Page 137 - Business Plans that Work A Guide for Small Business

128 • Business Plans that Work

common categories are market interest and growth potential, competitor
actions and retaliation, time and cost of development, operating expenses,
and availability and timing of financing. We will briefly highlight these
major categories, but don’t limit your thinking to only these categories.
Try to anticipate what else may be important for your company.

Market Interest and Growth Potential
The biggest risk any new venture faces is that once the product is devel-
oped, sales fall short of expectations. Although there are a number of
things that can be done to minimize this risk, such as market research,
focus groups, and beta sites, it is difficult to gauge overall demand and
growth of that demand until your product hits the market. This risk
must be stated, but countered with the tactics and contingencies the com-
pany will undertake if problems develop. For example, sales risk can be
reduced by hiring an experienced sales executive, developing an effective
advertising and marketing plan, or identifying not only a primary target
customer but also secondary and tertiary target customers that the com-
pany will seek if the primary customer proves less interested.
Perhaps the most effective method of countering this risk is to test
the market in a series of iterations. Thus many technology companies
go through alpha and beta testing. Basically, alpha testing is having “an
insider” group test the product. This can be as sophisticated as focus
groups, university MBA classes, and industry experts, or as simple as your
employees and friends. They report back and you make modifications
so that the product better meets their needs. Next, you might move the
product to beta sites. Beta sites are a handful of selected customers who
understand that the product is early stage and that there may be glitches,
yet they are excited by the product’s potential. Usually, you can get these
customers to pay a minimal price for the product, but sometimes you let
them use it at no charge. After you make adjustments during the beta
stage, you start controlled roll-out to the broader market. Try to have
feedback loops where you can learn from the customers and make change s
so that the product is better in the next version. Although this strategy
is commonly associated with technology products such as software, this
strategy can work with all businesses.
Lazybones has basically mimicked the market test methodology. Its
alpha site was the first store in Madison, Wisconsin. There, Dan and Reg
learned how to sell their laundry service, collect dirty laundry from their