Lisa Kovner will be blogging all month on beauty brand strategies, from Business Plan Dos and Don'ts to Distribution 101 to What Is Ops and Why Do I Care. You can read Kovner's "So, You Want to Build Your Own Beauty Brand" in our January issue, as well as her previous post, "Creating Cool." -Editor
Benjamin Franklin once said, “If you fail to plan, you plan to fail.” It’s good advice, especially if you want to build a business. Unfortunately, too many emerging beauty brands skip this important step to building their businesses.
Business plans are absolutely essential if your plans include securing funding from outside sources (e.g., banks, angel investors, equity partners, etc.) or if you need to prove to potential retailers that you’re business is solid.
The process can be a bit overwhelming, but it doesn’t have to be. Try using an online platform such as www.liveplan.com. For as little as $12.00 per month, you can build and update your business plan including your pitch, your strategy, your financials and more.
Before you meet with a contract manufacturer, package designer, distributor or retailer, write your business plan. You’ll save yourself from making costly mistakes down the road.
What Goes Into a Business Plan?
Entrepreneur.com outlines seven different sections of a business plan:
- Executive summary—The business concept, financial top line, capital requirements, current business position and achievements to date are usually include.
- Business description—What is your business about? What is the proof of concept? Why are your starting this business? How will it be structured?
- Market strategies—Market analysis, target market, market trends, industry growth projections, potential market share, positioning, pricing, distribution, sales and promotions, etc.
- Competitive analysis—Who are your competitors? What is their distribution? How are they marketing? What are their social followings? What motivates their customers? Where does your brand sit on the competitive landscape?
- Design and development—This is where you talk about the product development plans. What is the product? How is it different? Why will people want to buy it? How will it be packaged? What ingredients is it formulated with? What is the production process? How long will it take to bring to market? What are the risks?
- Operations and management—How will the business function on an ongoing basis? Who are the experts you’re working with? What is your organizational structure? What are your personnel and overhead costs? List out the capital requirements. State your landed cost of goods.
- Financials—This is the money section, and it’s absolutely essential. Include an income statement, cash flow statement and a balance sheet. It also helps to prepare a marketing/sales roadmap that outlines the detailed costs associated with bringing your product to market.
How Long Should a Business Plan Be?
For start-ups, a business plan may only be 15-20 pages long. There are lots of words, pictures and charts. When it’s converted into a presentation, it may only be 10 pages, depending on who you’re presenting it to.
Presentation plans are highly visual, as the expectation is that you’ll talk through the key points, rather than write them out in long-form.
Business Plan Dos and Don'ts
Do...
- Take the time to properly build a business plan.
- Research your industry and competition meticulously. When you tell a potential investor, retailer or expert that there’s nothing else on the market, they can tell you at least five without having to think about it. If you’re creating an anti-aging serum, every other anti-aging serum on the market is your competition.
- Thoroughly review your budgets to ensure you have enough money to market and sell your product as soon as it’s ready to ship.
- Keep it short and simple. There’s no need for most beauty start-ups to write a 50-page business plan. Stay focused on the essentials.
- Try using an online platform to build your business plan. It’s much faster and easier than trying to do it yourself. You can also hire someone to write it for you, but it can be an expensive option.
- Get help. If you get stuck on a certain area, reach out to an expert. For example, when you need help preparing the financial statements, contact a bookkeeper or a CPA. If you’re not sure of margins for distributors or retailers, search online for “keystone pricing” and you’ll find what you need.
Don’t…
- Be inflexible in your margins. When you set your pricing, create multiple pricing scenarios so you have an answer for distributors and retailers when they tell you your margin is too high.
- Be sloppy. Use spell check. Ask someone else to read it. If there are grammar, spelling and punctuation errors, it reflects poorly on you.
- Skip sections. When you title something as a business plan, there’s an expectation about the information it contains. If you reach a section you can’t complete, find an expert to help.
- Make unrealistic claims or state fantasy expectations. Keep it real. Refer back to your market strategies and competitive analysis.
Before you meet with a contract manufacturer, package designer, distributor or retailer, write your business plan. You’ll save yourself from making costly mistakes down the road.
Lisa Kovner (lisa@kovnercompany.com) is the founder of Kovner & Company, which propels brands forward using influencer-based and non-traditional marketing strategies for consumer, retail and distribution channels.
