July 27, 2002
Table of Contents
Quote of the Week
Featured Resource - JIMTOOLS.COM
Staff Article -
WRITING AN EFFECTIVE BUSINESS PLAN - PART 4
Marketing Tip of the Week
Guest Article -
THE NEW FRAUD BILL: DOES IT GO FAR ENOUGH?
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Quote of the Week
Once stretched by a new
idea, man's mind never returns to its original dimensions.
- Oliver Wendell Holmes
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WRITING AN EFFECTIVE BUSINESS PLAN
- PART 4
In previous articles we
discussed the following sections of your business plan:
We're going to finish up this series on writing an effective business plan
between this week and next. This week we discuss your products and services
and your specific plans for marketing them.
PRODUCTS AND SERVICES
This section appears to be fairly straightforward at first glance. You are
going to provide a write-up on the products and services you offer, in
detail. But you should also provide information about any significant
advantages you have with respect to each product or service.
Do you have exclusive distribution rights to your service area? If not, how
many other distributors of your products are there in your target market? If
you sell a product that thousands of other resell in your area it is not
going to be as impressive. Look for other factors that might provide
advantages. For example, are you the largest distributor and does this
distinction put you in a different pricing category that allows you to beat
If you manufacture your own product you will need to provide some product
comparison information. How do your products stack up against the industry
leaders you will have identified in your "Industry Analysis" section? What
sets your products apart? Are you aiming at a well-defined niche market that
nobody else seems to care about? If so, what makes your product appeal to
this niche market?
You will also want to address why customers need your products and the
demand for them. Do you sell brands that are highly regarded in the market
and effectively sell themselves? Do you have market information that backs
up your claims? How do customers typically use your products? Do they buy
them once and then they're out of the market or are they consumables that
the customer must buy several times per year?
Be creative in describing your products and services. Resist the urge to
simply provide canned descriptions of what you sell. Make the reader of your
business plan get excited about your products and the sales potential for
MARKETING AND SALES STRATEGY
Readers of your business plan are going to be very interested in this
section, particularly if you are a new enterprise. You can have the greatest
products on earth, but if you do not know how to market them properly, you
will fail. Venture capitalists, in particular, will probably know a lot
about what it takes to sell your products, so you want to impress them by
not only showing your knowledge of all the "normal" channels but by
presenting several unique ideas for making sales.
You will need to perform a lot of research for this section. You'll need to
know how other companies market products that are similar to yours and how
well each type of advertising works for these products. You should be able
to find this information in trade journals that deal with your industry. Use
this information as the basis for your basic marketing infrastructure and
then analyze ways you can create your own unique angles.
Just as important as advertising sources is your sales methodology. Many
companies forget about this and concentrate solely on advertising and
marketing. Sales is a process, not a one-time event. Marketing and
advertising need to feed your sales process to be most effective. Your sales
process is also the area where you can set yourself apart from your
competitors most easily. You can nail down the particulars of your sales
methodology by answering the questions in the following paragraphs.
What happens when a potential customer requests more information by mail, by
telephone, through your website, or by email? Who handles the request? How
quickly does your sales infrastructure respond? What types of materials do
you supply? What type of system do you have set up to follow up with these
potential customers? Do you have a methodology in place that allows you to
continue contacting potential customers without upsetting them? Does the
process result in the customer being added to your mailing list by his or
her own request?
Are all methods of communication from your customer integrated? In other
words, if a customer calls for information and then later requests
information from your website, do you have a methodology in place to know
these two requests came from the same customer?
Describe your sales methodology in great detail. If you find holes in your
existing methodology as a result of this exercise, resolve to fix them and
incorporate that into your business plan. It is perfectly okay to tell the
reader what you are GOING to do as well as what you are already doing. No
business is perfect. He or she will respect and like the idea that you are
finding new ways to do things and are committed to putting them into action.
If you are attempting to raise money with your business plan, include money
for this type of upgrade in your use of funds section. Most venture
capitalists and bankers will think it is money well spent.
Copyright (c) 2002
Tip of the Week
If you use email marketing in your
business, you have probably heard that you need to test your ads. You should
be preparing several versions of every ad you use, with different subject
lines and different bodies, and test each of them with smaller mailings
before committing an ad to a full campaign.
Mark Joyner of Aesop.com is currently carrying on a public test that you can
participate in and monitor. It's very interesting and should teach you a lot
about what works and what does not. Not only does this test monitor which
types of ads get opened most often, but it tracks which ads result in the
reader taking action, which makes the test that much more valuable. You can
monitor results in real time. Check it out for yourself here:
FRAUD BILL: DOES IT GO FAR ENOUGH?
by: Cary Christian
By early next week the new
corporate fraud bill that, hopefully, will work to prevent the recurrence of
Enron- and Worldcom-like debacles, should be signed into law. Such a bill is
needed to restore investor confidence and curb the effects of unbridled
greed among the leadership of our largest companies. But does the bill go
far enough to accomplish these goals? Let's look at the effectiveness of
some of the key provisions of the bill.
- The bill creates an independent five-member board to oversee the
accounting industry and grants it substantial power, including subpoena
power. Each year, the board will audit firms that serve 100 or more publicly
traded companies. This provision will put a leash on the largest accounting
firms, namely the remaining Big 4 and some of the larger firms among the
I would personally prefer to see the board audit any firm that audits a
public company with capitalization that exceeds a certain amount. Nothing in
the bill will prevent a Worldcom-sized company from shopping around for an
accounting firm that audits only 98 public companies. By like token,
auditing a firm that audits more than 100 tiny public companies is probably
a waste of time and money.
But even if an auditing firm is not subject to audit, it is still subject to
the rules and regulations promulgated by the board and fully subject to the
bill's requirements and penalty provisions.
- In an effort to curb conflicts of interest, the bill bans accountants from
doing most types of consulting work for companies they audit. This is an
outstanding provision that the accounting profession has been fighting for
years. In almost all cases, large accounting firms receive far more
non-audit revenues from audit clients than audit revenues. This creates a
major conflict of interest even though accounting firms will tell you they
still maintain their independence. Yeah, right! Money talks.
- The bill prohibits an accounting firm from auditing a company if any of
the company's top executives worked for the accountants in the previous
year. This provision is a good one as well. Accounting firms look to former
employees who move on to positions with clients as a source of new business
and as a friend on the inside. The relationship with such former employees
is a conflict of interest.
- The bill adds criminal penalties of up to 10 years in prison for corporate
financial fraud or obstruction of justice, including the shredding of
documents. I really like this one! Corporate executives who stand to gain
millions of dollars in stock options and stock appreciation by looking the
other way when corporate earnings are fraudulently overstated have been
perfectly willing to assume the risk of a slap on the wrist and a fine from
the SEC. It will be a different story when he or she is facing 10 years in
prison for such activities.
- Civil fines, penalties, payments and assets from corporate wrongdoers will
now be placed into a federal account for the benefit of defrauded investors.
This should allow investors to recover some of the value lost due to
corporate fraud should it occur again. Currently fines and penalties
collected goes to the government, not to defrauded investors.
- The bill requires companies to immediately disclose any and all large
off-balance-sheet transactions or other material changes in financial
condition. Another good one! These are the types of transactions that led to
Enron's downfall. Early disclosure of such transactions will allow the
market to react much more quickly and prevent sudden total loss of value to
the stockholders. The disclosure requirement will also work to prevent
corporations from entering into these types of deals unless they truly add
- The bill bars corporate wrongdoers from serving as company officers or
directors for life. Outstanding! Get caught once and you'll never have the
chance to do it again!
- The bill increases the enforcement budget of the Securities and Exchange
Commission. This was necessary. The SEC simply did not have the resources to
properly police our public companies. It earmarks $98 million to add not
less than 200 additional qualified professional personnel, additional
support staff and other resources needed to strengthen SEC enforcement
- The bill bans personal loans by corporations to their executives unless
the corporation is involved in the lending business and extends credit to
executives in the same manner and on the same terms as it extends credit to
the general public. ALL personal loans to executives SHOULD be banned and
the law as written should put an end to such activities.
- The bill requires CEOs and CFOs to give back bonuses awarded on the basis
of misleading financial statements. This is only fair and is an excellent
provision. Executives should not be able to profit from their misdeeds as
they have been able to do in the past.
- The bill requires top company officials to certify the accuracy of their
financial reports to the SEC. This seems to be a fairly innocuous provision
that doesn't add a lot of value. After all, these executives are responsible
for financial reporting anyway. But this certification will make it much
easier to successfully prosecute those executives who step out of line and,
as such, is actually an important provision.
Additionally, fines of $500,000 to $1,000,000 plus a five or ten year prison
sentence accompany improper certifications!
- The bill also contains provisions related to the independence and
objectivity of securities analysts. The provisions provide guidelines and
timelines for the development of rules, so it does not have teeth yet, but
it is a step in the right direction.
- In addition to new provisions, the law significantly strengthens existing
laws and specifically requests the United States Sentencing Commission to
consider whether criminal penalties for "white collar" offenses should be
Overall, I believe this bill is an excellent beginning. It actually goes
further than I thought Congress would go and appears to be a very serious
effort to make much-needed changes. There will no doubt be bumps along the
way and adjustments that have to be made, but we finally have some legal
accountability required of corporate executives and accounting firms.
I want to thank all of you who actually wrote your Congressman on this issue
as I requested. It turns out that the Worldcom debacle probably did more
good to further this legislation than millions of letters could have ever
done, but the effort is appreciated and Congress does listen to you. After
all, in this country YOU are the boss!
Copyright (c) 2002
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