Strategic Marketing Planning for the Small to Medium-Sized Business: Writing a Marketing Plan

Strategic marketing includes the actions of the business for the purpose of providing customer satisfaction. Strategy development considers business scope, competitive advantage, and organizational effectiveness. Customer targeting and assembling the marketing programs of the company are coordinated among the functions within the business. Strategic marketing provides the companies linked with the environment and emphasizes marketing as an integrated responsibility of the business rather than a specialized function.

Achieving competitive advantage requires teamwork and functional integration. I will highlight the importance of strategic management processes that function effectively in a rapidly changing business environment. External forces all through the composition and attractiveness of markets and the competitive structure that it presents in markets. Strategic marketing provides the expertise for environmental monitoring, for deciding what customer groups to serve, for product specifications, and for deciding which competitors to position against.

Marketing executives provide the professional skills and experience needed to meet these responsibilities. In addition, it is important to recognize that the company strategies involved in integrating marketing and other functional strategies. Successfully integrating multifunctional strategies is critical to providing high levels of customer satisfaction. Get Our Best Kept-Secrets. Customer preferences for product attributes must be transformed into product design and production guidelines. Success in achieving high-quality products and services depends importantly on finding out which dimensions of product and service quality drives customer satisfaction.

Marketing professionals have the experience and skills essential for analyzing customer satisfaction with surveys and net promoter scores NPS. Finally, strategic marketing moves beyond or revenue emphasis on marketing management. Instead, the objective is to make strategic marketing decisions that contribute to the financial performance of the business.

Strategic choices such as which markets to enter or exit are guided by estimated financial performance using the same criteria in time horizon used to gauge business success. Several basic financial analysis concepts and methods are needed for these actions. Learn more about m arketing budget models.

Before work can start on marketing strategy, management must clearly understand its objectives and plans for each SBU. It is essential to understand the business purpose, scope, objectives, and strategy make strategic marketing decisions that correspond to the corporate and business unit plan.

Top management must answer these key questions.

First, based on an assessment of the business units strength in attractiveness in each product market, what broad strategy will the unit pursue and what financial resources will be made available to carry out the strategies? Will the unit be managed for cash flow, growth, or earnings? Second, what are the specific expectations of top management regarding sales, market share, profit contribution, and other aspects of performance? These guidelines provide the basis for developing SBU and marketing strategies. For example, in determining sales and market share targets for a business unit, participation by key executives is essential.

Moreover, some flexibility in the negotiations may be necessary to motivate managers and to give them an opportunity to execute strategies with a high probability of success. The strategic marketing planning process used is shown in Exhibit 1. The situation analysis considers market structure and supply and demand, market segmentation, customer analysis, and competitor analysis.

Marketing strategy design examines marketing advantage, customer targeting, positioning analysis, strategy selection for different situations, and the new product strategy. The principles of marketing will explain additionally how to put meaning and values into what you plan. Your market research should focus on the information you need, to help you to formulate strategy and make business decisions. Market research should be pragmatic and purposeful - a means to an end, and not a means in itself. Market information potentially covers a vast range of data, from global macro-trends and statistics, to very specific and detailed local or technical information, so it's important to decide what is actually relevant and necessary to know.

Market information about market and industry trends, values, main corporations, market structure, etc, is important to know for large corporations operating on a national or international basis. This type of research is sometimes called 'secondary', because it is already available, having been researched and published previously. This sort of information is available from the internet, libraries, research companies, trade and national press and publications, professional associations and institutes.

Strategic Marketing Planning Process for SMBs

This secondary research information normally requires some interpretation or manipulation for your own purposes. However there's no point spending days researching global statistical economic and demographic data if you are developing a strategy for a relatively small or local business. Far more useful would be to carry out your own 'primary' research i. A lot of useful primary market research can be performed using customer feed-back, surveys, questionnaires and focus groups obtaining indicators and views through discussion among a few representative people in a controlled discussion situation.

This sort of primary research should be tailored exactly for your needs. Primary research requires less manipulation than secondary research, but all types of research need a certain amount of analysis. Be careful when extrapolating or projecting figures to avoid magnifying initial mistakes or wrong assumptions.

If the starting point is inaccurate the resulting analysis will not be reliable. For businesses of any size; small, local, global and everything in between, the main elements you need to understand and quantify are:. Primary research is recommended for local and niche services.

Keep the subjects simple and the range narrow. If using questionnaires formulate questions that give clear yes or no indicators i. Try to convert data to numerical format and manipulate on a spreadsheet. Use focus groups for more detailed work. For large research projects consider using a market research organization because they'll probably do it better than you, even though this is likely to be more costly.

If you use any sort of marketing agency ensure you issue a clear brief, and that your aims are clearly understood. First establish or confirm the aims of the business, and if you are concerned with a part of a business, establish and validate the aims of your part of the business. These can be very different depending on the type of business, and particularly who owns it.

Traditional business models are not necessarily the best ones. The world is constantly changing, and establishing a new business is a good time to challenge preconceptions of fundamental business structure and purpose. A business based on a narrow aim of enriching a few investors while relegating the needs and involvement of everyone else may contain conflicts and tensions at a deep level.

There are other innovative business structures which can inherently provide a more natural, cooperative and self-fuelling relationship - especially between employees and the organization, and potentially between customers and the organization too. When you have established or confirmed your philosophical and ethical position, state the objectives of the business unit you are planning to develop - your short, medium and long term aims - typically 'short, medium and long' equate to 1 year, years and 3 years plus.

In other words, what is the business aiming to do over the next one, three and five years? Grand visions need solid foundations. All objectives and aims must be prioritised and as far as possible quantified. If you can't measure it, you can't manage it. It announces clearly and succinctly to your staff, shareholders and customers what you are in business to do.

You can involve staff in defining and refining the business's mission statement, which helps develop a sense of ownership and responsibility. Producing and announcing the mission statement is also an excellent process for focusing attention on the business's priorities, and particularly the emphasis on customer service. Whole businesses need a mission statement - departments and smaller business units within a bigger business need them too.

You must understand and define clearly what you are providing to your customers. Under normal circumstances competitive advantage is increased the more you can offer things that your competitors cannot. Good research will tell you where the opportunities are to increase your competitive advantage in areas that are of prime interest to your target markets. Develop your service offering to emphasise your strengths, which should normally relate to your business objectives, in turn being influenced by corporate aims and market research.

The important process in developing a proposition is translating your view of these services into an offer that means something to your customer. The definition of your service offer must make sense to your customer in terms that are advantageous and beneficial to the customer, not what is technically good, or scientifically sound to you.

Think about what your service, and the manner by which you deliver it, means to your customer. Traditionally, in sales and marketing, this perspective is referred to as translating features into benefits. For example, if a strong feature of a business is that it has hour opening, this feature would translate into something like: Clearly this benefit represents a competitive advantage over other suppliers who only open The important thing is to understand your services and proposition in terms that your customer will recognise as being relevant and beneficial to them.

Most businesses have a very poor understanding of what their customers value most in the relationship, so ensure you discover this in the research stage, and reflect it in your stated product or service proposition s. If your proposition s cannot be seen as leading to any of the above then customers will not be very interested in you. This is the first 'brick in the wall' in the process of business planning, sales planning, marketing planning, and thereafter, direct marketing, and particularly sales lead generation. Business plans come in all shapes and sizes. Ensure your plan shows what your business needs it to show.

Essentially your plan is a spreadsheet of numbers with supporting narrative, explaining how the numbers are to be achieved. A plan should show all the activities and resources in terms of revenues and costs, which together hopefully produce a profit at the end of the trading year. The level of detail and complexity depends on the size and part of the business that the plan concerns. Your business plan, which deals with all aspects of the resource and management of the business or your part of the business , will include many decisions and factors fed in from the marketing process.

It will state sales and profitability targets by activity. In a marketing plan there may also be references to image and reputation, and to public relations. All of these issues require thought and planning if they are to result in improvement, and particularly increasing numbers of customers and revenue growth. You would normally describe and provide financial justification for the means of achieving these things, together with customer satisfaction improvement. Above all a plan needs to be based on actions - cost-effective and profitable cause and effect; inputs required to achieved required outputs, analysed, identified and quantified separately wherever necessary to be able to manage and measure the relevant activities and resources.

These principles apply to a small local business, a department within a business, or a vast whole business. Before attending to the detail of how to achieve your marketing aims you need to quantify clearly what they are. What growth targets does the business have? What customer losses are you projecting?

How many new customers do you need, by size and type, by product and service? What sales volumes, revenues and contributions values do you need for each business or revenue stream from each sector? What is your product mix, in terms of customer type, size, sector, volumes, values, contribution, and distribution channel or route to market? What are your projected selling costs and net contributions per service, product, sector?

What trends and percentage increase in revenues and contributions, and volumes compared to last year are you projecting? How is your market share per business stream and sector changing, and how does this compare with your overall business aims? What are your fast-growth high-margin opportunities, and what are your mature and low-margin services; how are you treating these different opportunities, and anything else in between? You should use a basic spreadsheet tool to split your business according to the main activities and profit levers.

A useful planning tool in respect of markets and products is the matrix developed by Igor Ansoff H Igor Ansoff, , who is regarded by some as the 'Father of Strategic Management'. The Ansoff product-market matrix helps to understand and assess marketing or business development strategy.

Any business, or part of a business can choose which strategy to employ, or which mix of strategic options to use. Each of these strategic options holds different opportunities and downsides for different organizations, so what is right for one business won't necessarily be right for another. Think about what option offers the best potential for your own business and market.

Think about the strengths of your business and what type of growth strategy your strengths will enable most naturally. Generally beware of diversification - this is, by its nature, unknown territory, and carries the highest risk of failure. This is fine if there is plenty of market share to be had at the expense of your competitors, or if the market is growing fast and large enough for the growth you need. If you already have large market share you need to consider whether investing for further growth in this area would produce diminishing returns from your development activity.

It could be that you will increase the profit from this activity more by reducing costs than by actively seeking more market share. This is an attractive strategy if you have strong market share in a particular market.

Developing new products does not mean that you have to do this yourself which is normally very expensive and frequently results in simply re-inventing someone else's wheel - often there are potential manufacturing partners out there who are looking for their own distribution partner with the sort of market presence that you already have. However if you already have good market share across a wide range of products for your market, this option may be one that produces diminishing returns on your growth investment and activities, and instead you may do better to seek to develop new markets, as in the next strategic option.

New markets can also mean new sub-sectors within your market - it helps to stay reasonably close to the markets you know and which know you. This is high risk - not only do you not know the products, but neither do you know the new market s , and again this strategic option is likely to entail working through new distribution channels and routes to market. This sort of activity should generally be regarded as additional and supplementary to the core business activity, and should be rolled out carefully through rigorous testing and piloting.

Consider also your existing products and services themselves in terms of their market development opportunity and profit potential. Other products and services may be more mature, with little or no competitive advantage, in which case they will produce lower margins.

The Boston Matrix is a useful way to understand and assess your different existing product and service opportunities:. The Boston Matrix model also called the BSG Matrix, Growth-Share Matrix, and variations around these titles is a tool for assessing existing and development products in terms of their market potential, and thereby implying strategic action for products and services in each of the four categories reflected in the model.

Like other four-part 2x2 matrix models, the Boston Matrix is a very quick and easy method for analysis, thinking and decision-making, while being unavoidably limited in its handling of subtlety and detail. Often in business and strategic thinking too much detail is unhelpful - instead, clarity and ease of understanding are extremely helpful, especially in communicating ideas to teams and groups, in which circumstances the Boston Matrix is an excellent aid.

Products in this quadrant need maintenance and protection activity, together with good cost management, not growth effort, because there is little or no additional growth available. There is no point in developing products or services in this quadrant. Businesses that have been starved or denied development find themselves with a high or entire proportion of their products or services in this quadrant, which is obviously not very funny at all, except to the competitors.

This is likely to be an area of business that is quite competitive, where the pioneers take the risks in the hope of securing good early distribution arrangements, image, reputation and market share. Gross profit margins are likely to be high, but overheads, in the form of costs of research, development, advertising, market education, and low economies of scale, are normally high, and can cause initial business development in this area to be loss-making until the product moves into the rising star category, which is by no means assured - many problem children products remain as such.

As a product moves into this category it is commonly known as a 'rising star'. When a market is strong and still growing, competition is not yet fully established. Demand is strong; saturation or over-supply do not exists, and so pricing is relatively unhindered. This all means that these products produce very good returns and profitability. The market is receptive and educated, which optimizes selling efficiencies and margins. Production and manufacturing overheads are established and costs minimised due to high volumes and good economies of scale.

These are great products and worthy of continuing investment provided good growth potential continues to exist. When it does not these products are likely to move down to cash cow status, and the company needs to have the next rising stars developing from its problem children. After considering your business in terms of the Ansoff matrix and Boston matrix which are thinking aids as much as anything else, not a magic solution in themselves , on a more detailed level, and for many businesses just as significant as the Ansoff-type-options, what is the significance of your major accounts - do they offer better opportunity for growth and development than your ordinary business?

Do you have a high quality, specialised offering that delivers better business benefit on a large scale as opposed to small scale? Are your selling costs and investment similar for large and small contracts? If so you might do better concentrating on developing large major accounts business, rather than taking a sophisticated product or service solution to smaller companies which do not appreciate or require it, and cost you just as much to sell to as a large organization.

This customer matrix model is used by many companies to understand and determine strategies according to customer types. Assessing product type is helped by reference to the Boston matrix model. There is a lot of flexibility as to what constitutes 'good' and 'not so good customers' - use your own criteria. A good way to do this is to devise your own grading system using criteria that mean something to your own situation.

This kind of customer profiling tool and exercise is often overlooked, but it is a critical aspect of marketing and sales development, and of optimizing sales effectiveness and business development performance and profitability. Each quadrant requires a different sales approach. The type of customer also implies the type of sales person who should be responsible for managing the relationship. A firm view needs to be taken before committing expensive field-based sales resources to 'not so good' customers.

Focus prospect development identifying and contacting new prospective customers on the profile which appears in the top left quadrant. Identify prospective new customers who fit this profile, and allocate your business development resources people and advertising to this audience. Consider also What are your competitor weaknesses in terms of sectors, geographical territory and products or services, and how might these factors affect your options?

Use the models described here to assess your best likely returns on marketing investment. The best way to begin to model and plan your marketing is to have a record of your historical say last year's sales results including selling and advertising costs if appropriate and available on a spreadsheet. The level of detail is up to you; modern spreadsheets can organize massive amounts of data and make very complex analysis quick easy. Data is vital and will enable you to do most of the analysis you need for marketing planning. In simple terms you can use last year's results as a basis for planning and modelling the next year's sales, and the marketing expenditure and activities required to achieve them.

These templates examples help the planning process. Add different columns which reflect your own business profit drivers or levers, and to provide the most relevant measures. Do the same for each important aspect of your business, for example, split by market sector or segment:.

These simple split analysis tools are an extremely effective way to plan your sales and business. Construct a working spreadsheet so that the bottom-right cell shows the total sales or gross margin, or profit, whatever you need to measure, and by changing the figures within the split altering the mix, average prices, quantities, etc you can carry out 'what if? If you are a competent working with spreadsheets it is normally possible to assemble all of this data onto a single spreadsheet and then show different analyses by sorting and graphing according to different fields.

When you are happy with the overall totals for the year, convert this into a phased monthly plan, with as many lines and columns as you need and are appropriate for the business. Develop this spreadsheet by showing inputs as well as sales outputs - the quantifiable activity for example, the numbers of enquiries necessary to produce the planned sales levels required to produce the planned performance.

Large businesses need extensive and multiple page spreadsheets. A business plan needs costs as well as sales, and will show profit as well as revenue and gross margin, but the principle is the same: Consider also indirect activities that affect sales and business levels, such as customer service. Identify key performance indicators here too, such as customer complaints response and resolution levels and timescales. Internal lead referral schemes, strategic partnership activity; the performance of other direct sales activities such as sales agencies, distributorships, export activities, licensing, etc.

These performance factors won't normally appear on a business plan spreadsheet, but a separate plan should be made for them, otherwise they won't happen. Your marketing plan is actually a statement, supported by relevant financial data, of how you are going to develop your business. Plans should be based on actions, not masses of historical data. The historical and market information should be sufficient just to explain and justify the opportunities, direction, strategy, and most importantly, the marketing actions, methods and measures - not to tell the story of the past 20 years of your particular industry.

As stated above it is easiest and best to assemble all of this data onto a spreadsheet, which then allows data to be manipulated through the planning process, and then changed and re-projected when the trading year is under way. The spreadsheet then becomes the basis of your sales and marketing forecasting and results reporting tool. As well as sales and marketing data, in most types of businesses it is also useful to include measurable aims concerning customer service and satisfaction.

The marketing plan will have costs that relate to a marketing budget in the overall business plan. This data is essentially numerical, and so needs also some supporting narrative as to how the numbers will be achieved - the actions - but keep the narrative concise; if it extends to more than a half-dozen sheets make sure you put a succinct executive summary on the front. The marketing plan narrative could if appropriate also refer to indirect activities such as product development, customer service, quality assurance, training etc.

Be pragmatic - marketing plans vary enormously depending on the type, size and maturity of business. Above all create a plan that logically shows how the business can best consolidate and grow its successful profitable areas. The marketing plan should be a working and truly useful tool - if it is, then it's probably a good one. Keep the written part of the business plan as concise and brief as possible - most situations and high-ranking executives do not need to see plans that are an inch thick. If you can make your case on a half dozen pages then do so.

Particularly if your plan is more than pages long, produce an executive summary easiest to do when you have completed the plan and insert it at the beginning of the document. If you need to include lots of reference material, examples, charts, evidence, etc, show these as appendices at the back of the document and make sure they are numbered and referenced during the main body of the plan.

Each new section should start at the top of a new page. Important plans should be suitably bound. All business plans should be professionally and neatly presented, with no grammar and spelling errors, clearly laid out in an easy to read format avoid lots of upper-case or fancy fonts or italics as these are all difficult to read. Your business plan contents and structure should be as follows:. A business plan for a more complex project such as an international joint-venture, or the formation of a new company including manufacturing plant or other overhead activities would need to include relevant information and financials about the overheads and resources concerned, and the financials would need to show costs and profits more like a fully developed profit and loss account, with cashflow projections, balance sheet, etc.

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While these aspects are not mechanisms within the plan, they are crucial reference points. Adapt as necessary according to your new strategic plans.

Your people are unlikely to have all the skills they need to help you implement a marketing plan. You may not have all the people that you need so you have to consider justifying and obtaining extra. Customer service is acutely sensitive to staffing and training. Are all of your people aware of the aims of the business, its mission statement and your sales propositions? Do they know what their responsibilities are? How will you measure their performance?

Many of these issues feed back into the business plan under human resources and training, where budgets need to be available to support the investment in these areas. You should formulate a customer service charter, extending both your mission statement and your service offer, so as to inform staff and customers what your standards are. These standards can cover quite detailed aspects of your service, such as how many times the telephone will be permitted to ring until the caller is gets an answer.

Other issues might include:. This charter sets customer expectations, so be sure you can meet them. Customers get disappointed particularly when their expectations are not met, and when so many standards can be set at arbitrary levels, think of each one as a promise that you should keep. Business-to-business customers would expect to agree these standards with their suppliers and have them recorded as part of their contracts, or as SLA's service level agreements. Increasingly, large customers demand SLA's to be tailored to their own specific needs, and the process of developing these understandings and agreements is absolutely crucial to the maintenance and development of large contracts.

Remember an important rule about customer service: It's not so much the failure to meet standards that causes major dissatisfaction among customers - everyone can make a mistake - the biggest cause of upset is the failure of suppliers to inform customers and keep them updated when problems arise. Not being told in advance, not receiving any apology, not getting any explanation why, and not hearing what's going to be done to put things right, are key areas of customer dissatisfaction, and therefore easy areas for suppliers to focus their efforts to achieve and communicate improvements.

A special point of note for businesses that require a strong technical profile among their service staff: It's therefore helpful to establish suitable mechanisms and responsibility to pick up problems and deal with them - a kind of trouble-shooting capability - which can be separately managed and monitored at a strategic level. Do not assume that technically-oriented staff will be capable of proactively developing customer service solutions and revisions to SLA's - they generally need help in doing so from staff with high creativity, empathy, communications and initiative capabilities.

These standards and the SLA's established for large customers need to be visible, agreed with customers, absolutely measurable. You must keep measuring your performance against them, and preferably publishing the results, internally and externally. Customer complaints handling is a key element:. Measuring customer complaints is crucial because individual complaints are crucial areas to resolve, and also as a whole, complaints serve as a barometer for the quality and performance of the business.

You need to have a scheme which encourages, not discourages, customers to complain, to open the channels as wide as possible. Most businesses are too defensive where complaints are concerned, preferring to minimise their importance, or to seek to justify and excuse them. Complaints are the opportunities to turn ordinary service into unbeatable service. Moreover, time and again surveys suggest that anything up to nine out of ten people do not complain to the provider when they feel dissatisfied - they just keep their dissatisfaction to themselves and the provider never finds out there's a problem, even when the customer chooses to go elsewhere.

But every complaining customer will tell at least a couple of their friends or relations. Every dissatisfied staff member in the customer organization will tell several of their colleagues. Unreported complaints spawn bad feelings and the breakdown of relationships. It is imperative that you capture all complaints in order to:. Information Technology - are your computers and communications systems capable of giving you the information and analysis you need? How do you use email - is it helping or hindering your business and the quality of service you give to your customers?

What internet presence and processes do you need? How should your voice and data systems work together? What systems need to be available to mobile staff? What customer relationship management CRM systems should you have? How should you consider all these issues to see the needs and opportunities? IT and communications systems increasingly offer marketing and competitive advantage to businesses in all sectors - make sure you know hat IT can do for you and for your customers.

Premises - Review your premises and sites in light of your customer service, distribution, and customer relationship requirements.

Strategic Marketing | Planning Process | Matrix Marketing Group

Pay particular attention anywhere in your organization that your customers visit - the impression and service you give here is critical. Reporting systems - If you can't measure it you can't manage it, and where finance and business performance is concerned this is certainly true. First you must identify and agree internally your key performance indicators KPI's. Identify every aspect of your service or performance that is important - then you need to be able to measure it and report on it, and where people are involved in performing to certain standards then the standards and the reporting needs to be transparent to them also.

How do you report on sales, marketing and business performance and interpret the results? Who needs to know? Who needs to capture the data? Having an open dialogue with your customers is vital. There's a double benefit to your business in ensuring this happens:. Try to devise a standard feedback form.

It can double as a promotional tool as well if it's made available on a wider scale. The form can carry details of your mission statement, service offer and your customer service charter. Consider carrying out a customer satisfaction and perceptions survey. There are many ways to do this on a small or large scale, and valuable feedback is always obtained from customer survey exercises. Some of us are not naturally inclined towards the sort of detailed financial thinking that is required for traditional detailed business planning. If this is you, you'll possess other valuable capabilities that will be useful in your own enterprise, and you'll maybe find it helpful to use this alternative approach to planning a new enterprise or self-employment.

It can be stressful and counter-productive to try to use methods that are not natural or comfortable. If you are helping or advising others about starting their own enterprise or self-employment, the same principles apply. Not everyone is naturally good at business planning, but everyone who dreams of being self-employed or who wants to start and run their own independent enterprise is capable of doing so, provided they work to their strengths, capabilities and passions.

People running successful enterprises come in all shapes and sizes, from all backgrounds, all ages, with skills, passions, and capabilities in any field you can imagine. Anyone can run their own business or be successful in self-employment given the simple determination to do so. Business and enterprise is not just for stereotypical 'business-types'; the benefits and advantages of being your own boss are available to us all.

Here are some pointers for people considering starting their own new enterprise, or for helping others to do the same. First, and especially if you are not clear of your own real strengths, or what direction to pursue, focus on using tools to understanding your own personality style and strengths. Then use this knowledge to imagine and realise how your natural capabilities can be used to best effect in defining and providing your own services or running your own enterprise.

They assess people's strengths completely differently to traditional IQ or academic evaluations, which are extremely narrow and generally not relevant at all for people who want to be their own boss. Understanding personality is also useful since personality-type greatly influences the way that a person approaches self-employment or running an enterprise, and what sort of service or business to offer. Many people are conditioned by schools and over-cautious parents to under-estimate their own potential and capabilities, which is a big reason to take a fresh look at what you are good at, and to re-think and understand better the ways that your personality type tends to be successful in life and business.

There are many ways to be successful and independent in life aside from building and running a conventional business and adhering to conventional financial planning methods. The basic economics of becoming successfully independent in any sort of venture are actually extremely simple, and focusing on the following simple fundamentals a process really can help many folk turn your dream or an idea into a successful enterprise or self-employment reality. It's usually easiest to think first of these factors in terms of daily, weekly or monthly numbers and values, and then to extend the figures to give totals for a whole year:.

What's your product or service? And importantly is this something that you have a real passion for? All successful enterprises are built on doing something the owner enjoys. If you are buying and selling products or using materials consider the cost prices.

If the main resource is your own time then attach a cost to your labour that reflects your available time for the work and the wage you need to draw. Divide your required annual wage by the number of work hours available to you, and this is your notional hourly labour cost. Ideally small businesses need a healthy profit margin or mark-up - doubling the cost is good if the market will accept it.

Take into account your competitors and what they charge and their relative quality. Service businesses that use only the person's time are often very attractive and profitable because there is no added complication of buying and holding stock - hence why window-cleaning, sign-writing, repairs, gardening, decorating, tutoring, writing, therapy, training, coaching and consultancy, etc.

Consider the effect of VAT especially for 'consumer' businesses - ie. Private consumers of course are more sensitive to VAT than business customers who can generally reclaim VAT should you have to add it to your prices. Identify your customers and market. Do you know this for sure? Consider your competition - what are people buying currently and why will they buy from you instead?

And how many customers do you need? Again remember the affect of VAT on your selling prices if applicable. There is usually a cost for generating new customers, especially in the early stages of a new enterprise. Once the business is established, say after six months to a year, 'word-of-mouth' referrals are for some businesses all that is required to produce new customers - especially those based in a local community, but virtually any new enterprise requires marketing at its launch. Does all this add up, and better still provide a cash surplus at the end of a year?

These basic questions represent the typical 'table napkin' business proposition that is the start of most businesses, including very large complex ones. People who dislike and are not fluent in detailed business calculations might find the above process a useful starting point when thinking about how to begin a new enterprise or a venture in self-employment.

If this is you, you are not alone: