WEEK 6

DEVISE A PLAN

Even if you act as a sales representative (rep) for a company, you are a business unto yourself. You have or should have your own income (in the form of commissions) and expenses. Like a bona fide business, you may even have separate budgets for marketing and operations, and if you have one or more assistants (and you should), you also have a payroll.

As a business, you should have your own business plan. A business plan does not have to be an intricately detailed document, but it does require a substantial amount of thought and foresight. It needs to address the structure of your business, what it does, and where it wants to ultimately end up. Your business plan establishes early on that what you are creating is an entity unto itself—something that’s bigger than just you and that ideally should continue to exist when you’re ready to retire or move on to something else.

ESSENTIAL ELEMENTS OF A BUSINESS PLAN

You can find loads of books and other resources on developing business plans that go into far more detail than I can possibly cover in one short chapter. I encourage you to reference one or more of these comprehensive resources at some point in your career. For now, focus on the basics covered in this chapter, and make sure your business plan does the following:

• Describes your business.

• Defines your market.

• Analyzes the situation.

• Communicates your vision.

• Projects revenue.

• Budgets for expenses.

• Identifies sources of investment capital.

 

Next I offer some additional guidance on how to develop each section of your business plan.

BUSINESS DESCRIPTION

Every business plan should start with a brief description of the business and what it does, for example:

 

As a business-to-business sales company, I am dedicated to assisting customers in selecting and using the right packaging products and services for their distribution needs.

 

Although the description is relatively brief (25 words), it sets out exactly what the business will do and what it offers clients.

MARKET FOCUS

Next, your business plan must establish your market, and by that, I do not mean something broad like “the housing market” or “the auto industry.” Although it may seem irrational, you have a better chance of achieving success by narrowing your market focus.

Instead of taking aim at the entire residential real estate market, for example, you may want to focus initially on first-time buyers or on people who are relocating to the area or retirees who need to downsize. Instead of trying to sell furniture to everyone within 20 miles of your store, you may want to focus on upscale homeowners or middle-income families. You can always expand later, but it’s best to start out with a limited focus.

Following is a sample market analysis for someone who sells athletic shoes and accessories:

The athletic shoes and accessories I sell are for competitive runners in high-school, collegiate, and Olympic arenas located on the West Coast of the United States. This market is willing to spend more on high-quality athletic gear that is proven to increase performance.

SITUATION ANALYSIS

Businesses are never created in a vacuum, so your business plan needs to address the realities of where you plan on doing business. It should address questions, such as the following:

• What makes you uniquely capable of achieving success in this market?

• What relationships can you tap for additional leverage?

• Who are your top competitors?

• Are you facing any additional challenges due to current market conditions?

• How is the market likely to change in the future?

 

Your business plan should have an entire section devoted exclusively to analyzing the current situation. Here’s an example of what a pharmaceutical salesperson might include in his or her business plan:

With over 10 years of experience in selling prescription medications for several different pharmaceutical companies, I now have a broad knowledge of various product lines and specific products that are currently available. Through my high-level contacts at local hospitals, I can market directly to most local area physicians and gain broad distribution through local pharmacies.

XYZ is my main competitor, but the company has a reputation for not delivering on time and failing to provide doctors with sufficient samples. By providing exceptional service 24/7, I am confident that I can capture at least 50 percent of XYZ’s existing market share.

VISION STATEMENT

When you close your eyes and imagine how your ideal business will operate, what do you see yourself doing on a daily basis? This vision should be included in your business plan. Your vision is likely to touch on other components of your business plan, including your market, the consumers you are targeting, and the unique combination of products and services you have to offer. In your vision, you crystallize everything in your business plan, summing up everything in a brief paragraph of two to five sentences, such as:

As the MPG guy, I specialize in sales and service of high-mileage vehicles of all makes and models in the highly green-aware community of Denver, Colorado. I offer only high-performance vehicles with proven track records for high-mileage and low emissions and work closely with customers to choose the right vehicle for their budget and lifestyle. After-sale service is a high-priority to ensure customer satisfaction long after the sale.

REVENUE PROJECTIONS

I often tell the salespeople and business owners I coach to forget about the bottom line and focus on the top line—your clients. Customer service should always be your primary focus, but when you are developing a business plan, you must pay some attention to your bottom line. Your business plan should include the following:

• Gross revenue you need to generate in order to break even, both annually and monthly. (Once you calculate your expenses, as discussed in the following section, you will have a clearer idea of your breakeven point.)

• The gross revenue you plan to earn both annually and monthly—your revenue goal.

• The number of transactions you need to complete in order to generate that revenue.

• The average commission from each transaction.

Many of the details you include in your business plan are going to flow out of these initial estimates. For example, if you plan on expanding gross sales from $2.5 million to $5 million, your plan will need to include details on how you are going to accomplish that goal. Are you going to invest more resources in marketing? Will you need to hire additional personnel to process transactions and serve customers? Are you going to implement new technologies to increase productivity? Your revenue projections generate the questions that the rest of your business plan will need to answer.

BUDGET

In order for you to remain solvent, you have to create a business plan that sets you on a course of bringing in at least enough revenue to cover expenses. Consider breaking your expenses into three categories:

1. One-time expenses or start-up costs: One-time expenses include the cost of equipment, such as a building, car, computers, and office furniture. What do you need to get up and running?

2. Fixed monthly expenses: These are hard expenses that will change little if at all each year. They will be a line item on your budget. Some of them might include rent or mortgage payment on your office building, taxes on your building, salaries, utility bills, phone service, Internet service, and office supplies.

3. Fluctuating monthly expenses: Some expenses are tough to pin down and budget for, including marketing and advertising expenses, seminars, and thank-you gifts. The good news is that you can usually cut back on fluctuating monthly expenses, if the need arises.

Your business plan needs to show how much money you need to bring in to get going and to keep going on a monthly and yearly basis.

START-UP MONEY

If you are already well-established, you may have sufficient funds and income to finance the implementation of your business plan yourself. If you are just starting out or are not quite successful enough yet to finance your future success, you may need to beg, borrow, or partner for the money and resources you need. Here are some ideas:

• Borrow money from family members or friends until you can “get on your feet.”

• Borrow money from a bank or other lending institution.

• Barter your services for the products and services you need. (Consult your accountant to determine whether you need to pay taxes on these trades.)

• Establish a partnership with someone who has what you need and needs what you have. (Be careful, though; partnerships can be very tricky and somewhat risky. I used to say “Pick a partner as carefully as you pick a spouse,” but with divorce rates at about 50 percent, I’m beginning to think that you need to pick a partner more carefully than most people choose a spouse.)

Do not hesitate to borrow the money you need to get started. Not starting is worse. Assuming you have a solid plan in place and you work the plan, you should have no problem paying back the loans.

 

Ralph’s Rule: Plan your work and then work your plan. When theory (your plan) encounters reality, you will often notice flaws in your plan. Make the necessary adjustments and keep trying until you get it right. Far too many salespeople abandon their plans at the first sign of trouble, which is usually a big mistake. When a ship is drifting off course, the captain does not turn around and head back; changing course a couple degrees is usually all that is required.