Manage your Enterprise and Resources to Achieve Your Goals - Start With a Business Plan

3. Define your competitive advantage.

What kind of product or service will you provide? To answer that specifically, look at the big picture first, says T. Waldmann-Williams with TWW Consulting in Bridgewater, N.J. What do you bring to your industry that is unique?

To figure this out, let's first look at what you learned in your corporate background. No matter who you are or where you've been, you've picked up a one-of-a-kind blend of knowledge, skills, interests, strengths and contacts that add up to a package unlike that of anyone else in the world.

Now how do you translate that into language your customers understand? Get help from your friends, family members, professional associates, potential clients, and other people who know you.

"Find out why people like you, why they want to do business with you," Waldmann-Williams says. "Ask other people. Do informational interviewing."

For instance, if you want to start a graphic design firm, ask people what they've observed about your work style, your talents, your artwork, your organizational skills. Realize that no matter what they say, favorable or not, you're gathering useful information. If others perceive you get testy when you're working on a tight deadline, then you don't want to tout how quickly you can turn a project around. That would just create stress for you.

Instead, highlight your strengths of working with a team to brainstorm ideas and your large national network of illustrators, graphic artists, photographers, web designers and printers who specialize in creating cohesive advertising campaigns for the film industry.

You've just discovered your competitive advantage, or the mix of qualities you possess that puts you above the competition. Now test it out. Go back to the people you asked for feedback and say, "What do you think about this?" Keep working on it till you can get it into words and a concept other people can repeat, Waldmann-Williams says. That way they'll talk about you and kick off your marketing.

4. Identify your company's customers and competition.

Who will buy your product or service? And how will you tell potential customers about what you're selling?

Johnson researched the potential client base for the catering business while she and her husband were still operating their restaurant. She simply asked other businesses whether they'd sign up for catering services if she made them available. Their overwhelmingly positive response made her business choice clear.

Like Johnson, Gloria Jenkins of Nashville found her future customers by listening and asking questions. She had often attended business functions with her husband, who owns a company that sells lightning protection equipment. Building contractors who had been buying his products for 30 years kept asking why his company didn't install the equipment too.

Jenkins had already been learning the industry by handling the accounting for her husband's company and sitting alongside him in seminars at national business conventions instead of sunning herself by the hotel pool. One day she told her husband she wanted to create a company that would install lightning rod equipment.

The business would involve a radical change from her 22-year career at Vanderbilt University as office manager for the chairman of the Pathology Department, which handled autopsies and medical specimens. But she knew she could fulfill a need in the industry.

Jenkins went back to the contractors and asked whether they were serious, whether they'd really rather pay a professional company to install their lightning protection equipment instead of taking on the liability themselves. They said yes. So she formed PowerCom Solutions LLC in May 2001 with two contracts already in hand. Today her company has fulfilled more than 140 contracts in 11 states.

Even if you already know your customer base, the way Johnson and Jenkins did, study your market because it will give you valuable insight into your competition and how to beat it.

And here's a twist to that: You also must understand your perceived competition. Even though you've determined your competitive advantage, some of your customers will see your product or service as interchangeable with those of others, says Deery with SCORE.

For example, Wal-Mart positions itself as a mass merchandiser with the lowest prices anywhere. If that's true, then it has no competition. But most shoppers know they can get some of the same items at Target. Those shoppers perceive the two as interchangeable.

This concept will help you study your customer segmentation, or identify several subsets of potential customers for your new business. You need to know these because you might market differently to each segment.

Let's say you want to sell antique furniture. One segment of customers will appreciate the expertise you put into scouring the earth for pieces from the 1700s and bringing them to your store, and they'll be willing to pay the price you ask for these rare finds. Other customers won't be able to tell the difference between that Rococo Revival table and a look-alike from Indonesia, and they'll probably balk at the price of the "real thing" even if they do have the money to pay for it.

So you shouldn't ignore those second-segment customers, but you might want to go the extra mile to educate them. You could do this by creating a newsletter or sponsoring seminars at your shop, for instance.

Your customers are the ones who will see and appreciate the distinction between your product and others, and be willing to pay the price for that difference.

Once you've identified possible customer segments, you need to see whether you can make the numbers work, Deery says.

"You cannot do any projection of sales without having gone through the process of asking, 'What is my service, what is unique about it, who will value it specifically and do I have any competition in this unique service, and will some of my customers think they can replace my unique service with my competitors' even if I don't think it will be the same?'"

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