersey: World Scientific, 2016. xxi, 309.ISBN 9789814651516.
How to prepare a business plan. Edited by Edward Blackwell. Rev. 4thed. London: Kogan Page, 2004. vi, 184 p. ISBN 0749441917.
How to write a business plan. Edited by Brian Finch. 3rd ed. Philadel-phia: Kogan Page, 2010. vii, 173 p. ISBN 9780749458942.
FORD, Brian R., Jay BORNSTEIN and Patrick T. PRUITT. The Ernst& Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley &Sons, 2007. xix, 233. ISBN 9780470112694.
Thesis supervisor: Ing. Petr Smutný, Ph.D.Page 1 of 2
Thesis supervisor’s department: Department of Corporate Economy
Thesis assignment date: 2016/05/26
The deadline for the submission of Master’s thesis and uploading it into IS can be found in the academic year calendar.
In Brno, date: 2018/01/08
Page 2 of 2
STATEMENT OF AUTHORSHIP
I hereby declare that I prepared the Diploma work “Business plan” myself, under the supervision
of Ing. Petr Smutný, Ph.D. All literature resources and other sources are used according to
legislation, internal regulations of Masaryk University and internal management acts of Masaryk
University and the Faculty of Economics and Administration.
Elvin Mansimov
ACKNOWLEDGMENT
I would like to say thank you to my supervisor for the great support and close cooperation despite
the heavy workload and schedule. Also, would like to take this opportunity and thank to Jana
Nesvadbová for helping me to overcome all the obstacles during my entire studies. Finally,
thanks to my wife who supported me all the time when I was developing this diploma work.
ABSTRACT
This diploma thesis focuses on the business plan for the new established company called Growth
Laboratory. Company aims to develop its new product – a book summary videos and introduce it
to its target market. The business plan will verify the company’s plan and help to develop and
achieve its short-term and long-term goals. Theoretical part of the thesis describes the business
plan from the academic point of view by researching relevant sources and approaches. Results of
theoretical analysis is implemented in the practical part. The thesis will cover the theoretical as
well as practical knowledge of the business plan preparations for video content market in the
social media.
Keywords:
Business plan, social media, video content, minimum viable product, SWOT, YouTube, social
media platforms, product validation.
TABLE OF CONTENTS THEORETICAL PART ................................................................................................... 1
KEY CONSIDERATIONS PRIOR TO BUSINESS PLAN .......................................... 1
1. OPPORTUNITY ........................................................................................................... 4
1.1 Problem worth solving .................................................................................................. 4
1.2 Solution ......................................................................................................................... 5
1.3 Validation ...................................................................................................................... 8
2. ORGANIZATIONAL PLAN ....................................................................................... 9
2.1 Cover page .................................................................................................................... 9
2.2 Table of contents ......................................................................................................... 10
2.3 Executive summary ..................................................................................................... 11
2.4 Vision mission and goals ............................................................................................ 12
2.5 Product description ..................................................................................................... 13
2.6 Business model ........................................................................................................... 15
2.7 Management of the company and other key people ................................................... 16
3. MARKETING PLAN ................................................................................................. 17
3.1 Situational Analysis .................................................................................................... 18
3.2 Market analysis ........................................................................................................... 19
3.3 Competition analysis ................................................................................................... 21
3.4 PESTLE analysis......................................................................................................... 24
3.5 Company analysis - Internal environment .................................................................. 25
3.6 SWOT analysis ........................................................................................................... 25
3.7 Target market / Customer analyses ............................................................................. 27
3.8 Marketing strategy in the target market ...................................................................... 28
3.9 Differentiating and positioning ................................................................................... 28
3.10 Marketing objectives and goals ................................................................................. 29
3.11 Marketing tactics ....................................................................................................... 29
4. FINANCIAL PLAN .................................................................................................... 32
4.1 Sales/Revenue forecast ............................................................................................... 33
4.2 Start-up Expenses ........................................................................................................ 33
4.3 Projected Profit and loss ............................................................................................. 34
4.4 Projected cash flow ..................................................................................................... 34
4.5 Projected balance sheet ............................................................................................... 35
4.6 Break even analysis ..................................................................................................... 35
PRACTICAL PART ....................................................................................................... 36
EXECUTIVE SUMMARY ............................................................................................. 36
1. OPPORTUNITY ......................................................................................................... 38
1.1 Problem worth solving ................................................................................................ 38
1.2 Solution ....................................................................................................................... 40
1.3 Validation. ................................................................................................................... 40
2. ORGANIZATIONAL PLAN ..................................................................................... 42
2.2 Vision, mission, and goals .......................................................................................... 43
2.3 Product ........................................................................................................................ 43
2.4 Business model ........................................................................................................... 43
2.5 Management of the company and other key people ................................................... 44
3. MARKETING PLAN ................................................................................................ 45
3.1 Situational analysis ..................................................................................................... 45
3.2 Market Analysis .......................................................................................................... 45
3.3 Competition analysis ................................................................................................... 46
3.4 PESTLE analysis......................................................................................................... 53
3.5 Internal company environment – SWOT analysis ...................................................... 56
3.6 Target market / Customer analyses ............................................................................. 57
3.7 Marketing strategy in the target market ...................................................................... 58
3.8 Differentiating and positioning ................................................................................... 58
3.9 Marketing objectives and goals ................................................................................... 58
3.10 Marketing tactics - 4p of marketing .......................................................................... 59
4. FINANCIAL PLAN .................................................................................................... 60
4.1 Projected sales forecast ............................................................................................... 61
4.2 Projected startup expenses .......................................................................................... 61
4.3 Projected profit and loss statement ............................................................................. 61
4.4 Projected cash flow ..................................................................................................... 61
4.5 Projected Balance sheet .............................................................................................. 61
4.6 Break-even analysis .................................................................................................... 61
MILESTONES AND KEY METRICS ......................................................................... 63
SCENARIOS ................................................................................................................... 62
BIBLIOGRAPHY ........................................................................................................... 65
LIST OF FIGURES ........................................................................................................ 68
LIST OF PICTURES ...................................................................................................... 68
LIST OF TABLES .......................................................................................................... 68
APPENDICES ................................................................................................................. 69
1
THEORETICAL PART
Theoretical part is the knowledge framework related to the practical part of the business plan. It
covers the current literature reviews for the respective topics, provides comparisons and
assessment of the approaches from various authors.
KEY CONSIDERATIONS PRIOR TO BUSINESS PLAN
According to Galai1 business plan serves as an important document when analyzing the
business or planning strategic changes. Successful business plan must be a concise document
generally ranging from 20 to 50 pages. It is a dynamic document rather than static. Before writing
the business plan it is important to decide who is going to write it. Galai says that it is a mistake
to leave the writing to entrepreneur or the manager. He recommends cooperation from different
departments of the company, or hiring external expert. If hiring expert is the choice then it is very
important to provide the first draft to the expert so that he can build on it. The reason is that
expert is professional on writing the business plan but he might not have enough knowledge
about your business. Also he emphasize that business plan should be concise and focused. What
Galai is trying to mean by focus is that every business plan is created for some purpose such as,
for innovative product, to attract partner or technological breakthrough. For example, if it is a
technological product then you should focus on explaining how it will be beneficial compared to
other products, or if it is completely new product then focus on proof of your concept, etc. Finally
business plan must be clear and organized. This might seem very minor point, but when
reviewers are checking the plan minor errors, or empty left page might create impression that
your company is not serious or waste resources intentionally. Galai does not recommend any
fixed structure format for a business plan, however mentions the importance of putting some
topics first depending on the purpose of the plan. According to him if the plan is for new venture
then chapter one needs to focus on the problem, solution that the product brings and validation of
that solution. For example if the new innovative product is a medical device then the first chapter
will describe the relevant medical problems and the current devices addressing it.
1 GALAI, Dan, Lior HILLEL a Daphna WIENER. How to create a successful business plan: for entrepreneurs, scientists, managers, and students. New Jersey: World Scientific, 2016. I, 3 p. ISBN 978-981-4651-51-6
2
Richard2 also emphasizes the importance of keeping in mind why you write the plan. He
also recommends keeping the plan as short as much as possible. Compared to Galai he is
extremely flexible when it comes to organizing the structure of the plan. He provides seemingly
different point of view for creating business plan. He formulates 3 questions and mentions that
business plan needs to be built based on them. Questions he asks are: Where are you now? Where
you want to be? How are you going to get there? He especially emphasis the importance of
second question as a way of defining the roadmap for the future business plan. Finally Richard
recommends top-down and down-top communications while developing the plan
Pinson3 is one of the authors who has devoted quite extended portion of the book to the
questions that have to be considered before writing the business plan. According to Pinson there
are a few key questions that need to be answered before writing the plan, such as what is this
business plan for and why do you need it? If you don’t seek a financial support what should be
your approach? How do you develop an exit Strategy? Where do the numbers come from in your
financial plan at the end?
When I compare Pinson’s approach to previous 2 approaches (Richard and Galai) it
becomes clear that all three of them recommend defining the purpose of the business plan in the
first place (Why do you write it?). What Pinson does differently than previous 2 authors is that
she considers 3 key questions at the beginning while others do it at the end. These 3 questions
are: What is the source of finance, exit strategy, and financial assumptions. I am strongly
convinced that Pinson’s approach of considering these questions at the begging is much smarter.
The reason I think in this way is explained below in detail (see sections below). When I assess
above mentioned approaches I noticed that Galai is the only person who talks about analyzing
problem, solution, and validation for newly created products. According to him if the product is
new then there can exist suspicions regarding validity of problem and solution. That is why
analyzing problem, solution and providing proof for validation can remove all the suspicions. I
find this type of approach very adequate and the reason is that my product is quite new and
without proper approach its validity might be undermined.
Finally, this section will not be covered in the practical part since it is about the
considerations before writing business plan. However, points mentioned in this section will serve
as a guideline to develop the business plan in the right way.
Source of finance: Financing (source of capital) is important and it will directly influence your
choice of exit. Keep in mind, when considering financing options, not only the ease with which
2 STUTELY, Richard. The definitive business plan: the fast track to intelligent planning for executives and entrepreneurs. 3rd edition. Harlow,
England: Pearson, 2012. iii, 41 p. ISBN 978-0-273-76114-3.
3 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. i, 7 p. ISBN 978-0-944205372
3
you can raise the funds you require to reach your goals, but the costs of each type of financing in
terms of both money and relationships. In the simplest sense, capital is available from four
sources: 1. yourself, 2. friends and family, 3. financial institutions, and 4. the public at large
(including Venture Capital and Private Equity).
Exit strategy: Pinson4 mentions that many people think exit strategy is a plan in case of failure,
but it is not true. It is a plan for success. Developing an exit strategy before you write your
business plan will enable you to make the best decisions for your business. Have you ever seen
runners line up for a race not knowing where the Finish Line is? This would never happen, right?
Whether you are starting a new business or expanding a current business, the implication is the
same. Before you begin the race you need to know where you expect to finish. Exit can be in one
of the forms mentioned below:
Selling all or a portion of the business.
Passing the business to a family member
Selling to an Employee Stock Ownership Plan
Taking the company public.
Liquidation
Financial assumptions: While writing the text portion of the business plan it should be
developed not only as a conceptual idea, but in terms of how it will generate revenues and/or
incur expenses. After certain amount of time, even the most astute business planner tends to get
confused about where some of the numbers came from. That is why following steps are
recommended.
As you develop each piece of your business plan, remember to develop it in terms of
revenues you expect to generate and expenses you expect to incur.
Keep a piece of paper at your side. As you determine the revenue and expense dollars
related to the task you are working on, jot down the assumptions that you have developed.
Be sure to include explanations of when revenues will be realized and when expenses will
be incurred.
When you are ready to develop your financial plan, gather your assumptions together in
one place and use them as the basis for the dollar amounts you input. Finally, append your
assumptions to your financial statements where they are needed for clarification.
4 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind and into the Marketplace, 2008. i, 8 p. ISBN 978-0-944205372
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1. OPPORTUNITY
This section is going to cover current academic approaches of analyzing, validating problem,
developing a solution, and finally validating that solution.
1.1 Problem worth solving
According to Brian5, before starting to find a solution it is key to define the problem clearly
in writing. Writing is called a psychoneuromotor activity. By writing out your problem on a paper
or on a whiteboard or flipchart, you are forced to use your visual sense, your auditory sense and
your kinaesthetic sense. As a result, you activate your whole brain in the act of defining your
problem clearly in the first place. Brian says that, 50 % of the problems can be solved by the act
of defining them clearly in advance. In most cases where people have wrestled with a problem for
a long time, it is because they have not taken the time to clearly define the problem in the first
place. Fuzzy thinking is a major obstacle to success in life and in the world of business. Second
step in Brian’s approach is called problem validation. At this stage he recommends to read,
research, and gather as much information as possible about the problem. The more information
you gather, the more likely it is that the correct solution to your problem will emerge from the
data, like cream rising to the top of milk. At this stage be prepared to follow wherever the facts
may lead. Resist the temptation to fall in love with a solution early in the process and then to seek
only that information that will confirm your initial conclusion. Keep an open mind.
According to MacAdam6 many entrepreneurs have a tendency to spend huge amount of
time working on the solution before they fully understand the problem or explain it clearly as a
need. The need must be clearly and concisely identified before you start working on a solution. If
you do this then you will end up solving a wrong problem. That is why if problem has not been
clarified in the marketplace by now then you must go back to the prior section and explain the
customer problem before you continue doing anything. The solution is the easy part of building
the value proposition. With the problem in mind the next step should be articulating the
importance of the solution to the customer.
Galai7 also thinks that the first step is determining whether there is a compelling need for
your product or service. It is the entrepreneur’s task to make sure that the need is valid. Proving
the need for your product is very important especially in the case of new or innovative product. In
some cases there is a need or vacuum in a sector which generates the environment seeking a
5 Brian Tracy. Creativity & Problem Solving (The Brian Tracy Success Library). 1st ed. AMACOM, 2015. vii, 25 p.9780814433164
6 John McAdam. The One-Hour Business plan – The simplest and practical way to start anything new. 1st ed, John Wiley & Sons, incorporated,
2013. ii 30 p. ISBN 9781118726228
7 GALAI, Dan, Lior HILLEL a Daphna WIENER. How to create a successful business plan: for entrepreneurs, scientists, managers, and students. New Jersey: World Scientific, 2016. iii, 25 p. ISBN 978-981-4651-51-6
5
solution. The solution may be a completely new category of products or an improvement of
existing products and processes. Shortage of raw materials, cost efficiency and safety are all
examples of concerns which requires some type of solution. In most cases you will see that you
don’t have to start from the beginning.
Brian, MacAdam, and Galai provide strong reasons about the importance of defining
problem in the first place, I agree with all 3 of them. In essence all 3 approaches are very similar.
Especially, I believe that there is a huge amount of truth in Galai’s opinion when he says that in
most cases you don’t have to start from beginning which means most probably there was
someone before you who dealt with that problem and tried to find a solution. Researching
already existing approaches can be a game changer.
1.2 Solution
According to MacAdam8 a quality entrepreneurial solution begins objectively with
customer in mind. We are thinking about how our target customers interact and the problems they
encounter, which creates opportunities for solution. He mentions that solution our customers want
might not be the one that we have the most fun creating, or be the easiest, or the most cost-
effective for us to deliver. He mentions that we have to be very careful with our previous
experiences or knowledge when we develop a solution. The reason is that our knowledge pushes
us to look at the solution from our perspective, not through customer’s eyes. Just be mindful of
our human tendency to revert back to what we feel comfortable with and what we know and
understand. Our eyes must be on the big prize – the customer. Stand directly behind your
customers and don’t move to anywhere else.
In order to find a solution Brian9 recommends to follow the following steps described
below:
1. Don’t reinvent the wheel – Remember whatever problem you are dealing with has probably
been solved by someone else, somewhere, and often at a great expense. You don’t have to
reinvent the wheel. Ask questions of informed people and consult experts. Look for others who
had the same problem and find out how they dealt with it
2. Let your subconscious work – Once you have assembled the information and discussed it
thoroughly with the other people involved, first try to solve the problem consciously. Think of
everything you can come up with to solve the problem, if you are not happy with the solution you
have provided then simply leave it and set a schedule to come back at a later time to check it
8 John McAdam. The One-Hour Business plan – The simplest and practical way to start anything new. 1st ed, John Wiley & Sons, incorporated,
2013. ii, 33 p. ISBN 9781118726228
9 Brian Tracy. Creativity & Problem Solving (The Brian Tracy Success Library). 1st ed. AMACOM, 2015. vii, 28 p.9780814433164
6
again. Brian says that when you switch the focus your subconscious and superconscious minds
begin working 24/7 like a super computer. Brian calls this process as turning over your problem
to a higher mental powers for solution.
3. Use your sleep – Review your problem before you go to sleep and ask your subconscious mind
for a solution. This tactic especially work well when you have a difficulty or dilemma that you
must deal with the following day. By requesting a solution, you will often wake up with a perfect
answer to your solution, it might happen that you will wake up in the middle of your sleep and
see that solution is right there just like a butterfly landing on your shoulder.
4. Write it down – Sometimes it is a good policy to have a notepad handy so that you can write
down these answers and ideas, rather than forgetting them which happens very often
5. Take action – Finally, whatever the idea it is, take action on it immediately. Don’t hesitate.
Sometimes ideas that come are time dated, if you take action wonderful things can happen. At the
end Brian strongly suggests to go through following 2 exercises:
1. Take any problem or goal you have and google it with key words and collect all the articles
and paper in order to review them. You may be astonished at what other people have already
found and what other people are already doing.
2. Ask around and try to find some people who have already solved the problem you are trying to
solve. You will be amazed how quickly you will find some people who has solved very exact
problem you are trying to find a solution.
According to Galai10 while developing a solution it is crucial to find an answer to the
following questions:
What kind of problem does it solve?
Would your potential customers agree that this is a pressing problem? How eager are they
for a solution?
Is there a price for not solving this problem?
Will your potential customers will understand how your product will solve their problem?
If your product does not clearly solve an existing problem, what is the justification for
your product?
Betty11 explains that a solution is valuable only if it is transparent, in another word if you can
explain why you are recommending it and that conclusions are going to be much more effective
10 GALAI, Dan, Lior HILLEL a Daphna WIENER. How to create a successful business plan: for entrepreneurs, scientists, managers, and students. New Jersey: World Scientific, 2016. iii, 28 p. ISBN 978-981-4651-51-6
7
and stronger if you can back them up with facts and numbers. The information on which belief or
judgment is based makes a big difference. If you describe to people why you reached your point
of view, they have the opportunity to decide whether they agree based on the logic you used.
Justification is a big part of action. Making your conclusion and solutions transparent – in other
words, showing your work is key to success. Betty summarizes above mentioned points in a
“logic diagram” which can be described as below:
Figure 1. Logic diagram
Source12
MacAdam provides information what solution is and what are the points to consider.
Compared to him Brian goes even further and provides steps for finding a solution. In another
word MacAdam tells what needs to be done, Brian tells how it can be done. First, Biran’s
approach is more practical, easy to apply and result oriented. Second, I have already read
Brian’s book long time ago and applied his recommendations when I was trying to find a solution
for another problem which yielded great results. As a conclusion point, Galai provides set of
questions to make sure that your solution is valid. Finally, Betty’s diagram can be very useful
11 Betty Vandenbosch. Designing Solutions for Your Business Problems: A Structured Process for Managers and Consultants. 1st ed. n/a. John
Wiley&Sons, Incorporated, 2003. vii, 107 p. ISBN: 9780787967659
12 Betty Vandenbosch. Designing Solutions for Your Business Problems: A Structured Process for Managers and Consultants. 1st ed. n/a. John Wiley&Sons, Incorporated, 2003. vii, 112 p. ISBN: 9780787967659
8
when it comes to summarizing data that leads to the final solution. I find all 4 approaches
adequate and believe that each can be useful at different phases of solution development.
1.3 Validation
Robert13 mentions that whether your organization is a multinational corporation or a small
company, validation is still a crucial component. The most important point that we are trying to
achieve by applying validation is to take a look from above and make sure that all information in
the plan has been confirmed, the plan has been fully rehearsed and all appropriate employees and
their nominated deputies have also involved in the exercise.
Stefan14 says that at the centre of every business is a product or service that needs to be sold
in order to generate income for the company. However, when you start from scratch, how do you
decide the features and characteristics of your product or service? Most probably you have done
some research until this point and know what kind of product you are going to create, but without
testing and validating the product you can’t build a profitable business. Shaping the initial
product or service is the most important and most crucial step of every business. You need to
decide which features and functions you see absolutely important for your customers, and test
them first. That is the point where one of the famous tactics comes to power. This tactic is called
MVP – Minimum Viable Product. MVP is an early stage prototype that allows potential
customers to experience the set of key features of your product and provide useful feedback.
Alexander15 also sees the MVP as one of the powerful tactics for validation and says that
main goal here is to get results as quickly, as cheaply, and efficiently as possible. Even in large
companies with big budgets you can start very cheaply. For example, use your smartphone to
make and test reactions to a video before you bring in a video crew to professionalize videos and
expand testing.
According to Lucy16 one of the main ways to test your business idea is to ask people if they
would use it. When you do that it is very important to make sure that market is big enough to
fulfil your expectations. If you took your friend Bob – a vegetarian insomniac – as your
inspiration to create new meat-free recipes, check whether anyone else in the world would log in
to your website to make purchase before plunging all your savings into the idea. It would not take
13 Robert Clark. Validating Your Business continuity plan.1st ed. n/a. IT governance publishing, 2013. i, 31 p. ISBN 9781849287746
14 Stefan Korn. Successful Online Start-Ups for Dummies. 1st ed. n/a. John Wiley&Sons, Incorporated, 2012. ii, 70 p. ISBN 9781118302699
15 Alexander Osterwalder, Yves Pigneur, Trish Papadakos. Value Proposition design – How to make stuff people want. 1st ed. n/a. John
Wiley&Sons, Incorporated, 2015. ii, 188 p. ISBN97818118968055
16 Lucy Tobin. Entrepreneur - How to start an online Business. 1st ed. n/a. John Wiley&Sons, Incorporated, 2012. ii, 115 p. ISBN 9780857082886
9
long time to realize that it was ridiculous, but even if your idea was absolutely sane you need to
make sure that there is a sufficient market to help you to become successful. During the testing
phase talk as many of your potential consumers as possible. Speak to people you know and more
that you don’t know because they are more likely to be brutally honest and critical.
When I summarize above mentioned points about validation it appears that majority of the
authors recommends creating a minimum viable product for validation (MVP). I also think that
this is one of the strongest validation models because it gives you a real feedback from a real
customer. Talking to someone might be sometimes misleading because people may not want to
hurt your feelings, but if they only see the product they are going to judge it brutally. Finally from
the above mentioned authors, Lucy was the only one who talked about the importance of
considering market size which I find a key factor to consider during validation.
2. ORGANIZATIONAL PLAN
This part is the entrance to the business plan which is mainly focused on topics that are related to
the business/company. Each topic is explained below in separate sections.
2.1 Cover page
Various authors presents different information that can be put on the front page, however
Pinson17 recommends that the company name, address, phone number, and web site address
should appear in the top one-third of the page. If you have a logo it will be an added enhancement
to the page, especially if it is printed in color. This is a great advantage, especially when seeking
an investor.
Company name
Company address
Company phone number (including area code)
Web address, if you have a web site
Logo, if you have one
Names, titles, addresses, and phone numbers of the owners or corporate officers
Month and year in which plan is issued
17 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 30 p. ISBN 978-0-944205-37-2
10
Name of the preparer
Dethomas18 says that there is no prescribed form of the title page, but the general rule is that
page must be sufficiently attractive to readers and also reasonably preserve conservative style.
2.2 Table of contents
Brian and Patrick19 see table of content as a necessary component of the business plan and
think that it serves exactly the same purpose as the table of content of a book does. However, it
should not show the number of pages and subheadings because new sections, subsections or
subheadings can be added at any time and that would make the numbering very difficult. That is
why it should only show title of the section as indicated below.
I. Table of contents
II. Executive summary
III. General company description
IV. Product and services
V. Marketing plan
VI. Operational plan
VII. Management and organization
VIII. Structure and capitalization
IX. Financial plan
According to Pinson20 most small start-up businesses will need only one page table of
contents. Existing companies will have historical information and financial statements as well as
projections. Larger, more complex companies will most likely have more detailed headings,
especially if the company is going after venture capital. In all cases, business plan must have the
following major three levels of title. The subheadings are dependent on the creator.
18 Writing and convincing business plan . 3rd ed. Hauppauge, NY: Barron's Educational Series, c2008, p. 4. ISBN978-076-4139-345.
19 FORD, Brian R., Jay BORNSTEIN and Patrick T. PRUITT. The Ernst & Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley &
Sons, 2007. v, 72. ISBN 9780470112694
20 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 30 p. ISBN 978-0-944205-37-2
11
Part I: Organizational Plan
Part II: Marketing Plan
Part III: Financial plan
Edward21 approaches to table of content little bit differently compared to Pinson, Brian
and Patrick. First of all he calls it layout of the business plan and mentions that information you
give must follow a logical pattern. You could present your material in the sequence shown here,
using headings, so that the reader can survey your plan and navigate without difficulty.
1. A brief statement of your objectives.
2. Your assessment of the market you plan to enter.
3. The skill, experience and finance you will bring to it.
4. The particular benefits of the product or service to your customers.
5. How you will set up the business.
6. The longer-term view.
7. Your financial targets.
8. The money you are asking for and how it will be used.
9. Appendices to back up previous statements, including especially the cash flow and other
financial projections.
10. History of the business (where applicable).
Summarizing all approaches show that each authors provide an optional table of content
and leave it to the writer to adjust it according to needs. All 3 authors think that every business
plan at least has to have 3 main headings which are information about company, marketing plan
and financial plan.
2.3 Executive summary
According to Brian22 businesses usually succeed when they are able to convey the message
in the executive summary and then back it up with valid data in the body part. Pinson23 mentions
that Executive summary is the short statement of the business plan. It summarizes the content and
purpose of the finished plan, covering all of the key points. It specifies who you are, what your
company does, where your company is going, why it is going where it is going, and how it will
get there. Compared to other authors Pinson goes a step further and shows that executive
summary should be written differently depending on the purpose such as, if you are searching for
lender, venture capitalist, or if it is only for internal use and not going to seek funds.
21 How to prepare a business plan. Edited by Edward Blackwell. Rev. 4th ed. London: Kogan Page, 2004. vi, 184 p. ISBN 0749441917
22 FORD, Brian R., Jay BORNSTEIN and Patrick T. PRUITT. The Ernst & Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley &
Sons, 2007. v, 77. ISBN 9780470112694
23 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 21 p. ISBN 978-0-944205-37-2
12
Haag24 also states that the executive summary should be formed after processing the entire
business plan and should occupy about 2-3 pages. Abrams25 even recommends to have only one
page because readers must be able to understand the whole plan in a short time without detailed
investigation.
I think that each of the above authors bring very strong argument in developing the
executive summary, however Pinson’s approach is more complete and relevant because she
provides step by step explanation how to develop executive summary when it is being created for
internal purposes, for seeking investor, and for partnership. Since I will be building my business
plan for internal use I want to eliminate unnecessary work and only cover the points that are
needed for internal use
2.4 Vision mission and goals
According to Shamir26 and House vision, mission and goals can be described as one of the
cornerstones of a company. Everyone describe these 3 concepts slightly in a different way but
they all meet at 1 point which is basic company goals. Vision is a set of shared values company
seeks. It can also be defined as an ideal and unique plan of the future. In a simplest term vision is
what company wants to achieve and mission provides an answer how to achieve it. A mission
statement is a brief (one or two sentences) description of the company’s fundamental purpose
including, nature, values, and its work. It should clearly explain why the company exists and
what it plans to achieve in the future27. Based on the mission company directs its resources. Goals
are specific milestones which takes the company towards its mission. It is always aligned with its
vision and mission. According to Doran28 goals should follow the rule of SMART which stands
for:
Specific
Measurable
Achievable
Real
Time bounded
24 THE HAGUE, Annette B. Writing a successful business plan: An overview. Workplace Health & Safety, 2013 61.1: 19 to 29
25 The successful business plan: secrets. 4th ed. Palto Alto, Calif : Planning Shop, C2003, p 50. ISBN 09-669- 63563.
26 HOUSE, Robert J.; Shamir Boas. Toward the integration of transformational, charismatics and Visionary theories.1,993th
27 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed.
Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 76 p. ISBN 978-0-944205-37-2
28 DORAN, George T. There's a way to write SMART management's goals and objectives. "And Miller. Arthur F. & Cunningham, James A" How to Avoid costly job mismatches "Management Review , 1981 70.11
13
2.5 Product description
Brian29 says that readers may not understand the special issues affecting your product that is
why you must explain the product briefly and clearly by keeping the following points in mind:
Don’t explain the technicalities here, simply explain how it does what it does. Where does it do
it? Is there anything unique about it? How is it supplied and distributed? According to Edward30
before describing the product it needs to be clarified to which category the product belongs. Is
product or service:
An entirely new idea?
An improved version of something that already exists?
Cheaper than the others?
More reliable as to delivery or after-sales service?
More readily available to local customers?
Once decided to which category the product belongs he recommends to clarify following
two points:
Describe the most important features. What is special about it?
Describe the benefits. What will the product do for the customer?
Note the difference between features and benefits, and think about them. For example, a house
that gives shelter and lasts a long time is made with certain materials and to a certain design;
those are its features. Its benefits include pride of ownership, financial security, providing for the
family, and inclusion in a neighborhood. You build features into your product so that you can sell
the benefits.
McAdam31 also comments on the differences between feature and benefit and says that
feature is tangible while benefit is intangible. A feature describes what the product does and
benefit portrays what the customer gets.
According to Ford32 prior to addressing in detail the company’s plans regarding areas such as
marketing and operations it would be useful to spend some time on describing company’s product
29 How to write a business plan. Edited by Brian Finch. 3rd ed. Philadelphia: Kogan Page, 2010. vii, 37 p. ISBN 9780749458942
30 How to prepare a business plan. Edited by Edward Blackwell. Rev. 4th ed. London: Kogan Page, 2004. vi, 11 p. ISBN 0749441917
31 John McAdam. The One-Hour Business plan – The simplest and practical way to start anything new. 1st ed, John Wiley & Sons, incorporated,
2013. ii, 36 p. ISBN 9781118726228
32 FORD, Brian R., Jay BORNSTEIN and Patrick T. PRUITT. The Ernst & Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley & Sons, 2007. v, 82 p. ISBN 9780470112694
14
and service. Ford says that regardless of strategic considerations a business can’t succeed without
an appealing product or service. Entrepreneur is more likely to be familiar with his or her chosen
field compared to reviewer. It is very important that the characteristics and appeal of the product
is explained in a very clear and simple fashion. The following information is usually included in
this section:
Physical description – describing physical characteristics of the product
Use and appeal – This is the place and opportunity to illustrate the unique features of the
product.
Ford mentions that it would be even useful to show the prototype or sample of the product to the
viewer to increase the appreciation.
Compared to above mentioned authors Pinson33 takes much detailed approach when it
comes to explaining the product. According to Pinson product description section should be
formulated differently if you are manufacturer, distributor, or retailer.
Manufacturers should describe products and give a general description of their development from
raw materials to finished item. The development of a flow chart or time line can help to identify
the various stages of research and development (R&D) and production. A time line can also be
used to demonstrate when raw materials must be ordered, how much time is needed in the
production process, and how much time is involved in inventory storage and in shipping and
handling. It is also important to discuss the raw materials that are used and how much they will
cost. Who are your suppliers, where are they located, and why did you choose them? Although
you may order from one main supplier, include information on alternate suppliers. Address how
you could handle a sudden increase in orders or a loss of a major supplier. How will the work get
done and at what cost? Project peak production times and determine when money will be needed
for key purchases. Include also cost breakdowns in the supporting Documents section to back up
your statements. Describe your production equipment and other product assets in terms of what
you already own, what you plan to purchase, and how much it will cost. Again think in terms of
dollars. When you are projecting cash flow, this information will provide the source for your
financial assumptions regarding production equipment.
While assessing above mentioned approaches I see that each of them provides valuable
information regarding product description. Brian’s approach of keeping the product description
simple, Edward’s differentiation between feature and benefit are very important points to
33 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed.
Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 35 p. ISBN 978-0-944205-37-2
15
consider while describing the product. Even though, Ford tries to explain product description
with different words but at the end he comes to the same conclusion as Brian. Compared to these
authors Pinson’s approach appears to be more complete and well thought. I noticed that Pinson
is the first author who separated the product description according to manufactured products,
distributed products, and retailed products.
2.6 Business model
According to Pinson34 a business model is the method of doing business by which a
company can generate revenue and sustain itself. Cheryl35 talks about different business models
and says that there are 7 types of business models in the digital business area which are:
1. The Freemium Model – This means providing free version and selling premium version.
Skype, MYSQL and GroupSpace all provide products or services entirely free of charge in order
to build huge audience. Another example can be Gillett which has based its model on Freemium
which means giving away free razors and selling very expensive razor blade heads.
2. The E-commerce Model – This means selling stuff or services as a merchant which can be in
different forms such as, selling straightforward product(guitar), virtual goods and digital
downloads (farm game), selling expertise, selling service, selling expertise, selling data, etc.
3. The Advertising Model – This means selling advertising space. Google and
TrustedReviews.com are examples of sites which provide advertisers with a targeted platform on
which to advertise. Many digital businesses use the advertising model as a secondary revenue
stream rather than the primary one: however many commentators see this tactic unwise because
well designed advertisement can take the customers away from your website. If you decide to
choose this form of advertising then make sure that you use several forms of ad sense programs
such as banner add, skippable ads, and google ads.
4. The Affiliate Model – Selling leads, products or services for which you earn a commission or
providing a commission to other parties.
5. The Revenue share Model – This means providing a share of revenue from products/services
that you sell, in exchange for something of benefits, such as exposure to a large targeted audience
6. The Subscription Model – This means selling subscriptions to content, such as news, or
service. Many websites combine subscription and advertising models. The monetization of
content by charging users a periodic fee (daily, monthly or annually) to subscribe works well
digitally because of the low-margin costs of information.
34 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed.
Tustin: Out Of Your Mind ...and into the Marketplace, 2008. ii, 37 p. ISBN 978-0-944205-37-2
35 Cheryl Rickman. The Digital Business Start-Up Workbook: The Ultimate Step-by-step Guide to Succeeding Online from Start-Up to Exit. 1st ed. n/a. John Wiley&Sons, Incorporated, 2012. I, 25 p. ISBN 97808557083043
16
7. The App store Model – This means selling applications via smart phones, tablet and
computers.
Allan36 says that Business model is a framework or recipe for making money – for
creating and capturing value. When she talks about internet based business models she mentions
the following ones: blogging, micro-blogging, social bookmarking, content –sharing
communities, wiki sites, virtual worlds/gaming.
All 3 authors agrees what business model is, however when it comes to describing types of
business models Cheryl’s list of models appears to be covering every aspect of digital market
models. From the relevancy and completeness point of view her approach is superior.
2.7 Management of the company and other key people
According to Pinson37 this part also needs to be included to the business plan to understand
who are the people on the captain’s seat and what are their knowledge and skills. She also
recommends to add CV’s of the people who are in charge. Ford38 says that at this stage you
should not discuss the management team in exhaustive detail but at some level so that the
reviewer can assimilate the leadership team in place to execute on the business objective. Galai39
also think that this part needs to be relatively short which should outline the organizational
structure, including:
The key manager and decision makers. Provide some background on their experience and
qualifications
The main devisions and departments and heir fields of responsibility
Company directors and advisors
36 Allan Afuah. Business Model Innovation – Concepts, Analysis, and Cases. 2nd ed. n/a. Taylor and Francis, 2011. i, 4 p. ISBN 9781136656422
37 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed.
Tustin: Out Of Your Mind ...and into the Marketplace, 2008. iv, 39 p. ISBN 978-0-944205-37-2
38 FORD, Brian R, Jay BORNSTEIN and Patrick T. PRUITT. The Ernst & Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley &
Sons, 2007. v, 80 p. ISBN 9780470112694.
39 GALAI, Dan, Lior HILLEL a Daphna WIENER. How to create a successful business plan: for entrepreneurs, scientists, managers, and students. New Jersey: World Scientific, 2016. v, 209 p. ISBN 978-981-4651-51-6
17
3. MARKETING PLAN
Donald and Russel defines marketing plan40 as a written document containing the
guidelines for the business center’s marketing program and allocations over the planning period.
A major component of a good marketing planning system is its thoroughness. A marketing
planning system is considered through if it does the following:
1. Utilizes experience from several managerial levels rather than just from product managers
2. Employees both internal and external sources of information rather than relying on just internal
information
3. Extends over period of time sufficient to collect and analyze the data necessary for developing
the marketing strategies. According to them marketing plan can be briefly structured as
following:
Executive summary
Situation analysis (competitor analysis, category analysis, customer analysis, planning
assumptions
Objectives
Product strategy
Supporting marketing programs
Financial documents
Monitors ad controls
Contingency plans
According to Cohen marketing plan is a roadmap41 which assists in management control and
implementation of strategy, stimulate thinking of using limited resources effectively, helps to
become aware of problems, opportunities and threats in the future, assist in helping to obtain
resources for implementation. Cohen outlines the marketing plan structure as following
Introduction - Describe what is the product or service
Situational analysis - PESTLE analysis, competitor environments, company
environments, neutral environments analysis
Target market – conduct segmentation and define your target market
Problems and opportunities
40 Donald R, Russel S. Analysis for Marketing Planning. 7th ed. New-York: Mass McGraw-Hill Irwin, 2008. xii, 299 p. ISBN: 978-007-126363-4 41 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. I,1 p. ISBN 0-471-75529-X
18
Marketing objectives and goals
Marketing strategy
Marketing tactics
Implementation and control
Summary
Both authors have very similar approach in defining what marketing plan is, but Cohen
provides more detailed and clear structure of marketing plan in general. It is much easier to
understand and follow his structure compared to Donald and Russel. However, Donald and
Russel provides deeper understanding when it comes to situational analysis, especially external
analysis. Finally, both authors recommends not to stick to their structure 100% and adjust it
according to needs. Malcolm and Hugh42 also provide very similar structure for marketing plan.
According to them an undiversified company generally uses less formalized procedures, since top
management tends to have greater functional knowledge and expertise than subordinates. In
contrast, in a diversified company it is usually not possible for top management to have greater
functional knowledge and expertise than subordinate. Plus planning tends to be more formalized
in order to provide a consistent discipline for those who has to make decision throughout the
organization
3.1 Situational Analysis
Situational analysis is very important because it is one of the concerning factors that
influence the company. Width and depth of the analysis carried out may vary. Porter43
proposes a minimum framework for analysis of external environment when preparing a
business plan. Framework is defined by the following areas:
Trend in the product area
Market growth trend
Trend in prices
Trend in demand
Difficulty in entering the market
Changes in the development of technologies
Changes and developments in market regulation
42 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. I, 4 p. ISBN 0-471-75529-X
43 PORTER, Michael E. Competitive Strategy: Techniques for Analyzing Industries and COMPETITORS. New York: Free Press, c1980. vii, 197 p. ISBN 00-292-5360-8
19
According to Donald and Russel situational analysis should cover following areas44:
Aggregate market factors (category size, growth, seasonality, profits)
Category factors (threat of new entrants, bargaining power of buyers, bargaining
power of suppliers, pressure from substitutes, rivalry, category capacity)
Competitor analysis
Supplier analysis
Environmental factors (PESTLE)
Company environment – internal analysis
Target market/Customer analysis
Cohen mentions that situational analysis45 contains vast amount of information. Simply to
say situational analysis comes from taking a hard look back to your environment. Many
marketing experts also call this as environmental scanning. Cohen defines his own way and
divides it into following categories which can be summarized as:
Market analysis
Environmental analysis (PESTLE)
Neutral environment (financial, governmental, media, special interest environments)
Competitor analysis
Company environment – Internal analysis
When I summarize all 3 approaches I see that last two approaches from Cohen, Donald
and Russel are very similar and cover more areas compared to the first approach. However,
Cohen does not include customer analysis when he conducts situational analysis. Instead he
analysis customer separately. I find this approach relevant because customer analysis is
very complex and requires special attention in a different section.
3.2 Market analysis
According to Donald and Russel46 either for new products or existing ones it is critical to
ask whether the market is sufficiently attractive to warrant new or continued investment. In
order to find it out they recommend researching following areas
44 Donald R, Russel S. Analysis for Marketing Planning. 7th ed. New-York: Mass McGraw-Hill Irwin, 2008. xii, 198 p. ISBN: 978-007-126363-4
45 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. I, 5 p. ISBN 0-471-75529-X
46 Donald R, Russel S. Analysis for Marketing Planning. 7th ed. New-York: Mass McGraw-Hill Irwin, 2008. xii, 178 p. ISBN: 978-007-126363-4
20
Size of the market – Larger markets are considerable attractive to both small and big
companies. However, larger markets tend to draw competitros with considerable
resources, thus making it hard for small firms to enter.
Market growth – Market growth is a key market factor advocated by many planning
models. It is important to consider current growth factors along with future growth
projections in order to stay competitive in the market. Fast growing markets are
universally attractive because high margin profits, but it is also important to keep in
mind that fast growth markets attract more competitors and market share can change
very quickly which can result in buncrupcy.
Stage in product life cycle – Market size and market growth are often portrayed
simultanesoulsy in the form of the product life cycle. It is usually in S-shaped and
breaks down product sales into four segments: Introduction, growth, maturity and
decline. In the introductory phase market growth and size of the market is low
making it unatractive for majority of prospects who choose to wait until market
enters its growth phase. Finally in the decline phase most of the competitors flee.
Sales cyclicity – Cyclicity of the sales are very important factor since it can leave the
companies under huge risk of not being able to sell anything. For example: some
businesses are depend on interest rates(real estate), or weather. Not being able to take
into consideration effects of cyclicity can leave the company with a big loss.
Seasonality – Seasonality in general is not viewed positively. It is key to understand
if the seasonality can effect the business in a negative way or not. Some products are
seasonal in nature. If this is the case then question is how company can capture
highest level of demand during the season
Cohen also adresses to market analysis47 topic and considers following questions crucial
while analysing attractiveness of the market
What are the demand and demand trends in the target market?
What is the forecast demand for the product – is it growing or declining?
Who is the decision maker – purchase agent or customer himself/herself directly?
Who, where, when, what, and why do customers buy
Above questions that Cohen asks to analyse the market are in some way similar to the
points mentioned by Donald and Russel. Donald and Russels’s approach covers
47 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. ii, 10 p. ISBN 0-471-75529-X
21
comparingly more points, however some of the points they cover are not relevant for my
market. For example: Seasonality and sales cyclicity analysis would add no value because of
the characteristics of my market. I consider Cohen’s approach more relevant.
3.3 Competition analysis
According to Daye and Wensley48 company receives remuneration (meets its main
objectives), if it can satisfy customer needs better than competitors. Cohen49 sees
competitors as units fighting against you. They are important because they are the only units
that are going to fight against your interests intentionally. Cohen recommends to describe in
detail main competitors, the products they offer, their plans, experience, know-how,
financial, human and capital resources, and suppliers. Most importantly discuss their current
and future strategies. Describe what are the strength and weaknesses of the competitors,
what marketing channels they use.
Donald and Russel also ask the same questions as Cohen does, however they provide tools
and sources how to find answer to those questions. Simply to say Cohen tells what needs to be
done but he does not tell you HOW to do it, where Donald and Russel provides necessary tools,
sources, and methods to find answer. They also recommend not to stick to their method all the
time while trying to find answer to the above questions. According to them every marketing plan
is different and it might require different type of tool or approach to find an answer. Additional to
competitors, Millers50 talks about the importance of suppliers and says that it is very important to
pay close attention to them. He classifies supply strategy as a strategic management decision
which becomes even more valuable with regard to the use of the concept of TQM (Total Quality
Management). Also, Bankers and Khosla51 refer to the process of selecting suppliers as an
important decision-making in management control, which can provide a competitive advantage to
the company. Furthermore, Dikson defines twenty attributes that should be compared when
selecting suppliers. 52Among these twenty attributes 2 of them takes central place which are
quality and price.
When analyzing competition Porter suggests his “five forces model”53. He has identified
five competitive forces that shape every industry and every market. From strategic point of view,
this analysis technique is crucial to determine the positioning of a company in a market, but also
48 DAY, George S.; Wensley, Robin. Marketing theory with a strategic orientation. the Journal of Marketing, 1983, 79-89. 49 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. I, 9 p. ISBN 0-471-75529-X
50 MILLER, Jeffrey G., et al. Production / Operations Management: An Agenda for the'80s. Decision Sciences, 1981, 04/12: 547-571.
51 Bankers Rajiv D .; Khosla, Inder S. Economics of Operations Management: A Research Perspective. Journal of Operations Management, 1995 12.3-4: 423-435.
52 Dickson, Gary W. An analysis of vendor selection systems and Decisions. 1996.
53 Anne-Christine Cadiat, Carly Robert. Porter’s Five Forces: Stay ahead of the competition. 1st ed. Primento Digital, 2015. ii, 9 p. ISBN 9782806268389
22
to fight against the competition. It is necessary to clearly identify company’s relationship with the
other industry players, including: Customers, suppliers, producers of substitute products, potential
new entrants, competitors. Based on this five forces model emerges in the following form:
Figure 2: Porter’s five forces model
Source54
Bargaining power of Customers. Customers can have very strong power especially in the
following cases:
There are only a few customers or they purchase large volumes
Products available on the market are standardized and differ very little from competing
products
The transfer cost from one supplier to another is low
They can directly integrate the supplier’s activities into their own production chain.
54 Anne-Christine Cadiat, Carly Robert. Porter’s Five Forces: Stay ahead of the competition. 1st ed. Primento Digital, 2015. ii, 5 p. ISBN 9782806268389
23
Bargaining power of Suppliers. Similarly, suppliers can have an impact on the profitability of a
company by imposing their own conditions in the same way as customers. The power of suppliers
is significant when:
They are particularly concentrated or in a monopoly situation
They have many customers from different industries
The transfer cost is high
They offer differentiated products and there are no substitute products for what they offer
They are able to incorporate more activities into their core business further down the
supply chain
Threat of substitute products. Substitute products offer alternatives to the existing offer in a
sector. They respond to similar needs in a different or innovative way. More generally substitute
products pose threat by gaining market share and putting pressure on prices. Substitutes products
become real threats when:
They offer a better quality
The cost of transferring to the substitute product is low
The price of the substitute product is lower
Threat of new entrants. New entrants shape up the market by reaching a previously unoccupied
position, by delivering greater value to new consumers. The threat of new entrants is stronger
when:
There is no patent to protect technologies, which allows easy access to them
Barriers to entry and the capital requirements are very low
Economies of scale are weak
There are few cultural barriers
Replacement costs for the customer are low
Companies are not necessarily loyal to the companies that supply to them
The likelihood of revenge from actors already established on the market is low
The government provides aid and subsidies for new entrants
24
Rivalry. At the heart of the model, the internal rivalry of the sector can be influenced and
evaluated by the other forces of the model. Competitors are constantly fighting within the sector
to increase or simply maintain their position in this field. Competition can take many forms and
result in actions such as:
Lower price
Introduction of new products
Advertising campaigns
Improvement of product ranges and services
The intensity of the competition depends on the number of companies active in the sector, their
respective size and the scale of their market share. It can increase if:
The sector is not concentrated. For example, when competitors are numerous and of
comparable size
The industry growth rate is weak
Barriers to entry are low and barriers to exit is high
The degree of product differentiation is low
Fixed costs are high
After analyzing all the approaches from above mentioned 7 authors I can strongly say that
Porter’s approach is more complete and relevant for competition analysis. Points mentioned by
other authors are true and I don’t have any objections against them, however they are not as
complete as Porter’s five forces model.
3.4 PESTLE analysis
PESTLE analysis is one of the most common analyzes used in analyzing external
environment in order to decide on the right strategy. All of the authors I have reviewed
strongly recommend it. Thompson and Martin states that PESTLE analysis is a framework
that classifies external factors such as political, economic, social, technological, legal and
environmental.55
55 THOMPSON, John L, MARTIN, Frank. Strategic Management: Awareness & change. Engage Learning EMEA, 2010.
25
Name PESTLE is an acronym which stands for:
Political factors - Various forms of government intervention and policy decision
implemented to run the economy
Economic factors - Macroeconomic conditions around the company, as well as seasonal
fluctuations in the economy
Social factors – Analysis of Social, cultural, and demographic factors
Technological factors – It includes technological changes that may affect the company.56
Legal factors – it covers analyzing legal aspects that might impact the company
Environmental factors – These are the factors related to climate, and weather.
3.5 Company analysis - Internal environment
Internal analysis cover 3 important areas within the company.57 These are:
Resources
Capabilities
Core competencies
According to William in order to analyze the company it is important to describe the
situation in your company and the resources you have. Also describe your current products,
experience, know-how, financial, capital, human, supplier and other important factors. As a
summarization method he recommends to cover all the details under SWOT analyses. This
part will be covered in more detail under SWOT analysis below.
3.6 SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is
an in-depth examination of key factors that are internal (strengths and weaknesses) and external
(opportunities and threats) to a business. After researching several sources about SWOT analysis
found out that almost all of them come to the same point in explaining what SWOT analysis is.
For the purpose of this plan I will conduct SWOT analyses in the way that is described by
Pinson58. Compared to other authors she provides set of questions in each part as a roadmap.
56 HO, Joseph Kim-Keung. Formulation of a systemic PEST Analysis for strategic analysis. European academic research, 2014 2.5: 6478-6492.
57 Guide to business planning.2nd ed. London: The Ecomomist in association with Profile Books, 2009, p. 41. ISBN 9,781,846,681,226th
58 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th
ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. iv, 34 p. ISBN 978-0-944205-372
26
According to Pinson Conducting a SWOT analysis will enable a business to channel its focus into
those areas that present the greatest opportunities and those competencies in which it is strongest.
Concurrently, the business will look into ways to mitigate its weaknesses and develop plans and
strategies to overcome any threats that present themselves. When conducting a SWOT analysis, it
is important to be realistic about the strengths and weaknesses of your business. According to
Pinson in order to conduct a SWOT analysis, questions below needs to be answered.
Strengths
Do you have a proprietary product/technology?
Do you have a unique business model?
Do you have any value added services?
What advantage(s) do you have over your competitors?
What specialized areas do you have expertise in?
What recognition have you received?
Weaknesses
What aspects of the operations of the business can be improved upon?
What aspects of the product(s) and/or service(s) can be improved upon?
Is there a lack of expertise in any area?
Is the location of your business a problem?
Have you received any negative feedback?
Opportunities
Are there any markets that are not being served with your product(s) and/or service(s)?
Are there any emerging niche segments within your industry?
Are there any target market and/or industry trends that are of interest to you?
Are there any changes in technology that could be beneficial to you?
Is there an emerging/developing market within your industry?
Have some of your competitors left the marketplace?
Are there any companies that can be taken over?
Are there any companies with whom strategic alliances can be formed?
Are there any opportunities in international markets?
Threats
Are there any new competitors emerging?
Are existing competitors gaining strength?
Are the prices of your competitors going up or down?
Are competitors introducing new products and/or services to the
Market place?
Are there any challenges that are emerging within the industry?
Are there any new government regulations being enforced?
27
3.7 Target market / Customer analyses
Target market is a segment of customers who are most interested in the product you are
offering. These are the customers that marketing efforts should be focused on. According to
Kotler59 in order ot identify the best target market segmentation analysis should be conducted.
Segmentation is dividing a market into distinct groups of buyers with different needs,
characteristics or behavior, who might require separate products or marketing mixes. Kotler
offers criterias for segmentation which can be categorized as below.
Geograpchic characteristics
Demographic characteristic
Psychographic characteristics
Behavioral characteristics
After segmentation it is necessary to select those segments that are most appropriate for the
company and will bring the highest profit. According to Kotler it is important to consider certain
indicators while deciding which segment to target.60These indicators can be described as below
Segment size
Future potential for growth
Attractiveness of the segment
Considering if the segment will help to the company to meet it’s goals
Considering company resources
While doing literature review I noticed that Donald and Russel61 have exactly the same
approach as Kotler. They even cited Kotler at the end of the page. So if I have to describe their
approach it would be exact copy of Kotler’s approach except they did not talk about
indicators(future potential, size, etc) that needs to be considered when deciding on a final target
market which I find very crucial. Cohen62 also recommends the same type of segmentation as
Kotler did, and he mentions that there are other ways to define the target market but he does not
talk about any of them. My conclusion is that in order to define the target market
59 Kotler Philip. Principals of Marketing. First European edition. Prentice Hall, c1994. ISBN 01-372-2851-1 Cliffs, NJ: Prentice Hall, c1994. ix,
398 p. ISBN 01-372-2851-1 60 Kotler Philip. Principals of Marketing. First European edition. Prentice Hall, c1994. ISBN 01-372-2851-1 Cliffs, NJ: Prentice Hall, c1994. ix,
418 p. ISBN 01-372-2851-1
61 Donald R, Russel S. Analysis for Marketing Planning. 7th ed. New-York: Mass McGraw-Hill Irwin, 2008. iii, 129 p. ISBN: 978-007-126363-4
62 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. v, 54 p. ISBN 0-471-75529-X
28
recommendations from Kotler would be satisfactory because he covers all the segmentations
criterias that can be used as a base.
3.8 Marketing strategy in the target market
After defining the target market Kotler63 suggests to choose one of the targeting strategies
listed below:
Undifferentiated marketing - A market-coverage strategy in which a firm decides to
ignore market segment differences and go after the whole market with one offer
Differentiated marketing - A market-coverage strategy in which a firm decides to target
several market segments and designs separate offers for each.
Concentrated marketing - A market-coverage strategy in which a firm goes after a large
share of one or a few submarkets.
Cohen also strongly recommends to choose one of the above targeting strategies. He mentions
that if you attempt to serve every single customer segment most probably you will not be able to
satisfy their need. For the purpose of this plan concentrated marketing strategy is the most
suitable one. According to Kotler this is one of the effective strategies for newly starting
companies so that they can direct their resources and efforts to a single point.
3.9 Differentiating and positioning
Differentiation and positioning follows the segmentation and targeting. According to
Kotler company or market offer can be differentiated and positioned along the lines of
product, services, personnel or image64. Positioning is the way that product is defined by
consumers on important attributes – the place the product occupies in consumers’ minds
relative to competing products.
Kotler offers three positioning alternative strategies:
1. Strengthen a brand’s current position in the mind of consumers
2. Search for a new unoccupied position that is valued by enough consumers and grab it.
3. Deposition or reposition the competition.
He also mentions that company can be differentiated in one aspect but positioned in another
aspect in the minds of the customers. In another word differentiation and positioning do not have
to go hand in hand.
63 Kotler Philip. Principals of Marketing. First European edition. Prentice Hall, c1994. ISBN 01-372-2851-1 Cliffs, NJ: Prentice Hall, c1994. ix,
417 p. ISBN 01-372-2851-1
64 Kotler Philip. Principals of Marketing. First European edition. Prentice Hall, c1994. ISBN 01-372-2851-1 Cliffs, NJ: Prentice Hall, c1994. ix, 421 p. ISBN 01-372-2851-1
29
According to Donald and Russel positioning is consist of 4 steps:
1. Identifying alternative positioning themes.
2. Screening the alternatives accordingly
3. Selecting the position that best satisfies the identified criteria
4. Implementing programs such as advertising
When I compare above mentioned points I see that Kotler’s approach is more clear and direct to
the point, whereas Donald and Russel lacks clarity.
3.10 Marketing objectives and goals
According to Pinson65 this section should clearly outline what you want to accomplish
through your marketing strategy. Your market research, advertising campaigns, sales incentives,
public relations efforts, and networking plans should all move your business in the direction of
achieving your marketing goals. Many companies hope to expand their customer base, increase
sales, achieve profitability, and promote new products and services, and other similar idealistic
objectives. Not every business owner, however, can articulate precisely what these goals mean
for his/her own company. The best marketing plans are results-oriented; they define specific,
realistic, measurable goals within time parameters. All sales, advertising, and public relations
efforts are then designed to work together to achieve these goals. Goals of your marketing
strategy, for example, could include creating a strong brand, building a strong customer base, and
increasing product/service sales. Each goal should be explained in specific terms.
Cohen66 also agrees with Pinson when it comes to defining what objectives and goals are.
He also differentiate objectives from goals. According to him an objective is an overall goal.
Objective is more general and may not be quantified. To establish a product in the market place,
become the market leader or become dominant in the market is an objective. Compared to
objectives goals are quantified. For example: To sell 10 000 units a year is a goal.
Both authors provides explicit explanation regarding goals and objectives, however they way
Cohen describes the differences between the objective and goal is very easy to understand and
apply during objective and goal setting
3.11 Marketing tactics
Cohen67 shows that marketing tactic can be chosen in terms of the product, price,
promotion, distribution and other tactical or environmental variables. As strategy tells what you
65 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. v, 43 p. ISBN 978-0-944205-372
66 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th
ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. v, 44 p. ISBN 978-0-944205-372
67 COHEN, William A. The marketing plan. 5th ed. Hoboken: John Wiley, c2006. v, 54, p. ISBN 0-471-75529-X
30
need to do to reach your objectives, tactics tell you how you will carry out your strategy. These
tactical actions are described in terms of what is called the “marketing mix” or the “4Ps” of
marketing. According to Kotler marketing mix is the set of controllable tactical marketing tools
that the firm blends to produce the response it wants in the target market. The marketing mix
consists of everything the firm can do to influence the demand for its product.
Product means the totality of ‘goods and services’ that the company offers to the target market.
Price is what customers pay to get the product. Promotion is activities that communicate the
merits of the product and persuade target customers to buy it. Place includes company activities
that make the product available to target consumers. According to Pinson an effective marketing
program blends the marketing mix elements into a coordinated program designed to achieve the
company’s marketing objectives. The marketing mix. Constitutes the company’s tactical toolkit
for establishing strong positioning in target markets. Pinson mentions that in this section of your
marketing plan, the contents should shift from descriptive to extremely detailed68. For example,
when you describe your sales strategy, you will also elaborate on the materials you will produce
and the campaigns you will organize. When you define your advertising strategy, you will need
to identify how you will spend your money on each medium and in what markets. Web
advertising campaigns will be described in terms of specific portals, size of banner ads, frequency
of e-mail marketing, and more. Both authors agrees how marketing tactic should look like and
provide similar definition, however Pinson goes one step further and provides set of questions for
each “P” that serves as roadmap. From this perspective I consider Pinson’s approach to be
more complete.
68 Anatomy of a business plan: the step-by-step guide to building your business and Securing your company's future . 7th ed. Tustin, CA: Out of Your Mind..and IINT the Marketplace, c2008, 18 -19. ISBN 09-442-0537-2
31
Figure 3. The marketing tools under each P
Source69
69 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. v, 50 p. ISBN 978-0-944205-372
32
4. FINANCIAL PLAN
Ignatius70 mentions that there are usually 2 most critical questions that you need to answer while
developing financial part. First, what are my business’s realistic financial needs? In another
words, what capital do I need to start my business. Second, how do I satisfy these needs? Usually,
a combination of various sources are being used to finance the business. Basically there are two
categories of financing:
1. Debt financing. This is the money borrowed from bank which will have to be repaid
eventually.
2. Equity financing. This is money put into business by the owner or shareholders through and
initial public offering (IPO) if it is public company. Equity financing for small business or start-
ups is usually mainly through personal investment by the founder or family. This is the most
common source of finance for small firms because of the essential conservatism of many business
owners towards both debt and external equity. Once the source of financing has been decided
they you can move to forecasting your expenses, cash flow, profit and loss, etc. According to
Ignatius this is one of the less flexible part of the business plan. Forecasting templates usually
stay the same for all business plans but numbers change according to business. Ignatius also
recommends conducting sensitivity analysis to identify how susceptible your business will be to
changes. He offers 2 optional scenarios – Optimistic and pessimistic.
Optimistic scenario - Sales and other income are increased by 10% - you will need to adjust
expenses to allow for this, including increased costs of materials, salary costs, etc.
Pessimistic scenario – Sales and other income decreases by 10% - you will equally need to
adjust to allow for this change
According to Ford71 in the case of new or infant company, it is crucial to put the nature of
the financial plan into proper perspective. Because for newly founded companies there is not
financial history on which one may base estimates. The obvious consequence is that projections
will be clouded with uncertainty. However, attention to detail can make this section far better
than guesswork. Ford thinks that it is widely accepted that projected financial analysis will be to
some extent uncertain, that is why it is often recommended to calculate more than one financial
scenario, such as optimistic and pessimistic scenarios.
Pinson72 mentions that if you are a new business and not going to seek a lender or
investor. You will not include the "Application of Loan Funds" and the "Loan Fund Dispersal
Statement". You will include all pro forma statements. The word "pro forma" in accounting
70 Ignatius Ekanem. Writing a Business Plan – A practical guide. n/a. Taylor and Francis. 2017. vii, 31 p. ISBN 9781315465807
71 FORD, Brian R., Jay BORNSTEIN and Patrick T. PRUITT. The Ernst & Young business plan guide. 3rd ed. Hoboken, N.J.: John Wiley &
Sons, 2007. xiv, 141 p. ISBN 9780470112694
72 PINSON, L. Anatomy of a Business Plan: The Step-by-Step Guide to Building a Business and Securing Your Company's Future. 7th ed. Tustin: Out Of Your Mind ...and into the Marketplace, 2008. vi, 77 p. ISBN 978-0-944205-37-2
33
means "projected". These are the statements (cash flow, income projections, balance sheet, etc.)
that are used for you to predict the future profitability of your business. You will not be
performing magic and will never be 100% right. However, your projections should be based on
realistic research and reasonable assumptions. It is dangerous to overstate your revenues and
understate your expenses.
All three authors agree that financial projections are not going to be perfect, however it
can be improved by paying special attention to details. Ford and Ignatius both recommend to
develop different scenarios and define how you will react to future changes. Also, I noticed that
there is very small flexibility in the format of templates for developing financial forecasts. They
are the less flexible ones. After assessing recommended templates from 7 sources I have chosen
the most mentioned one from www.score.com. Every financial section described below has its
own template accordingly. Filled version of the templates will be attached to the appendices. See
appendices number 8-13
4.1 Sales/Revenue forecast
Forecasting sales of your product or service is the starting point for the financial
projections. The sales forecast is the key to the whole financial plan, so it is important to use
realistic estimates. Divide your projected monthly sales into "Categories", which are natural
divisions that make sense for your type of business. Typical categories might be: product lines,
departments, branch locations, customer groups, geographical territories, or contracts. Also don’t
forget to study your past sales records in detail. Note seasonal or other periodic fluctuations;
determine what caused them and when they are expected to recur. Be sure to build these
fluctuations into your projections for the coming year.
4.2 Start-up Expenses
Nearly everyone who has ever started a business has underestimated the costs, and then
faced the danger of running with inadequate capital reserves. The key to avoiding this pitfall is to
adopt a rigorous approach to your research and planning. EXPENSES - Begin by estimating
expenses. What will it cost you to get your business up and running? The key to accuracy here is
attention to detail. For each category of expense, draw up a list of everything you will need to
purchase. This will include both tangible assets (for example, equipment, inventory) and services
(for example, remodeling, insurance). Then determine where you might purchase these goods or
services. Research more than one vendor; i.e.: comparison shop. Do not look at price alone;
terms of payment, delivery, reliability, and service are also important.
CONTINGENCIES - Add a reserve for contingencies. Be sure to explain in your narrative how
you decided on the amount you are putting into this reserve. WORKING CAPITAL - You cannot
open with an empty bank account. You need a cash cushion to meet expenses while the business
gets going. Eventually you should do a 12-month cash flow projection. This is where you will
34
work out your estimate of working capital needs. For now, either leave this line blank or put in
your best rough guess. After you have done your cash flow, you can come back and enter the
carefully researched figure. SOURCES - Now that you have estimated how much capital will be
needed to start, you should turn your attention to entering amounts; how much will be injected by
partners or investors, and how much will be supplied by borrowing.
COLLATERAL – If you are planning to get a loan from a bank then show what assets are offered
as collateral to secure the loan, and give your estimate of the value of these items. Be prepared to
offer some proof of your estimates of collateral values.
4.3 Projected Profit and loss
COST OF GOODS SOLD (COGS) are those expenses directly related to producing or
buying your products or services. For example, purchases of inventory or raw materials, as well
as the wages (and payroll taxes) of employees directly involved in producing your
products/services, are included in COGS These expenses usually go up and down along with the
volume of production or sales. Study your records to determine COGS for each sales category.
Control of COGS is the key to profitability for most businesses, so approach this part of your
forecast with great care. For each category of product/service, analyze the elements of COGS:
how much for labor, for materials, packing, for shipping, for sales commissions, etc. Compare the
Cost of Goods Sold and Gross Profit of your various sales categories. Which are most profitable,
and which are least - and why? Underestimating COGS can lead to under pricing, which can
destroy your ability to earn a profit. Research carefully and be realistic. Enter the COGS for each
category of sales for each month. In the "%" columns, the spreadsheet will show the COGS as a
% of sales dollars for that category. GROSS PROFIT is Total Sales minus Total COGS.
OPERATING EXPENSES (also called Overhead): These are necessary expenses which,
however, are not directly related to making or buying your products/services. Rent, utilities,
telephone, interest, and the salaries (and payroll taxes) of office and management employees are
examples. NET PROFIT is extracting total Operating expenses from gross profit to calculate net
Profit.
4.4 Projected cash flow
Refer back to your Profit & Loss Projection. Line-by-line ask yourself when you should
expect cash to come and go. You have already done a sales projection, now you must predict
when you will actually collect from customers. On the expense side, you have previously
projected expenses; now predict when you will actually have to write the check to pay those bills.
Most items will be the same as on the Profit & Loss Projection. Rent and utility bills, for
instance, are usually paid in the month they are incurred. Other items will differ from the Profit &
Loss view. Insurance and some types of taxes, for example, may actually be payable quarterly or
semiannually, even though you recognize them as monthly expenses. Just try to make the Cash
35
Flow as realistic as you can line by line. The payoff for you will be an ability to manage and
forecast working capital needs.
4.5 Projected balance sheet
Projecting your balance sheet can be quite a complex accounting problem, but that does not
mean you need to be a professional accountant to do it or to benefit from the exercise. The
desired result is not a perfect forecast, but rather a thoughtful plan detailing what additional
resources will be needed by the company, where they will be needed, and how they will be
financed. Using your last historical balance sheet as a starting point, project what your balance
sheet will look like at the end of the 12 month period covered in your Profit & Loss and Cash
Flow forecasts. How will the year's operations affect assets, debts, and owners' equity? For
example, let us say you are planning significant sales growth in the coming year. Go through the
balance sheet item by item, asking what the effects will likely be:
ASSETS: Inventory and Accounts Receivable will have to grow. New equipment may be needed
for increased production. You may draw down on cash to finance some of this. Now, since a
balance must balance, you need to consider the effects on the other half of the statement:
LIABILITIES & EQUITY: Some of the growth may be financed by profits retained in the
business as Retained Earnings. Your Profit & Loss Projection will tell you how much might be
available from that source. Funds may be contributed by the owners through contributions of
more Invested Capital or loans to the company (Notes Payable to Stockholders). Suppliers may
provide some of the financing via increased Accounts Payable. The rest will have to be financed
by borrowing, which can be: Short term loans (due within 12 months) such as a line of credit. Or
by Long Term Debt (maturity greater than 12 months).
4.6 Break even analysis
Using figures from your Profit and Loss Projection, enter expected annual fixed and
variable costs. Fixed costs are those that remain the same regardless of your sales volume. They
are expressed in dollars. Rent, insurance and real estate taxes, for example, are usually fixed.
Variable costs are those which change as your volume of business changes. They are expressed as
a percent of sales. Inventory, raw materials and direct production labor, for example, are usually
variable costs. Under the variable expenses column, use whole numbers as a percentage, not
decimal numbers. For example, use 45%, rather than .45%. For your business, each category of
expense may either be fixed or variable, but not both.
36
PRACTICAL PART
Practical part of the thesis is going to describe how reviewed frameworks and approaches will be
applied to creation of the final business plan. Each practical part is divided into two section:
analytical section and results section. The first (analytical) describes how I have applied the
theory and what tools I have used, and results illustrate what are the final outcomes.
EXECUTIVE SUMMARY
Growth Laboratory is a social media channel dedicated to growth and self-improvement
through summarizing and animating books in the areas of entrepreneurship, and self-
improvement. The business idea behind the creation of this channel is to increase interest in
books by summarizing them in a way that it is easy to understand, short, fun, accessible to social
media users and people who don’t have time to read or simply can’t learn by reading.
Our primary products are book summary videos which are 100% free to watch. Each
video is in HD quality and consist of a title, tags, background music, animation, script, voiceover,
and a thumbnail. Under the videos we provide affiliate links to books and animation software
where viewers can directly make a purchase from the provider.
Our viewers (customers) are English speaking young people from all over the world who
are active on social media. Age segment is between 18 to 30 years old students, graduates, and
fresh employees who are interested in self-improvement and entrepreneurship. Sex ratio is 65%
male and 35% female.
Our short term goal is to reach 139 K view on the channel by then end of 12 month. In the
long term we aim to position ourselves as one of the top 5 brands in the self-improvement and
entrepreneurship niche over the period of 5 years.
Currently we are competing against four competitors in the market. Among these
competitors one of them (main competitor) with a 76% market share has been inactive which
creates a gap on the supply side. There are two advantages that will help me to compete in the
market. First one is how I have positioned myself. Majority of the competitors are doing random
videos about different books, and topics, compared to them I plan to grab one of the untapped
niche (entrepreneurship and self-improvement) and focus my resources on that niche only.
Second, I have added a new feature to the videos which provides better visual experience
compared to my competitors.
I (Elvin Mansimov) am the founder and owner of the channel. Except me, there are two
suppliers who are providing voiceover and animation services. Voiceover supplier is one of the
bests in the market with 10 + years of experience.
37
For the purpose of financing I will use my own savings. Based on the calculations and
forecasts for 12 month, initial required capital is 2190 $. From this capital 881$ belongs to startup
expenses (including 170$ contingency reserve) and the rest 1309 $ will be used to cover the costs
until the 6th month of production where channel will start producing enough cash flow to cover
the entire costs. Break-even point is forecasted to be in the 10th month after producing 36 videos.
At the end of the 12 month period channel will generate 5065$ in net profit. Total assets for the
end of the year is forecasted to increase up to 7309$ compared to the beginning of the year, where
it is 3074$.
Based on the calculations we can clearly see that channel doubles its initial investment in
less than 12 month period. Market analysis shows that this growth rate is going to double year
after year as the number of social media users increase. Cisco estimates that online video will
account over 72% of all internet use by 2019. Every year only YouTube viewers grow by 100%.
YouTube reports that average total watch time for users is up by 60 % year after year. 81% of
millennials owns smartphone and 91% of them watch video on their smartphone every day. This
is 1950s all over again. Phone has already replaced TV and people are following social media.
Marketing is also shifting from TV and banners to social media influencers.
38
1. OPPORTUNITY
1.1 Problem worth solving
The conclusion of my literature review revealed that at this stage I have to analyze the problem
from the perspective of my customers. And the best-recommended way to do this is through
understanding customers by talking to them, or any other methods that would help to get closer. It
was also concluded that it is the best if the problem we are going to solve matches with our skills
and capabilities. The way how I have applied these principles and the results I got is described
below:
I wanted to create an online business and stop working for someone else 9 to 5. After
analyzing my capabilities and skills (see appendix #1) it appeared that I could create online
English language course for beginner level students. First, I identified ten most famous sources
that teach English language and read more than 15 000 comments, talked to more than 50 people
for two months just to understand problems of my target group. At the end of my research, I was
quite surprised because most common problems I discovered were not related to English
language learning. They were mainly behavioral problems as described in the figure below.
Picture 1. Most common problems mentioned during analysis. (Out of 2100 comments)
Source: Author
At this point, I was very desperate because I was not able to come up with a language course idea
that would solve some of these problems. Two weeks passed, and I was almost ready to give up,
but then I noticed that my judgment did not allow me to understand their problems. I was so
preoccupied to solve their problem with a language course idea, so I did not notice that they don’t
39
have any major complaints with the existing courses. As McAdam says “Just be mindful of our
human tendency to revert to what we feel comfortable with and what we know and understand.
Be open-minded. Our eyes must be on the big prize – the customer.”
That was the turning point for me because I realized that the product they need to solve
their problem is not going to be a new type of language course. Their problems were different,
and it required a different type of solution. Personally, I could understand their problems well
because I had the same which I solved through listening to AUDIO self-development books. But
until I discovered audio books and saw the potential benefit from them I had to pass three major
barriers. I knew that majority of those people were having at least one of those three barriers I
was having described below:
1. I am an audio, visual and kinesthetic learner. Reading a book is not my way of
learning. It always seemed like doing a boring chore. It is all black and white, and it makes me
fall asleep. According to Patrick73, it is very crucial to identify which learning type you have
before applying one. He primarily talks about the role of reptilian brain (oldest brain) in learning
and says that if a teacher or presenter can’t directly influence the reptilian brain then learning
curve will always be downward sloping. According to him, reptilian brain understands pictures,
not the text, can be influenced by emotions not logic, and finally, it is self-oriented which means
if the reptilian brain does not see an instant gain then it stops paying attention.
2. Sometimes I pushed myself to read a book, and I could understand what author is trying
to say, however, I wanted to see a real-life example from a person who is in my situation and who
implemented those tips and got results. I wanted to hear a sincere and resonating story, not just
set of tips and tricks
3. I spent majority of my time on social media, and there was nothing around me that
would trigger interest in books.
Results: I knew that those people I analyzed were having at least one of the problems which kept
them away from the source of solution - books. I wanted to find a solution which would cover all
three of problems and trigger interest in books. Even though, I started the analysis with a different
idea in mind (teaching English) I am firmly convinced that it is very natural to end up with a
different result. As McAdam says “Problem our customers have might not be the one that we
have the most fun solving, or be the easiest, or the most cost-effective for us to deliver.” So to
sum it up, I concluded that problem that I will be solve is going to be reducing the obstacles that
keep certain group of people from reading.
73 Patrick Renvoise, Christophe Morin. Neuromarketing: Understanding the buy buttons in your customer’s brain, 1st ed, SalesBrain LLC, 2005, viii, 243 p. ISBN 0974348228
40
1.2 Solution
In order to develop the solution I used following steps recommended by Brian. (See theoretical
part - solution section)
1. Took the final problem from the previous section and used different search engines (See
appendix # 2) to collect articles, papers, and websites in order to review them and see if there was
a solution developed already that would give me an idea how to develop my solution or make the
existing one better.
2. Asked people around me to find someone who have already solved the same problem that I am
trying to solve or know someone who have done it.
By following the steps described above I came up with four different solution ideas that I could
use, but quickly realized that I am not able to apply majority of them because I did not have
enough skills for them, such as speaking in front of a camera. After trying several solution ideas
and failing, I finally found one that would fit the best.
Results: Most suitable solution was animation videos where I wanted to summarize the books in
8-10 minutes with animation, voiceover and music. My goal was to design these videos in a way
that it is simple to understand, educative and contains resonating examples. The tool I used to
turn the solution idea into a final product is called videoscribe provided by sparkol.com who is
animation service provider for teachers and educators.
1.3 Validation.
To validate the solution I used the MVP (Minimum viable product) approach. I prepared the first
video and posted it into a book related Facebook page to see if people are interested or not. My
goal was to find out if people are getting engaged in my video, leave comment, like or share.
Results: Within the first 3 hours after posting the video 2000 people joined to my page, more
than 200 hundred people shared it on their pages, 30 people commented (positive), and hundreds
of people liked it. Even several people took the time and sent me “thank you” messages for
sharing such a video with them. This video was not even a high quality, but it was enough for me
to validate the problem and my solution.
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2. ORGANIZATIONAL PLAN
2.1 Cover page
As I could see in the theoretical part there is no specific limitations and requirements about
creation of a cover page. I used one of the recommended template from Pinson and amended it
according to my needs.
Results:
Growth Laboratory
Josefa Kotase 1185/5,
70030 Ostrava
E-mail: [email protected]
Founder and President, Elvin Mansimov Vinarska 5a, 471
603 00 Brno, CZ
E-mail: [email protected]
Plan prepared November 1, 2017
By the president
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2.2 Vision, mission, and goals
In order to define the vision, mission and goals I choose 3 different time slots and brainstormed
about each of the statement separately. The reason I chose three different time slots is because
majority of the time I write something and then when I come back and read it again it sounds
horrible. I can’t believe that I actually wrote it.
Results:
Vision statement: Our vision is to fight mediocracy and help growth through books.
Mission statement: Our mission is to become one of the top 4 social media channels in the self-
development and entrepreneurship niche within five years.
Goals:
Long-term.
1. Focus on building a passionate community, not just a channel by engaging with the viewers.
2. Produce a high-quality video per week and be consistent in that
3. Study viewer reactions (comments, likes, shares) constantly to see what they like the most to
provide more of it.
Short-term
1. Reach 139 K view, and 5043 $ revenue by the end of 4th quarter
2. Cooperate with a similar level channel for promotion after the 1st quarter
3. Cooperate with a much higher level channel for gaining new subscribers after the 2nd quarter
4. Activate monetization until the end of 1st quarter by reaching 10 K views
5. Reach 84 K view by the end of 3rd quarter.
2.3 Product
Our product is book summary videos. Each video is in HD quality consisting of a background
music, animation, script (summary of the book), voiceover, and a thumbnail. Main benefits are:
Makes learning easy and fun, saves time, it is free of charge, an explanation with real-life
examples, improves learning ability by applying different sensory functions (picture, voice,
reading, writing), and finally it triggers interest in books.
2.4 Business model
For this business plan, I have identified two models that fit the best. These models are:
Advertising model and affiliate model. The way how I identified these are the most suitable
models is through analyzing other channels in the social media platforms. First, I choose 10
social media influencers who take their channels seriously and approach it as a real business and
then watched their videos where they were explaining what kind of model they use in order to
generate profit.
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Results: Advertising model – This model will allow me to sell advertising space to marketers
through ad sense programs such as banner add, skippable ads, and google ads.
Affiliate model – I will join to affiliate programs of Amazon.com and Scribe.com to sell their
products under my videos and earn a percentage (7-10%) on them. If viewers want to read the
entire book or use the same software I use, they can easily use the links provided to make a
purchase
2.5 Management of the company and other key people
Attaching CV’s to the attachment is one of the options so that reader can get the full picture if
he/she wants to understand who is in the captain seat.
Results: Elvin Mansimov is the only person in charge at the moment. Please see appendix#3 for
his CV to get the full picture of his skills and capabilities.
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3. MARKETING PLAN
3.1 Situational analysis
I will implement situational analysis in four area. These areas are market analysis, environmental
analysis (PESTLE), competition analysis, and company environment analysis (Internal analysis).
In order to provide better view and clear analysis I will be covering each of these four topics in
separate sub-sections below.
3.2 Market Analysis
To analyze the market I will research three questions mainly (recommended by Cohen):
1. What is the demand and demand trends in the market?
2. What is the forecasted demand for the product?
3. Who is the decision maker (buyer)?
To provide an answer to the first question I will be analyzing trends in two markets
simultaneously because of interdependency in my market. First, trends in social media
advertisement market. Second, trends of video content viewers on the social media channels. The
tool I will be using is 2016-2021 visual networking forecasting index from cisco.com. And the
second tool is the yearly report from Youtube.com.
For the second question, I will be using socialblades.com and reading comments under my
competitor’s videos to understand the demand and trend for similar products. And finally, the
last question does not require any tool or research because decision makers in my niche are
viewers directly.
Results: Cisco estimates that online video will account over 72% of all internet use by 2019.
Every year video viewers just on YouTube grow by 100%. YouTube reports that average total
watch time for users is up by 60 % year after year. 81% of millennials own smartphone, and 91%
of them watch video on their smartphone every day. It is the 1950s all over again. Phone has
already replaced the TV and people are watching YouTube and Facebook instead of NBC, CBS.
Above mentioned trend is also pushing marketers to shift from TV and banners to social media
influencers. One of the main reason for this shift is related to high viewer engagement and
reliance on the influencers to provide the right information. Already people are not forced to
follow a specific channel. If an influencer can gather a particular group of people to his channel,
it means that people resonate with his content. And when he recommends a product most
probably viewers will not question it. That is the fact companies are realizing and moving toward
social media to advertise their products which creates excellent opportunities for social media
influencer marketing. According to Cisco, every year budget for marketing, especially for video
advertising, is increasing. By 2019 planned budget is 14.36 billion.
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Figure 4: Growth trend of social media marketing
Source: Cisco.com - Forecast and Methodology. 2016–202174
Based on my research (reading and analyzing comments for four months) I can firmly tell that
current viewers love well-prepared book summary video contents and almost every fifth
comment repeats the same thing – Please upload more videos like this. Demand is already quite
high, and it will grow even higher as new viewers join social media channels. However, the
number of suppliers are only 4 and producing videos are very time consuming and costly which
creates a big gap between supply and demand. Plus, the main competitor of the market who has
76.3 % market share has been inactive (no video upload, no marketing) over the period of 13
months (Last upload-15.10.2016). Despite the fact that channel has been inactive it has been
growing over 100 000 subscribers. This shows how strong demand is and how trend is moving
upward even without any marketing and promotion activities.
3.3 Competition analysis
To analyze the competition in the market, I will use Porter’s five forces model. As already
described in the theoretical part there are certain vital questions need to be answered under each
“forces” in order to understand the threat.
I will build my analysis around these questions by researching and providing answers to each of
them. Below in the tables, left side (THREATS) represents the questions related to respective
74 Cisco Visual Networking Index: Forecast and Methodology-2016–2021. Cisco.com, CISCO, 15 Sept 2017
47
force, and right side describes the IMPACT on my business. Green colors are low impact, and red
colors are high impact zones.
Table 1. Bargaining power of customers
Source: Author
THREATS IMPACTS
There are only a few customers or they purchase
large volumes
Nature of my business allows me to open up to whole world
and have viewers all over the globe. That is why there are
many customers and they don’t have any bargaining power.
Products available on the market are standardized
and differ very little from competing product.
Based on the observations that I conducted in the market I
can strongly say that products are not standardized and they
differ a lot from each other.
The transfer cost from one supplier to another is
low
By analyzing how subscription works on social media I can
conclude that transferring to another supplier is just one
click away. Transfer cost is low and there is no barriers
stopping viewers to subscribe other channels.
They can directly integrate the supplier’s
activities into their own production chain
Integrating suppliers would have no effect on my business
because video production system is complex and it would
not be enough to integrate the suppliers.
Result: According to analysis low transfer cost can be a threat, however low barrier for
transferring to another channel does not necessarily mean losing the viewer altogether, because
the viewer can be subscribed to several channels simultaneously. In the short run low barrier of
transfer bears no threat in my market, however, in the long-run, it can have a substantial adverse
impact if I can’t compete with my competitors and start producing lower quality videos with low
value. To reduce the impact of losing viewers to other channels, I will continuously focus on
improvement, innovation, testing and add new features to bring extra value.
Table 2. Bargaining power of suppliers
Source: Author
THREATS IMPACTS
Suppliers particularly concentrated or in a
monopoly situation
After observations and comparisons that I did on fiverr.com
it became clear that number of suppliers are many and price
range differ a lot. This is the only analysis that I conducted
on a single source. There are also other websites who are
providing supplier services that I need, and taking them into
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account would expand the supplier market even further.
That is why I can firmly say that market is very
competitive.
They have many customers from different industries Market trend forecasts from Cisco shows that number of
social media users and influencers increase every day and
based on that we can conclude that their services will be
required even more by time and it will push the price up in
the long run.
The transfer costs are very high Changing supplier can have very high costs because I am
outsourcing voiceovers and viewers get very agitated by
new voice. This actually happened with two of my
competitors and their viewers were quite upset with the new
voice. It wasn’t because of the quality, simply viewers were
used to the previous voice and could not get accustomed to
the new one. From this aspect I can say that transferring to
another supplier would make many of my viewers leave
and reduce my profit.
They offer differentiated products and there are no
substitute products for what they offer
I have identified four alternative sources where I can get the
same services from different suppliers. So there is very
small space for differentiation.
I have researched more than 50 voiceover actors and identified one at fiverr.com that meets the
majority of criteria, such as relevancy of the voice for narration, price, quality, and most
importantly long-term cooperation agreement. As it is described above in the supplier analysis, it
is very costly to transfer to another supplier that is why long-term cooperation is one of the
critical criteria that we have mainly emphasized and agreed upon to avoid the future drawbacks.
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Picture 3. Voiceover supplier
Source: fiverr.com
Table 3. Bargaining power of substitute products
Source: Author
THREATS IMPACTS
They offer a better quality I have compared existing substitute channels to mine and
other direct competitors and they are not superior in any
aspect.
The cost of transferring to the substitute product
is low
There is no barrier to transfer to a substitute channel
because nature of social media and internet makes it
effortless.
The price of the substitute product is lower Price factor does not have high impact, because everyone
provides their product for free (business model requires it to
be free)
Above analysis of substitutes show that low barrier of transferring to the substitute channels is the
only threat. However, because of the nature of my market, low barrier of transfer does not mean
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that if the viewer is going to subscribe to the substitute he/she is going to unsubscribe me. Plus,
the existence of substitutes do not necessarily bear a threat, it can be even opportunity for future
growth. For example: If a substitute channel prepares a video around a specific topic which is
also covered in one of my book summary videos we can direct viewers to each other. It is a win-
win situation for both of us because we gain extra subscribers, plus it is suitable for the viewers in
a way that they can get more information. Currently, there are four substitute channels. The total
size of the substitute channels is 1.641.394 subscribers.
Picture 4: List of substitute channels
Source: Author
Table 4. Threats of new entrants
Source: Author
THREATS IMPACTS
There is no patent to protect technologies, which
allows easy access to them
All the technologies are either open to everyone or could
be easily bought. There is no patent
Barriers to entry and the capital requirements are Based on the startup expense analysis (see appendix#9) I
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very low can tell that capital requirements are not high.
Economies of scale are weak Economies of scale is strong because internet creates
opportunity to scale.
Replacement costs for the customer are low Since everything is on the internet and one click away
there is no barrier stopping viewers to transfer to new
entrants
Customers are not necessarily loyal to the
companies that supply to them
It is very difficult to measure the overall level of the
loyalty in the market because it changes from channel to
channel. Some has more loyalty compared to others and
the main factor for that is the engagement of channel
owner with viewers through comments.
The government provides aid and subsidies for
new entrants
Government does not provide any aid for new entrants
since it is a private sector and government does not have
any interest in that.
Table 5. Rivalry among competitors
Source: Author
THREATS IMPACTS
Introduction of new products I observe my customers every day, and based on this I can
tell that there is only one competitor at the moment who
provides new products
Advertising campaigns Currently two of my competitors are cooperating to
promote their channels.
Improvement of product ranges and services I have subscribed to all my competitors so that I can see
their movement and products constantly. Based on the 13
month observation I am able to say that out of four
competitors only one constantly improves.
The sector is not concentrated. For example, when
competitors are numerous and of comparable size
As it is described below (picture 5) competitors are in
different sizes
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The industry growth rate is weak Based on the yearly report from YouTube.com I can say
that industry growth is doubled every year.
The degree of product differentiation is low There are many sources and alternatives that can be used
for differentiation. By observing current channels I can tell
that every channel has at least one thing that is different
from others. New technologies create many options for
differentiation.
Competitors bear the highest level of threat. To reduce this, I have decided to ally instead of
fighting against them (which is unrealistic for a beginner). Since I am a new channel, it would be
naive to believe that existing competitors will quickly agree to cooperate with me. Merely to say
cooperation with me is not going to be profitable for them. In this kind of situations, Robert
Cialdini talks about a powerful tactic in his book called “Science of Persuasion.” Robert says “
When you need support don’t look at to a group of people and think who can help me, instead
look for someone to whom you can help by solving his/her problem or making something a lot
easier.” This type of approach activates the principle of reciprocity, in another word when
someone does a favor, you feel obliged to do the same. Based on this tactic I will suggest the
following offer to my competitors:
I will send them several video suggestions and let them choose one, and I will take the full
responsibility for production, costs, offer it to them for free, let them upload it to their channel
and take the entire profit from the views. I will even prepare the description section and add all
the links, so that my competitors do not have to do anything except clicking a few buttons.
In return, I will be exposed to a broader audience and gain new subscribers. There is very high
chance that my competitors will accept it because they always need content for their channel and
it is not cheap and easy to produce it regularly. Offering them one video will give them rest time
for a week, bring extra profit without any expenses, and keep the viewers happy. Currently, there
are four competitors in the market holding 1.121.208 subscribers altogether.
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Picture 5: List of competitors
Source: Author
After analyzing all 5 forces it becomes clear that I don’t have direct impact on any of the forces.
In this situation the best strategic movement is to form allies, extend the network and build
engaging relationship with the viewers in order to maintain the position and excel other players
in the long run.
3.4 PESTLE analysis
Political analysis – Coface.com is one of the global websites which allows investor and
entrepreneurs to assess the country and compare one to another. Based on my analysis and
readings on this website I can tell that Czech Republic is among the countries which bears low
(A2) level of political risk. Power of private sector is strong in Czech Republic which makes the
government to act carefully when it comes to changing laws and regulations impacting
businesses.
Overall, political risks have a shallow impact because of the nature of my business. It may have
only one substantial adverse impact if Czech Government bans social media channels within its
borders as Iran, and North Korea did. This option is very unlikely to happen. In worse scenario, I
can transfer the channel to another account in a different country and manage it from that
account.
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Economic analysis – According to OECD.org recent economic growth in Czech Republic will
continue in 2018 and 2019 driven by robust private demand and a dynamic external sector.
Increasing wages will support household consumption and low interest rates will boost capital
investment. Labor shortages will weigh on growth. Also Czech koruna is expected to get even
stronger. US dollar is my main currency, however I will be investing my profit in the Czech
Republic, and in that sense, strong Czech currency can have a negative impact on my overall
wealth. If Czech currency gets even stronger then I have 3 alternative options:
1. Reinvest it in the company and release two videos a week instead of one
2. Invest the profit in a different country with a weaker currency (Azerbaijan).
3. Invest in long-term index-funds with USD
Social analysis – In order to understand the upcoming social changes I analyzed 5 research paper
results about the generations. According to research done by “Grail-Research” every generation is
much more digital than previous one. Consumers of future are called generation Z. Generation Z
is a common name for the most recent generation at the labor market. Members of generation Z,
born after 1990, are characterized as highly connected, active use of communications and media
technologies such as World Wide Web or YouTube. According to this research 31% of US
children, ages 6-12, wanted an iPad over any other electronic device for Christmas in 2010;
followed by a computer (29%) and an iPod touch (29%). The world for Gen Z is digital and the
accessibility of technology has made them overly dependent on it for many activities.
Technology has also impacted the way that Gen Z learns. According to a study by ‘Habbo Hotel’,
the world’s largest virtual community for teens, 43% prefer the digital approach and find it
easiest to learn from the Internet. 38% like combined learning from print and online and only
16% state books as their preferred way of learning. In a global survey, Gen Z rejected traditional
TV over streaming Video-on-Demand (VOD). In addition, PCs (51%) and mobile phones (43%)
were ranked more important devices than TVs (3%).
Based on this analysis it is not difficult to forecast that my channel has a chance of becoming a
next-generation library.
55
Picture 6. Generation Terminology by birth
Source: grailresearch.com
Technological analysis – By analyzing the trends in the market over the last 14 month I can tell
that changes in the technology is happening very fast. Because of this I have to stay alert and see
to which platforms or technologies people are migrating to. Currently changes on the existing
platforms do not bear threat. For example, YouTube is continually implementing changes, but
these changes are done to improve user and content creator experiences. Changes are fine as long
as I follow them and enforce the ones that would improve my business. However, not being able
to cope with the technology can kill the business in a short period of time. Today we have
Facebook and YouTube, but it is questionable if we are going to have them in the long run as
well. That is why in order to stay in the game for a long period of time following the
technological trend is a key factor.
Legal analysis – I identified three YouTube certified channels and checked their videos
regarding legal issues that content creators face. After analyzing all three of them it became clear
that copyright claims can have huge negative impact on my channel. Two copyright strike is
enough to lose the monetization completely on the channel. After third strike channel is shut
down completely. In order not to face any copyright strikes I will be using following options:
- YouTube Channel – I will use standard YouTube license (free) to create the channel
- Music – I will be paying yearly for a music of my own choice.
- Photos and videos – I will be using copyright free sources such as unsplash.com, canva.com
Environmental analysis – Only environmental factor impacting my business is harsh climate in
Czech Republic during winter seasons (compared to Azerbaijan). I come from a hot climate zone,
56
and I need more sunlight to avoid getting sick during colder seasons. I will be visiting hotter
countries during summer holidays to get enough “battery” for cold times (recommended by my
doctor) so that I can continue production non-stop.
3.5 Internal company environment – SWOT analysis
Strengths
Knowledge about free resources to avoid copy-right strikes. Majority of my competitors
have been stroked for copy-right claims. Compared to them I have identified reliable
sources to avoid strikes. (see legal environment analysis)
High quality voiceovers. No one in the market uses professional voiceover services,
compared to them I have experienced supplier with 10 + year of experience (see supplier
analysis).
Have a strong indication that product will be successful (see validation section).
Higher understanding of the market trends and customer needs (see market analysis).
No dependency from a financial institution for a loan (see startup expenses)
Has a proven psychological tactic to get cooperation approval from experienced
competitors (see competitor analysis)
Weaknesses
Have less experience and small subscriber base compared to my competitors (see picture
5)
Cane be affected negatively by strong Czech currency (see economical analysis)
Production can be stopped because of my repetitive sickness in regard to cold weather in
Czech Republic (see environmental analysis)
Dependency from the voiceover supplier. High costs of transitioning to another supplier
(see supplier analysis).
Opportunities
Social media marketing is in steep upward trend (see market analysis )
Main competitor with 76.3% market share has left the market (see market analysis)
There are opportunities to build strategic alliances with existing competitors for
promotion (see new entrants and competitor analysis)
Social media influencers are becoming dominant in marketing and their costs are
increasing constantly (see market analysis)
Big companies are moving to social media platforms to advertise their products (see
market analysis)
Video content is already on the way becoming main source of data and way of learning
new things (see social analysis)
57
Upcoming generation (generation Z) prefers learning from videos rather than books which
can create more demand for my channel ( see social analysis)
Threats
Low barriers to entry and emerging competitors (see new entrants analysis )
One of the competitors is gaining strength and spends time on improvement (see
competitor analysis)
Promotional alliances are being formulated among competitors (see competitors analysis)
Constant technological change (see technological analysis)
Low transition cost to another supplier (see bargaining power of customers)
3.6 Target market / Customer analyses
I have implemented segmentations based on 4 characteristics defined by Kotler. These are:
Geographic, demographic, psychographic, behavioral characteristics. Last two criterias are the
main ones for me. Once segmentation is done I will choose the most appropriate segment as a
target market. When I decide on the target segment I will also consider following criterias:
segment size, future potential for growth, attractiveness of the segment, considering if the
segment will help to the company to meet it’s goals, considering company resources.
Results: Based on the above mentioned points, and observations in the market I have identifed
two segmetnts described below. And out of these two segments first one is the most suitable one
meeting majority of criterias, such as segment size, future growth, attractiveness, etc.
- 19-29 years old Male and females
- Mainly students, graduates and fresh employees
- Speaks English
- Lives all over the world and has access to
internet
- Have a calm, and hardworking personality
- Has a busy lifestyle, but still concerned about
his/her personal growth
- Reads books, especially self-development books
- Enjoys spending time on the social media,
especially
on YouTube and Facebook
- Tends to favor quality over economy
- Has mainly audio, visual an kinesthetic learning
style
- Wants to feel fulfilled in his/her career and life.
- Values time with small group of friends
- Believes in himself/herself. Constantly tries to
improve
- 30-35 years old Male and females
- Speaks English
- Lives all over the world and has access to
internet
- Has a busy lifestyle, but still concerned about
his/her personal growth
- Reading books is just one of the hobby
- Spends some time on the social media, especially
on YouTube and Facebook
- Tends to favor quality over economy
- Has mainly audio, visual an kinesthetic learning
style
- Wants to feel fulfilled in his/her career and life.
- Values time with small group of friends
- Constantly tries to improve
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3.7 Marketing strategy in the target market
Method of identifying which strategy is the best will be based on the characteristics provided by
Kotler. According to him mature and already established companies can easily choose
undifferentiated marketing, however newly established companies need to do opposite and chose
more concentrated approach in order to use its limited resources effectively
Results: Based on the above mentioned points I have identified that concentrated marketing
strategy will be the most appropriate one, because my channel is new and in order to establish
myself in the market I have to direct my limited resources and capabilities to a single point. This
strategy will allow me to understand the target market in a deeper level and establish strong
foundation.
3.8 Differentiating and positioning
In order to differentiate my product I have analyzed the videos of 15 channels from different
niches to see if there can be a specific feature that can be used also in my videos in order to add
more value compared to my competitors.
And for the method of positioning I have researched the videos of my competitors to find a
specific series of books that are not summarized broadly so that I can position there.
Results:
Differentiation - After researching videos in different markets, I found that b-roll videos are quite
famous. These are small videos specially prepared to be used in the background to give a visual
explanation to the viewer. To validate the idea of integrating animation with b-roll videos, I
found three channels who have already done it and analyzed the comments and feedbacks under
the viewers. As expected the majority of them liked it.
Positioning – Researching videos of my competitors revealed that almost all of them are doing
random videos about different books and topics. I found out that there is no competitor in the
market whose channel is solely dedicated to summarizing books about entrepreneurship. It is true
that some of them have done book summaries about entrepreneurship. However, it is not
consistent. My goal is to position myself as a channel for an entrepreneur. First of all, I have
particular passion and interest in entrepreneurship. Second, it is one of the niches that are being
underserved. Combination of these two reasons will make the entry process comfortable and help
to establish my channel as a brand in a short period.
3.9 Marketing objectives and goals
I will use Cohen’s approach to formulate marketing objectives and goals. He differentiate
objectives from goals and mentions that objectives should be set first and then based on them
59
different small goals can be formulated. That is the exact method I have used. Also during
objective formulation I have considered company objectives as a baseline.
Results:
Objectives Goals
3.10 Marketing tactics - 4p of marketing
Products - Our primary products are book summary videos. Each video is in HD quality
consisting of a background music, animation, script (summary of the book), voiceover, video b-
roll and a thumbnail. Main benefits are: Providing solutions to self-development problems
through books, makes learning easy and fun, saves time for people who can’t read entire book or
wants to know what is the book about before reading it, it is free of charge, explanation with real
life examples, improves learning ability by applying different sensory functions (picture, voice,
reading, writing, emotions), and finally it triggers interest in books. Our secondary products are
affiliate products from Amazon.com, and scribe.com. These products are books and animation
software sold through affiliate links.
Price – Our primary products (videos) are 100% free. We only make profit from the indirect sales
of secondary products (books and software programs) through affiliate links and views (ads). We
provide easy access to the products and give 5% discount. Cash payment is not valid, only digital
payments are accepted through credit/debit cards or PayPal.
Place – Our channel is going to be located on 2 platforms - YouTube and Facebook. On
Facebook we will have a community page, and on YouTube it will be educational channel under
standard YouTube license. Videos will be stored in the video sections of the channels and
respective affiliate links for the books and software will be placed under the videos in the
description section.
Promotion – We will be using promotional activities described below:
1. Build a brand not just a channel
2. Build a passionate and loyal
community
3. Enlarge the network in the market
1. Produce consistent videos about
entrepreneurship, and self-
development
2. Always respond to comments
under videos and engage with viewer
3. Produce at least 2 videos in
cooperation with existing players
within 12 month.
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Cooperation with other channels - I will create 2 videos in cooperation with 2 different
channels and let the person share the video in his/her channel. This is one of the greatest
way to get exposed to a different audience for free and get huge amount of traffic at once.
This type of promotional alliance is the most effective one on social media and can be
repeated several times with the channels who has similar content.
Guest posting to promote the channel – There are many communities who are in need of
providing valuable content to the followers who welcomes guest posts with no problem
because it gives them something to share with the viewers.
Keyword Strategy - I have identified 8 proven key word strategies to use in order to get
more clicks to open my videos (see appendices).
Search engine optimization. I will use Tubebuddy plug in for choosing tags so that my
videos appears in the first pages.
Thumbnail strategy - Canva.com will be used to create mouthwatering and compelling
thumbnails to get viewer’s attention to open the video.
“4 P” sales strategy (Promise, picture, proof, pitch) – This strategy will make sure to grasp
viewer’s full attention in the first 5 seconds and maintain it until end.
Consistency strategy – YouTube prioritizes the channels and recommend it to viewers
who has a consistent upload system. I have studied and copied very strong planning
system from my competitor in order to maintain my uploading schedule.
Buying YouTube and Facebook views – 137$ from the total budget is considered for
buying views in order to promote the channel in the first three months.
Honest call to action for affiliate sales – My viewers are very sensitive to open sales
tactics. If they see that I am trying to sell a book or software at the end of each video it
will simply irritate them and make them think that whole idea was just to trick them to
make a purchase. That is one of the key lessons I learned from one of my competitors. His
call to action to buy the book turned against him. At the end of the video he gave a contact
number and email to order the books in case someone interested, however it backfired. In
the first glance it might seem normal call to action, but viewers got really irritated and
thought that they have been tricked into purchasing the book and simply ignored the
amount of value channel was giving for free. Another competitor of mine had a very
similar call to action, but with totally different effect. He said: “If you would like to buy
the book feel free to use the link below, please keep in mind that I get small profit if you
use this link. You don’t have to use my link, but doing so helps me to provide better
videos”. Simply adding small amount of honesty changed the game completely. This is
the technique I will apply to promote affiliate sales on my channel.
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4. FINANCIAL PLAN
In this section I will be summarizing each financial statement briefly. In order to see the entire
calculations and more details check the appendix number 8-12. All calculations and forecasts are
done for 12 Month period.
4.1 Projected sales forecast
In order to forecast the future sales I choose one of my competitors to whom I expect to have
similar level of growth and used Socialblades.com to see his average revenues and forecasted
mine based on them. Also to make sure that numbers on Socialblades.com are precise I watched
video report from that competitor where he was explicitly announcing his revenues. By
comparing these two sources I forecasted (for 12 month) my sales as following:
Total revenue from books sales through Amazon affiliate link – 1750$
Total revenue from software sales through Sparkol affiliate link – 5906 $
Total revenue from views – 1505$
TOTAL revenue at the end of 12 month – 9161$
4.2 Projected startup expenses
To cover the startup expenses and production costs I will be using my own savings. Total amount
of investment is 2190 $ and from these amount 881$ is separated for startup expenses (including
170$ contingency reserve). The rest 1309 $ will be spent to cover the production costs until the
point (End of 5th month) where channel will generate enough capital to cover its costs.
4.3 Projected profit and loss statement
After deducting production costs, depreciation and taxes from the total income it is forecasted
that channel will generate 5065$ in net profit at the end of 12 month.
4.4 Projected cash flow
Until the end of 5th month I expect to have negative cash flow. Only after that cash flow will be
enough to cover the monthly costs. Monthly cash paid out is constant for each month (385 $),
however cash receipts change every month because of its dependency from the views.
4.5 Projected Balance sheet
Projected total assets at the beginning of the 12 month period is forecasted to be 3074$, compared
to that at the end of the year this number increases up to 7309$
4.6 Break-even analysis
Based on the literature review it was concluded that break-even point = Fixed costs / (selling
price – variable cost). However, we can not define a selling price for our products based on
variable and fixed costs. Main reason is that our product price is defined based on the views not
the costs we incur, which means as the channel grows and gets more popular the price of our
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videos increases. Simply to say every unit produced is sold to a different price. However,
considering the fact that break-even point happens at which total costs and total revenue are equal
we can conclude that after producing 36 videos at the beginning of 10th month we reach to break-
even point.
MILESTONES AND KEY METRICS
Picture 7. Milestones for 12 month
Source: Author
Metrics
1. YouTube analytics program and socialblades.com will be used to measure number of views,
subscribers, as well as earnings from views.
2. Affiliate accounts from Amazon.com, and Sparkol.com will be used to measure changes in
book sales and software sales
3. Number of likes, shares and comments will be main metric to measure the viewer engagement
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SCENARIOS
Authors that I reviewed recommends preparing at least 2 scenarios (pessimistic and optimistic),
however I am strongly convinced that more scenarios developed the better it is because majority
of the time it is not a single event or scenario that impacts the company. It is usually chain of
events and scenarios. That is why I have developed all the possible scenarios I can think of and
provided clear instructions describing how I will react in case of a particular scenario takes place.
Results:
Digital economies /Block-chain technology becomes commonly used – Application of block
chain technology to businesses is still in development phase. There are many global companies
who has already started to invest in it and even offer some services, such as Amazon AWS, IBM,
and Microsoft Azure. This is a type of technology that can be programmed to record not just
financial transactions, but virtually everything of value. In order to be able to react to the changes
in this technology I have already started to learn how it works and how I can be the early adopter.
Recently I completed a certification course called “Block-chain essentials” which was provided
by IBM. I plan to invest more time to this area and be ready in case it is fully adopted by
companies.
Increase in the use of Amazon’s Alexa (voice search engine) - According to many marketers
Alexa has a potential of becoming major competitor against Google. According to social media
marketers Gary Vaynerchuk75 and Scott Galloway Google’s major concern at the moment is
Alexa. If Alexa becomes prominent then I will hire a special contractor to educate me about
search engine optimization for Alexa. Also I have started to educate myself to be able to react to
changes as soon as possible.
Amazon starts selling video books – Amazon is one of the fastest growing companies in the
world and they have been inventing in new technologies and ideas constantly. Amazon has
already started to sell Audi book summaries, and it is expected that in the near future they might
consider providing video book summaries similar to my products. If this happens I will make
adjustments to my existing videos and adapt it to Amazon’s requirements in order to able to sell
on their platform. This option would open new opportunity for my business and scale it very fast.
75 Gary Vaynerchuk. Jab, Jab, Jab, right hook: How to tell your story in a noisy social world. 1st ed. HarperCollins. New York, vii, 234 p. ISBN 978006231671-4
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Competitors and new entrants become stronger – Low barriers to entry increases the number
of new entrants with better idea and product. If this happens and market becomes saturated, then I
will move to a different market such as German, French, and Italian which are almost untapped.
YouTube and Facebook changes algorithm – YouTube and Facebook constantly change their
algorithm, recently algorithm changed from view counts to engagement level. And it is more
likely that more changes will come by the time. Changes in the platform is just inevitable and
content creators has no option except adopting it or leaving the platform completely. Even
though, these changes are done to increase the user and content creator experience, failing to react
to the change can be fatal. I have identified three channels who are certified by the platforms to
guide content creators in the application of changes and improvements. I will constantly follow
them to stay ahead of the game.
Current Animation software supplier increases the price – I have already identified another
alternative supplier which can be used in case of price increase.
Voiceover supplier increases the price – Since my current supplier knows that transferring to
another supplier is very costly he can use this against me to increase the price or set the
conditions that are not acceptable for me. In order to avoid this to happen I plan to sign a binding
contract with him. Moreover, I will constantly search for another alternative supplier for a worse-
case scenario.
65
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LIST OF FIGURES
Figure 1. Logic diagram ..................................................................................................... 7
Figure 2: Porter’s five forces model ................................................................................. 22
Figure 3. The marketing tools under each P ................................................................... 31
Figure 4. Growth trend of social media marketing .......................................................... 46
LIST OF PICTURES
Picture 1. Most common problems/blockers recorded ..................................................... 38
Picture 2. Results of validation ......................................................................................... 41
Picture 3. Voiceover supplier............................................................................................ 49
Picture 4. List of substitute channels ................................................................................ 50
Picture 5. List of competitors ............................................................................................ 53
Picture 6. Generation terminology by birth ...................................................................... 50
Picture 7. Milestones for 12 month ................................................................................... 62
LIST OF TABLES
Table 1. Bargaining power of customers .......................................................................... 47
Table 2. Bargaining power of suppliers............................................................................ 47
Table 3. Bargaining power of substitute products ........................................................... 49
Table 4. Threats of new entrants ....................................................................................... 50
Table 5. Rivalry among competitors ................................................................................. 51
75
APPENDIX # 4: CREATING THE COMPANY – SOLE PROPRIETORSHIP.
According to major three agencies I contacted and official report from Expats.cz76 in Czech
Republic one of the common routes to doing business is through a sole proprietorship, often
called a trade license. A sole proprietor (osoba samostatně výdělečně činná, or OSVČ) is a
physical person who has income from carrying out a business and/or self-employment (a
freelancer or entrepreneur). A sole proprietor may be registered with the Commercial Court
(Obchodní soud), or the trade license regulator (živnostenský úřad). The sole proprietor is liable
without limitation, and trades on his-her own full name – to which s/he might attach some
differentiating trade name. S/he must be 18 years of age, have a clean criminal record. The annual
accounting records of the company may be kept using either simple or accrual accounting. Sole
proprietors do not need to file accounts with the commercial court’s document repository (sbírka
listin), nor register for a databox (datová schránka) for e-communication with the government
unless they choose to do so.
Formation of sole proprietorship
Sole proprietorships can be formed in 1-5 days after filing papers with the trade license regulator.
You will need to file the application on a Monday or Wednesday, as other days are by
appointment only. Preparing forms in advance (downloadable from the internet) is also advised.
Applications can be processed while you wait, although generally staff will merely accept the
forms and check the documentation and provide you a registration within a few days.
Comprehensive services in this area are provided by accounting and business services firms, as
well as many legal offices, but with patience and determination you can do it on your own. Fees
for formation can vary depending on the level of hand-holding provided, 5,000–10,000 CZK
being representative. To form a sole proprietorship, the entrepreneur files with the trade license
regulator a registration form describing the full name and personal details, residential and legal
place of business (místo podnikání), and list of selected trades. The application must also contain
photo identification, proof of citizenship or legal residency (usually a long-stay or permanent
residence visa), a foreign criminal record extract or affidavit confirming you have no criminal
record, depending on your country of origin, a property deed (výpis z katastru nemovitosti) and
owner permission (souhlas vlastníka) for your place of business, trade license selection form, and
76 John Mohr. “Doing Business through a Sole-Proprietorship (Trade License)”. Expats. Expats.com, 17.04.2014,
http://firma.domytax.cz/en/blog/howto-register-sole-trader-zivno-czech-republic, 13.10.2017
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a stamp tax of 1,000 CZK per trade license. Trades are divided into free (volné) and regulated
trades. Most trades fall under the free category, but others are regulated, like accountants,
interpreters and medical professionals may require proof of higher education, professional
certifications, etc. Professional liability assurance (bonding) can usually be obtained for these
regulated trades.The trade license regulator will obtain a criminal record extract on your behalf
from the Czech criminal register. Sole proprietors will need to obtain the same from their home
countries or any other country where they lived more than 3 years, or potentially an affidavit from
their embassy in Prague.
Taxes and regulations
A sole proprietorship is regulated by a great number of government entities; the most significant
are the trade license and finance and social insurance regulators, and a health insurance company.
Employees of a sole proprietor are taxed in the same way as employees of an s.r.o. – we will not
consider these regulations or taxes here (see section on s.r.o.s). Sole proprietors generally must
file an income tax return (daňové přiznání) each year by March 31, and health and social
insurance returns (Přehled o příjímech a výdajích OSVČ) by April 30. While sole proprietors
without permanent residence in the Czech Republic are not eligible to participate in the public
health insurance program, they are required to possess insurance of a type known as complex, or
komplexní. Most sole proprietors will be obligated to pay into the Czech social insurance system,
but others (like Americans) might be able to elect to pay elsewhere for a period of up to 5 years.
Foreigners are advised to obtain a certificate of social security coverage from the country into
whose system they are paying.Direct taxes are calculated from taxable income, which will be
either revenues less deductible expenses, or, under the percentage of revenue option, generally
40% of revenues. You can keep accrual or simple accounting books and still use the percentage
of revenue method. Health and social insurance, meal and entertainment expenses, or poorly-
documented expenses are not deductible. Both health and social insurance taxes max out at
1,809,864 CZK of taxable income.
Financial regulator
You will need to register with the financial regulator within 30 days for self-employed income
tax. You may also register for VAT if you want to be able to reclaim VAT on eligible business
expenses, or road tax if you will operate a car as part of the business. Income tax: 15% of the
taxable income.Sole proprietors must pay monthly advances on social insurance and health
insurance that are netted against the annual liability due in April. The regulator/health insurance
company provides a summary of advances received to the payer each February. In the first year
of business, the advance will be set to the minimum amount; in subsequent years, to the amount
of tax paid in the prior year. The amount of social insurance advances paid depends on whether
self-employment is your main or secondary source of earned income. (See health and social
insurance section).
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Social insurance regulation
Most likely you will need to register for social insurance if you are self-employed. You might not
have to if you are not subject to the Trade License Act (e.g., a journalist) or if you are covered by
a certificate of coverage under a foreign program. For example, American citizens who are self-
employed are permitted to continue to pay into the US system, even if they work in the Czech
Republic, for up to 5 years. Most entrepreneurs will be considered to have self-employment as
the main source of income. If you are an employee or receive any number of government
entitlements, your self-employment may be considered a secondary source of income. This will
impact especially the amount of the advance that you need to pay. Social Insurance: 14.6% of the
taxable base. Minimum monthly advance payment is: 1,836 CZK (main); 735 CZK (secondary).
APPENDIX #5: CONTENT RESEARCHING AND PLANNING TECHNIGUE.
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APPENDIX #6: VIDEO PRODUCTION PLANNING MODEL
APPENDIX # 7: LIST OF PLUG-INS
1. YouTube: YouTube's OWN search bar to generate ideas about what videos will work.
NOTE: Search using a Google Chrome Incognito browser so that your search history
doesn't affect the results.
2. TubeBuddy: A great plugin with a built-in keyword research tool you can use directly on
YouTube.
3. canava.com: Design mouthwatering thumbnails. Free images and free design tools
4. Social Blade: Social Blade is a great tool to get a developer understanding of user trends
and growth. This is a free website that allows you to track the backend data of channels.
5. Google Keyword Planner Tool: This is a much more advanced tool for keyword research.
Look for keywords with high search volume and low to medium competition. There is
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LOTS of information on here and it is easy to get overwhelmed or waste time to look at
metrics that are irrelevant.
6. KeywordTool.io: A simple alternative to the Google Keyword Planner.
7. VideoIQ: This is a free google chrome plugin that provides information.
8. FameBit: FameBit is site used for influencer marketing, where they connect channels and
advertisers. This is an additional way to monetize the channel. Brand deals can range
anywhere from $100-5000.
9. 99designs.com: Tool for designing logos
10. upwork.com: The freelance site to get custom video intros/outros.
11. picmonkey.com: Free photo editing site. Pic Monkey is a great alternative to photoshop or
other paid editing tools.
12. rev.com: Video transcription service. Works great for generating closed captions and
transcribing your videos. They normally provide your video transcript within 24-hours
and cost around $1 per minute of video.
13. Aweber: The email service provider to collect and send emails. Building an email list is a
great way to promote your YouTube channel to your list.