The 5C’s of Business Planning – Essentials for SME

By Matthew Kwan
Principal Consultant, Adams Company Limited
© Copyright. February 21, 2007

After having talked to many SME owners, I found a cruel phenomenon is that a lot of them are often ignorant for not going through any structured business planning process at all even having started their businesses for sometime. I am compelled to share this article as it is dear to my heart and I hope it may help SME owners in general.

As SME, you just cannot take chance to waste your limited capital on any undesirable investments. Therefore, it is absolutely essential to go through your business planning in a structured fashion in order to ensure you are making the right business decisions.

The 5C’s of Business Planning is actually a model that I combined from different business planning ideas and models. I think it is simple and easy enough to any SME owner to use without much effort. You just need to follow the steps and answer the questions honestly. Even you do not know the answers for the time being, you may just put “ACTION TO FIND OUT!” to continue and follow up later.

So, what are the 5C’s, they are Customers, Competitors, Complementors, Channels and Costs.

1. CUSTOMERS – It is not surprised to see this to be the first on the list but questions you should really ask are:

  • What are the industries or business segments that identify your customers?
  • What age, gender, education and income level that identify your customers or do it matter at all?
  • What countries and national boundaries that your customers operate?
  • What are the common characteristics that identify your customers? e.g. size of business, years of operation, number of employees…etc.
  • How big is the Total Available Market (TAM)? i.e. How many potential customers are there in your targeted market across the board?

COMMENTS: You should spend as much time as possible to go through this analysis of your customers as it will help you to uniquely identify your desired customers. Any future sales and marketing effort and resources should only be spent on your desired customers but not any customers.

2. COMPETITORS – As stated in Sun Tzu’s Art of War, “You will win every battle by knowing your enemies as well as yourself!” Just knowing the names of your competitors are not good enough, you should also ask:

  • Who are your direct competitors? i.e. they have similar products/services to your offerings?
  • Who are your indirect competitors? i.e. they have substitute products/services to your offerings?
  • What is the price ranges of your direct and indirect competitors?
  • What are the success factors of your direct and indirect competitors?
  • What additional product features or services areas that your competitors are offering over yours?
  • What marketing or promotion are your competitors doing?

COMMENTS: You should focus on those direct and indirect competitors of your desired customer segment. Some companies maybe doing similar business of yours but not necessarily are your competitors at all as they maybe focusing on very different customer segments.

3. COMPLEMENTORS – Alliances is a topic getting more and more attention in the business world. The way Steven Covey’s “Seven habits of highly effective people” put it is “To Think Win-Win”. For example, a digital camera company is a complementor to battery cell companies as well as digital memory companies. So the basic questions to ask are:

  • Who are the companies or organizations that your products/services will benefit from the sales/growth of their products/services?
  • Who are the companies or organizations that their products/services will benefit from the sales/growth of your products/services?
  • COMMENTS: Working with other companies requires a lot of effort and sometime you may even have to give in for relationship building but strong alliances will definitely help you to grow your business in a faster rate than you could do it on your own. So it is worth spending time and effort in finding and building your complementors!

4. CHANNELS – Without properly identifying your channel players even you have great products and services, they can only be sold in a contained environment! The idea of channels is very abstract and you have to have a clear mind when answering these questions:

  • Who else can help you to sell your products/services to your desired customer segment? (Typically, these are your resellers but sometimes your customers can be a very effective selling channel of yours!)
  • Who may already have strong relationship to your desired customer segment that they can market your products/services for you? (Very often, your complementors and your field workers are your very strong marketing channels!)

COMMENTS: You need to build a very good framework and sales kits in order to manage your channels well as channels are very often opportunistic as your business is not necessary their primary priority!

5. COSTS – Pricing is an art and it governs everything about your profit and loss accounts in your books before you sell any product/service to your desired customers. You really have to be extremely sensitive to this topic and careful to take a balance to ensure your success in sales. So you should ask:

  • How much is the maximum can your customers afford to pay for your products/services?
    b. How much is the minimum you are willing to selling your products/services to your customers?
  • How much more/less you want to charge over your competition and why is so?
  • What discount rate are you willing to give to your customers if they are buying in quantity?
  • What margin or percentage discount are you prepared to give to your channel resellers?

COMMENTS: Cash flows should be your topmost concern. Under this consideration, you should really be aggressive enough to establish a good size of customer base by offering an attractive pricing over your competitions if you are new to the market. A good pricing strategy with channel support should help you to reach your goals in a faster pace.

In summary, the 5C’s of Business Planning is just a model for you to go through your business planning in a structured way. You should use it to ratify your business decisions. There are no model answers to the questions being raised above but definitely the answers will change over time as your business progresses. Therefore, constant review of your business using this model is required in order to reflect the changes of the kind of dynamic market situations we are in today and ever!

5C而後行: 中小企業務計劃絕招

關廣智先生

白武士有限公司首席顧問
2007年1月12 (c) 版權所有
作為一間中小企,你總不能浪費你的有限資金在一些不良投資上。因此,你是絕對必要創建一個有完整架構的業務計劃,以確保你做出正確的業務決策。

這個5C的業務計劃,其實是我從不同業務計劃的思路和模式結合出來的典型。我覺得這是既簡單又易用,任何中小企業業主都不需花太大氣力就能使用。你只需要遵循有關的步驟和誠實地回答問題。即使你不知道答案的時候,你可以只標示「行動去了解!」,以便繼續進行和稍後跟進。

那麼,甚麼是5Cs?這是指客戶(Customers)、競爭對手(Competitors)、輔助者(Complementors)、渠道 (Channels) 和成本 (Costs)。

A. Customers 客戶:- 這項首先出現在名單上是毫不讓人感到奇怪。你需要問以下的問題:
1) 你的大多數客戶是來自哪些行業環節?
2) 你能確定你客戶的年齡、性別、教育或收入水平?這是重要的嗎?
3) 你的客戶是來自特定的國家或地區?
4) 你的客戶有沒有共同特點?舉例來說,業務的規模、開業的時間和員工人數等。
5) 到底目標市場有多大 (Total Available Market,TAM)?在你的目標市場中到底有多少潛在客戶?
了解明白你客戶的資料是至關重要的。上述練習將幫助你界定哪些是獨特的關於你想要的客戶。任何未來的銷售、市場營銷的努力和資源,應只用於你的理想客戶,但不是對任何客戶都一視同仁。

B. Competitors 競爭對手:- 孫子兵法有云:「知己知彼百戰百勝」。知道你競爭對手的姓名並不足夠,你亦必須問:

1) 誰是你的直接競爭對手?他們有否提供跟你相類似的產品或服務呢?
2) 誰是你的間接競爭對手?他們是否有替代或媲美你提供的產品或服務呢?
3) 你直接和間接競爭對手的價格範圍是多少?
4) 你直接和間接競爭對手的成功因素是甚麼?
5) 甚麼額外產品功能或服務領域是你的競爭對手正在提供超越你的呢?
6) 你的競爭對手在做甚麼的市場促銷活動呢?
你應該著眼在你理想客戶環節上的直接和間接競爭對手。有些公司可能會做跟你類似的業務,但不一定是你的競爭對手,因為他們或許著眼於非常不同的客戶群體。

C. Complementors 補充者:- 在商業世界裡,搭配越來越受到更大的關注。Steven Covey的「高效人士的7種習慣」將它形容為「想像雙贏」。舉例來說,一間電子數碼相機公司可以是電池公司,以及數碼記憶體公司的補充者,因此一些基本問題要問的是:

1) 誰是公司或組織受惠於你的產品或服務的銷售或營業增長?
2) 誰是公司或組織受惠於他們的產品或服務的銷售或營業增長?
與其他公司合作需要投入大量的精力,有時你甚至可能為了建立關係而要讓步,但強大的聯盟一定會幫助你加快拓展業務的速度,遠遠快於你自己能夠做到的。因此,你還是值得花費時間和精力去尋找和建立你的補充者。
D. Channels 渠道:- 如果沒有適當列明你的所需渠道,即使你有極好的產品和服務,這些亦只能在一個狹窄的環境中銷售!理想的渠道是很抽象的,而你在回答這些問題時必須有一個明確的態度:

1) 有誰可以幫你銷售你的產品或服務到你的目標客戶群?(在通常情況下,這些人都是你們的經銷商,但有時候你的客戶可以是你一個非常有效的銷售渠道。)
2) 誰可能已經跟你的目標客戶群有了牢固的合作關係,這樣可以使你的產品或服務有了市場定位?(很多時候,你的補充者和你的前線員工會是你非常有力的營銷渠道!)

你需要建立一個很好的框架和銷售套件來管理你的渠道,但渠道往往是非常因勢利導的,正因你的業務未必是他們的優先考慮的首選。
E. Costs 成本:- 定價是一門藝術,它主宰一切,在你銷售任何產品或服務給你的目標客戶群前,定價會決定你的盈利和虧損帳。你對這個題目真的要非常敏銳,並謹慎地尋求平衡,以確保你的銷售成功。因此,你應該問:
1) 你的產品或服務在你的客戶承擔能力內最高能叫價多少?
2) 你願意將你的產品或服務賣給你的客戶最低價是多少?
3) 在有競爭之下,你想賺多些還是少些,為甚麼會這樣?
4) 如果你的客戶大批入貨,你願意給與甚麼折扣率?
5) 你準備給你的渠道經銷商多少折扣率或幅度?

如果你是新進入一個市場,通過給與較你的競爭對手更吸引的定價,你應該要有足夠的野心去建立起一個有規模的客戶群。一個有渠道支持的良好定價策略應該有助你更快達成目標。

總之,5C業務計劃只是一個模型,讓你有系統地進行業務規劃。你應該用它來使你的業務決策獲得認可。上述問題不會有標準答案,但答案肯定會隨著你的業務進展而有所轉變。因此,為了反映我們今日和以往那充滿活力的市場轉變,用這個模式來不斷檢討你的業務是有其需要的。

Maximizing dollars on Web marketing – SME primer

By Matthew Kwan © Copyright. All rights reserved.
Principal Consultant, Adams Company Limited

January 26, 2007

With the advance of Internet and broadband connection, shopping behavior of most people nowadays has changed dramatically over the last decade. Suddenly, your company’s Web presence has become the gauging factor to the success of your company, SME is no exception!

So how can you maximize your dollars on Web marketing to get the best return on investment? Is there any ways that you can ensure the money is right spent? I am going to share here an “IDEAL” model that you may consider to follow:

  • I – Identify Your Customers
  • D – Decide Your Budget
  • E – Experiment Your Options
  • A – Assess Your Results
  • L – Leverage Others

1. Identify Your Customers
Any marketing books will tell you this same thing – first and foremost, you need to know who your customers are. That may seem obvious but sometimes we are just missing the target without really thinking through the process. It is not so much who exactly your customers are but what are their shopping behaviors and desires on prices, trends, attributes of products/services, other complementary products/services that will help your sales…etc You really have to spend time to analyze your customers, even getting market data to support your analysis. Without these data, I can guaranteed you that you will waste money on your marketing effort!

2. Decide Your Budget
Your marketing budget should not be fixed and it should be as dynamic as possible. Deciding your budget should be a process with reference to the return of sales enquiries through the use of the budget. For new start up companies I suggest to go a little bit more aggressive for the initial period until you are comfortable with the good sales pipeline. By aggressive, I do not mean to spend a lot but allow good amount of money for you to use with caution. The right amount should be relative to your company cash flow, you just should not spend more than you can afford. My hint to this is to include your marketing budget of your initial period to be part of your initial capital investment and the subsequent budgets to be part of your sales expense. In this way, you do not have to worry too much of you initial marketing budget becoming a burden to your expense in your overall cash flow planning.

3. Experiment Your Options
There are just too many options for Web marketing. You need to list them down and give them some priority and assign budget according to their priorities. However, with SME’s, I suggest to spend your dollars on proactive searching rather than mass advertising as it is too expensive to do. So here are some of the proactive searching options for your reference:

  • Search Engines: Yahoo and Google is the most widely used search engine these days in Hong Kong. Actually, you do not have to pay a lot in order to get started. For example, you just need to deposit HK$240 to Yahoo and start your keyword search sponsor link instantly. However, deciding which keywords to be used does required some good thought. My personal experience tells me that you are better off by including your city and product/service category in a phrase to avoid paying unnecessary amount of money to compete with the big company with tons of marketing budget. In such a way, the charge will be a lot cheaper than a standalone keyword. E.g. “cheap business service in Hong Kong” This actually makes a lot of sense as more and more people are searching by phrase rather than simply a keyword. Do remember that the keyword list must be revised constantly to get the best results.
  • Web Directories: most portal sites would have business directory sections that you can post your company information on them. A lot of these sites are still free of charge and welcome your postings. E.g. Yahoo, Timway, Trade Development Council, SMEcare.com…etc. However, it may take longer time to get your company information posted depending on each portal’s schedule.
  • Auction Sites: Yahoo, eBay, Red-dots, Go2HK are some of the popular auction sites in Hong Kong. Some SME companies are actually operating entirely using these sites to generate their sales. You may just need to pay very little per transaction to start selling.
  • Blogs/Discussion Groups: Blogs are getting very popular and if you can identify your customer interests, you should try to become members of their Blogs and Discussion Groups communities. After joining, you can post messages and point people to your websites for product/service information and etc. Most of these communities are free to join. On the other hand, setting up a blog of your own is very easy and it takes no time. By doing so, you are setting up a community of your own. The only matter is to maintain the content and keep it alive. It is very labor intensive to keep it living if you are not good at sharing thoughts!
  • YouTube: YouTube is a video broadcasting website and it has become so popular that you should consider using it as part of your web marketing strategy. There are actually SME companies using it as a mean of product introduction, training and even customer service due to its popularity and free of charge nature.

4. Assess Your Results
As mentioned above, you should spend your marketing budget wisely by assessing the results regularly. Most Search Engines will have tools to help you to generate reports for your analysis. However, these reports are only meaningful if you are tracking in parallel how your sales and enquires are being done through which web channel. It takes good discipline in doing so! To start with, I suggest to do daily and weekly review to ensure money is wisely spent.

5. Leverage Others
No matter your business is selling products or providing services, you will always have companies which may complement your products/services. My recommendation is that you should try your best in getting these companies to list and link your company website in their website as partner or show in related links. You should also do the same thing for them vice versa. In this way, you are building a network of alliances and I find it a very effective way to build both awareness and credibility.

Summary

Web marketing is an art and it takes time and effort to perfect. In this Internet age, we just do not have an option of opting out of Web marketing. However, if you are willing to try, practice will make perfect and you will certainly find reward f