Real Small Business

II. Business Description

Whether you're looking for money or simply creating an internal document, you must be able to present a clear portrait of what your company does. Your business description is your corporate vision, and includes: who you are, what you will offer, what market needs you will address, and why your business idea is viable.

Too many business owners make the mistake of operating without a vision; a situation which hampers their business' ability to grow and prosper. A business owner without a vision will have difficulty describing his or her business and will provide a long, rambling description, a few stock phrases, or a collection of incomprehensible jargon when asked for one. A concise, easy-to-understand description of your company will not only help your business plan, but will benefit you in any number of other day-to-day situations - from networking to making cold calls to approaching a newspaper for an interview. A typical business description section includes:

1. An overview of your industry

2. A discussion of your company

3. Descriptions of your products/services

4. Your positioning

5. Your pricing strategy

1. The Industry

Begin your business description with a brief overview of the industry you will be competing in. Ultimately, you want to demonstrate that you are in a "hot" industry with an excellent long-term outlook. You're also setting the stage for your company description by showing where you fit in the marketplace.

Discuss both the present situation in the industry, as well as future possibilities. You should also provide information about the various market segments within the industry, with a particular focus on their potential impact on your business. Be sure to include any new products or other developments that will benefit or possibly hurt your business. Are there new markets and/or customers for your company/companies such as yours? What about national trends or economic trends and factors that will impact your venture?


    Feel free to be dramatic.

    You can describe your industry like you're telling a story. Grab the reader's attention with strong, exciting language that will get them interested in your industry and your business.

    Answering "why" makes any description stronger.

    Saying "the market will grow at 25% annually" may sound impressive. But what caused that rate of growth? Adding "...because a growing number of baby boomers now entertain at home instead of going out" makes it stand out.

    This is not a discussion of your competition.

    That information will come later in the competitive analysis portion. Instead, you are providing an overview of the industry where you and other companies will compete.

    Many business plans make the mistake of basing their market observations on conjecture.

    Instead, you will want to research your industry and back up your observations with facts. Be sure to note all sources.

    Trade associations are excellent sources of information about trends in your industry.

    To find the trade association for your industry, consult the Gale Encyclopedia of Business and Professional Associations.

    General business newspapers and magazines (like the Wall St. Journal or Business Week) and trade newspapers and magazines (those covering a specific industry) often report industry-wide trends as well. Many research and university libraries carry various trade publications and newsletters. Look in Bacon's Media Directories for lists of publications, or use a database like Nexis to find references on specific subjects.

    Don't be afraid to include negative information about your industry.

    Discussing the possible roadblocks your company might face shows you have a realistic view of the market.

    If you cite information from specific newspaper or magazine articles or research reports, you might want to include a copy in your business plan appendix.

2. Your Company

The discussion of your company should begin with your mission statement - a one or two sentence description of the purpose of your business and to whom your product or service is targeted. Not being clear in your mission statement indicates that you are not clear about the purpose of your company.

Describe Your Company

Once you have your mission statement, you can then discuss the more "technical" aspects of your company. Remember that you're telling your company's story, so even though there are specific areas you will need to cover, you will want to keep it lively and interesting. Some areas you should include are:

    What type of business is it? Wholesale? Retail? Manufacturing? Service?

    When was the company founded? Is it a start-up, or an established enterprise? What is the story behind the founding of the company?

    What is your business' legal structure? Sole proprietorship? Corporation? Partnership?

    Who are the company's principals and what pertinent experience do they bring?

    What market needs will you meet? Whom will you sell to? How will your product(s) or service(s) be sold?

    What support systems will be utilized? Customer service? Advertising? Promotion?


    Your company's focus often depends on your market. A small town general store can sell groceries, hardware, newspapers, and gasoline because they may be the only store that sells those items in the area. A larger market would require greater specialization to set yourself apart from the competition.

    Small business owners often get stuck using existing labels which don't accurately describe their companies. Ask yourself what business are you really in? What true benefits do you provide? For example, if you create corporate newsletters, are you just a "newsletter publisher" or do you "help large companies communicate important information to their clients and prospects."

    If you're an established company, give a brief history and cite prior sales and profit figures. If you've had losses or other setbacks, explain why, and discuss what is being done to correct them. Has company ownership changed hands? Be sure to talk about why it was sold.

    When discussing the company's principals, you don't need to run a complete resume - save that level of background for later in the plan. But don't be too brief, either. Don't just say "Ajax Financial Services is being founded by Jean Smith." Instead, it's stronger to write something like, "Founder and President Jean Smith, former Chief Financial Officer of Acme Industries, brings 25 years of experience in financial services to Ajax Financial Services."

3. Descriptions of your products & services

Describe each of your products or services with a particular focus on how it will be used. Go into as much detail as necessary for the reader to get a real flavor for what you are selling. What are the applications and the end uses? Underscore the specific features or variations that your products have.

Stress Your Unique Selling Proposition

Be sure to emphasize your Unique Selling Proposition (USP). Your USP is the proprietary information that sets your product or service apart from your competition. If you are using your business plan to solicit funds, this is what your reader will want to see. If it is an internal document, your USP will be critical to your sales and marketing strategies. Without a USP, your product or service will appear drab and there will be no compelling reason for people to buy it.

What would some USPs be? For a food product, it could be a proprietary recipe (like Kentucky Fried Chicken's secret recipe) or a special way the food is served (like Boston Market's hand-carved turkey). OXO Good Grips, a maker of kitchen gadgets, set itself apart by using ergonomically designed grips and handles on all its products.


    Focus on your success factors.

    In other words, think about how you are going to turn a buck. Why will your products or services be successful in the marketplace? There are any number of reasons you can use - it's a well-organized business, we use state-of-the-art equipment, our location is exceptional, the market is ready for our product, its a great product at a fair price, etc.

    If you are selling a product, you may want to include full specifications.

    If available, include a quality photograph as well.

    One of your challenges will be to keep the "unique" in your USP.

    If there is a chance your competition will begin offering products or services that also have your unique features, then you should also discuss how you plan to remain ahead of the pack.

    Be specific in describing your competitive edge.

    Don't just say something like "we intend to provide better service." Explain how you will do so, and why that sets you apart from your competitors.

4. Your Positioning

Position is your identity in the marketplace: how you want the market and your competitors to perceive your product or service. While your USP is based on features of your product or service, your positioning is based on your customers and competition. Federal Express positioned itself as a reliable and dependable overnight delivery service for businesses. MTV and VH1 play many of the same music videos, but MTV is positioned as the choice for young, hip viewers, while VH1 is considered the station for more mature viewers.

If you run a dry cleaning business you can be the fastest, the most dependable, the cheapest, or the business providing the best service. A mail-order gift business can emphasize price, convenience, a flexible returns policy, unique products, or some combination of these. A hairdresser may be positioned as hip, traditional, pampering, inexpensive, or convenient. You may think that positioning is based on image. Develop your position by answering the following questions with brief, direct statements:

    What is unique about your product or service?

    What customer needs does your product fulfill?

    How do you want people to view your products or services?

    How do your competitors position themselves?


    Research your competitors by shopping their stores or calling them to see what they offer and what they charge for it.

    To create a list of your competitors strengths and weaknesses, look at areas such as distribution, pricing, value, service, timeliness. If you were undertaking market research, for example, you would look at depth of research price, frequency of survey, add-on services, and reputation in the marketplace. A dry cleaner would look at pricing, location, services such as delivery, hours of operation, quality of their cleaning, whether or not they are computerized and if they provide services such as tailoring and mending.

    If appropriate, research your competitors in trade magazines to unearth their strengths and weaknesses.

    In order to position yourself in the market you will need to understand standard industry practices, such as pricing, billing, distribution. This information is usually available from trade organizations. Call the reference librarian or visit the reference section of your library to find the appropriate association in a book called the Gale Encyclopedia of Business and Professional Associations.

5. Your pricing strategy

Discuss what you will charge for your product or service and how you derived the price. For example, a luxury gift importing business sets prices not only to cover costs and make a profit but to position products as luxury items. A printing shop with a good location charges slightly more than its competition because it has a convenient location and it has determined that the market will bear the higher price.

Once you have briefly explained your pricing and rationale, discuss where this pricing strategy places you in the spectrum of the other providers of this product or service. Next, explain how your price will: get the product or service accepted, maintain and hopefully increase your market share in the face of competition, and produce profits.


    Investors are used to seeing (and rejecting) business plans in which an entrepreneur says the product or service they want to create will be higher in quality and lower in price than those of their competitors. This makes a bad impression because it's usually unrealistic. If you really do have a higher quality product, it will appear that you may plan to underprice it, and consequently undersell it.

    Costs tend to be underestimated. If you start out with low costs and low prices, you leave yourself with little room to maneuver, and price hikes will be difficult to implement.

    If you charge more than competitive existing products, you will need to justify the higher price on the basis of newness, quality, warranty, and/or service.

    If a price will be lower than that of an existing, competing, product or service, explain how you will maintain profitability. This may happen through more efficient manufacturing and distribution, lower labor costs, lower overhead, or lower material costs.

    Discuss how higher prices may reduce volume, but result in high gross profit.

Next: Creating a Business Plan: III. The Market


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How to Start Your Own Business: Creating a Business Plan - Business Description

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