Looking For

Once you have decided what business you are in, then you must provide readers of your plan with a complete description of the business. Things that they will be most interested to learn include your: financial performance; product benefits; marketing strategy; and management capabilities.

Below is the description of business for South Mill, Inc. Take a moment to study it, and look at some of the key items that are presented in this section of its business plan.

Sample description of business

South Mill is a vertically integrated manufacturer of high quality Polo and T-shirts for men and women. The company plans to increase sales and profitability by selling high value products to a wide variety of customers. South Mill sells its clothing to companies like Ralph Lauren, Brooks Brothers and Neiman Marcus. Additionally, the company sells its clothing using its own brand name to wholesale and retail customers like K-Mart and Sears. The company has increased net sales from $1.5 million in 1994 to $4.5 million in 1997, a compound annual growth rate of nearly 45%, and has been profitable since 1990.

South Mill was incorporated in November 1987 by certain members of the management team who collectively have over 50 years of industry experience. Their vision was to cost effectively manufacture higher quality Polo and T-shirts and sell to a wider variety of customers than other competitors in the industry. To meet its objective of producing low cost, high quality clothing, South Mill invested in the latest technology available to manufacturers.

Since the business started, South Mill has been a leading manufacturer of Polo and T-shirts and has set new standards for styling and quality. The company was first to market with competitively priced clothing that utilized fiber-reactive dyes to reduce fading and rib-knit collars with more thickness to resist curling. Market acceptance of these products was rapid, and the company has been able to expand its sales and profitability every year by reaching more customer segments. In 1991, South Mill started manufacturing its line of Polo and T-shirts with long sleeves to diversify its product mix and utilize its production capacity more efficiently.

Additionally, South Mill works with customers to develop new products with unique styling. This gives the company a competitive advantage, since most of its competitors lack the flexible manufacturing facilities necessary to offer "made-to-order" services to their customers. That often leads the company to be chosen as the "manufacturer of choice" by large retailers and wholesalers.

The first sentence tells readers what business South Mill is in. "South Mill is a vertically integrated manufacturer of high quality Polo and T-shirts for men and women." Note that South Mill has taken the narrow approach in deciding what business it is in. Although a broader approach, such as "South Mill is a vertically integrated manufacturer of clothing for men and women," might give it more opportunity to develop other articles of clothing for different markets, it has decided to focus strictly on Polo and T-shirts for men and women.

The next sentence addresses the key element of South Mill's marketing strategy by stating that it plans to sell "high value products to a wide variety of customers." While most investors will applaud the concept of selling "high value" products, since they are usually associated with price premiums, some may get nervous at the thought of trying to meet the needs of "a wide variety of customers." It is often difficult for a business to meet the needs of a few customers, let alone a wide variety of customers. However, South Mill then follows-up by explaining that it has been able to do this successfully in the past by citing examples of some of its customers.

The fifth sentence says what every investor, banker or manager wants to hear. "The company has increased net sales from $1.5 million in 1994 to $4.5 million in 1997, a compound annual growth rate of nearly 45%, and has been profitable since 1990." Any company that has been able to grow its sales every year for the past four years, achieve an annual growth rate of 45%, and still remain profitable, is worth a second look.

The remaining three paragraphs of South Mill's description of business provide insights into its management team that "collectively have over 50 years of industry experience," its competitive advantage of being a low cost producer, and its product benefits "that have set new standards for styling and quality." South Mill finally goes on to point out that it has become the "manufacturer of choice" by some of the largest customers in the market.

There are many ways for you to describe your business to potential investors, bankers or managers, but the basic outline will always be the same. Start by answering the question "what business am I in?" and follow it with key points about your marketing strategy, financial performance, and management experience.

Why is it so important to figure out what business you are really in? It's important because you need to recognize that some companies that are not your direct competitors today, may be tomorrow. A classic example can be found in the railroad industry. Early on, these companies did not recognize that they were in the transportation business (they thought they were in the railroad business), and soon began losing customers to automobile manufactures and commercial airlines.