Business people often overlook this important stage of the business plan process because they think it is clear and simple and slough it off. Wrong, wrong !! You not only have to know what products and services you want to offer, but also exactly what they are and in what price range you want to sell them. You also have to have an idea what you eventually want to sell in the future.
It isn't a simple process to secure products and it certainly isn't easy to establish prices. You want to be different, you want to stand out. There's no sense being the same as everyone else. Let's look at a couple of different businesses to better understand what I am talking about.
If you are operating a landscaping business ask yourself these questions:
- How are you going to distinguish yourself from the competition?
- Are you going to attack your competition with price – a bad idea in most cases – or by adding benefits for your customers?
- What value-added benefits are you going to offer?
- Are you going to offer a seasonal package of services or are you going to charge by the visit?
- Are you going to include fertilizing and weed control together with lawn maintenance or are those services going to be extra?
- Are products like fertilizer paid for separately?
- Are you going to charge your customers the same price for fertilizer you pay or upcharge them?
By answering questions like these, you will be able to make decisions about what services you want to offer and what revenue streams you can expect to have once you are in operation. You need to identify your potential revenue streams because it is those streams that fuel your sales. The greater number of revenue streams you have, the greater chance you have to build your sales. You also need to know what services you are going to offer because you need to know what skills your employees require. If you aren't a certified 'this' or 'that', then you'll need to have someone on your team who is if it is a requirement.
Let's look at a clothing store. Say you have decided that you want to open a ladies' wear outlet in the local mall.
- Are you going to carry accessories?
- What about outerwear?
- Are you going carry sportswear or business wear or both?
- What is your price point?
- Are you going to offer an alterations service?
- Is it going to be in-house?
- Are you going to charge for the service or include it in the price of purchases?
As you can see there is a lot of work to do. You must do your homework. You must be able to 'see' what is happening in your business BEFORE you open.
You also have to be aware of the potential changes in the marketplace throughout the year. Seasonal shifts in demand for products and services can be dramatic. Summer sales can be good or poor. Maybe you operate in a college town and from June through September the population base tumbles. March break can be a boom or bust depending upon where your business is located.
Once you have a good handle on your products and services, you will be able to better forecast your sales – you'll have your revenue streams – and you'll be able to forecast your cost of goods sold because you'll know where you are buying things from and how much you are paying for them. It is all about projections for your financial forecast.