Executive business man working at office writing in a calendar and looking seriously

Think of marketing as getting people to know, like, and trust you. Think of sales as helping them configure, choose, and pay for what you offer that they want or need.

You have to be flexible about a business plan, so take what you can from what we say here and make sure it applies to your business. After all, form follows function.
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In general, a standard business plan includes three parts of the sales and marketing section. Those are the market analysis, the marketing plan, and the sales plan. Keep it short and simple—just big enough to cover your actual business need.

Keep in mind that you don’t have to prove a market if you are developing a plan for internal use, but you do have to do that and a lot more explaining if your plan is going to be used to support an investment proposal or application for a business loan.

Keep in mind, as you develop this part of your plan, the words of famous entrepreneur and venture capitalist Marc Andreessen: “The only thing that matters is getting to product/market fit.”

Know your market:

Today, market information is a matter of sifting, sorting, digesting, figuring out what’s important, and giving it context. If the past was about needles and haystacks, today it’s about finding the right needle in a mountain of needles.

Are eggs bad for you? There’s data to prove it. Are eggs good for you? There’s data to prove it.

One survey of small business owners concludes that social media is important to less than a third of them; another survey proves social media is vital to more than two-thirds. The difference is how the survey was designed, who was contacted, and how. Hint: The survey conducted over Facebook shows the importance of social media, and the survey conducted by mail proved the opposite.

Developing the market story

The story behind the information is most important. Every year I see several dozen business pitches, I read hundreds of summary memos, and I read 50 or more formal business plans. The best of them develop the market with stories. Numbers are nice too, but stories give the numbers context and relevance.

So, for example, the market analysis for a new, high-tech, smog-free technology starts with a smog-choked city and the impact of pollution. A market analysis for distributing restaurant leftovers to homeless people starts with a picture of the garbage area behind a restaurant, full of discarded food. A market analysis for a worldwide crafts market starts with a picture of an African woman who would be able to sell her crafts worldwide using just her mobile phone.

When you can’t illustrate an abstract problem, highlight a person or people who have a need and will benefit from the solution. A plan for a video game that helps autistic children starts with the story of a specific child and his parents. A pitch for a new medical technology starts with two aging baby boomers. I still remember one that started with a graveyard and a claim for a percent of deaths that could be reduced by a new device. That makes the market analysis matter.

Finding the numbers to flesh out the story

Don’t get tunnel vision about data and research. Way too often I see people struggling to find information to fit their preconceived notions of what’s needed, instead of accommodating what’s available.

For example, I dealt with a person who was going crazy trying to divide businesses into categories of annual revenue, which is impossible, instead of just defining categories by numbers of employees, which is easy to find. Take what information is available, if it works and takes you to meaningful business decisions—not what information you thought you wanted.

For example:

  • If you want to divide U.S. businesses into segments according to size, use the numbers of employee data the government offers; don’t insist on some other size factor such as revenues or office space.
  • If you want to divide businesses into size using employee numbers, use the government classifications. The U.S. economic census divides employee numbers into the classifications shown below. It obviously makes no sense to decide to break the sizes into 1-15 and 16-20 when the government already uses a different classification.
  • As you look for market information, you’ll often find classifications established by somebody else, before you started looking. Be flexible. Use what’s available.

Considering market segmentation

Few marketing concepts are more powerful than segmentation, which is about dividing a market into meaningful pieces. For example, divide a population by age and gender, and you have a classic demographic segmentation. This is obviously useful for businesses related to clothes and shoes, for instance.

You might also want to look at married or single, and maybe married or divorced, and other possible variables. And you could also focus on one gender in one age classification and only those married or not, focusing on several factors at once.

Divide a population by income and you have a different segmentation, sometimes called economic segmentation, useful for lots of businesses. Auto retailers, restaurants, travel agencies, and sellers of luxury goods, to cite a few examples, might set strategy and tactics based on this segmentation. The government tracks income by family.

Some creative segmentation schemes are based on psychographics, which are collections of personalities, values, opinions, attitudes, interests, and lifestyles. I find the idea behind psychographics intriguing; for instance, knowing that somebody drives a certain type of car can help you predict other seemingly unrelated preferences.

So, a man driving a pickup truck might be likely to wear cowboy boots rather than Birkenstock sandals, and a woman driving a Volvo station wagon is more likely to buy organic spinach than fried chicken. Or so it seems. I don’t like stereotypes so the idea makes me uncomfortable, but it seems to work for goods and marketing.

It’s about potential market

A market analysis is about potential customers, not actual customers. If you need it for your business plan event, include an analysis of potential customers. As an essential first step, estimate how many potential customers there are. The way you determine that depends on your type of business.

For example, a retail shoe store needs to know about individuals living in a local area; a graphic design firm needs to know about local businesses; a national catalog needs to know about households and companies in an entire nation.

For more on this, check out this article: TAM, SAM, and SOM, huh?

Know the industry you’re in

Usually, a market analysis includes a view of the industry you’re in. People expect to see a picture of the industry with factors such as industry trends, industry growth, recent developments, common keys to success, how concentrated in how many big players, how many total participants, and similar factors.

The details depend on the industry and the specific nature of the business plan event. And you, the business owner, obviously need to know your industry well in order to survive—whether you write down what you know in a formal plan, or just keep it in mind with strategy and tactics in a lean plan.

Do this if it fits the objective, but don’t weigh your plan down with too much information. I recently advised an entrepreneur developing a new bar in a resort area to summarize his lengthy analysis of the bar business in his main plan, and move the bulk of the information into an appendix.

Your marketing plan:

Marketing strategy is essentially target marketing. That flows from the market analysis. Define what market segments are most important to your business, and explain why. Then structure the marketing plan section around your marketing tactics. As you do, write around your tactics to explain the logic for outsiders.

A classic marketing plan might include the following pieces:

  • An explanation of the choice of the target market.
  • A summary of the main taglines, key selling points, value proposition, and so forth (we could call this messaging).
  • Discussion of media, which almost has to be social media and content marketing these days, but used to be advertising budgets, placement, and so on.
  • Pricing is your most important marketing message.
  • Channels of distribution for physical products or websites, mobile marketing and such.
  • Promotion, if it isn’t covered in the earlier discussion of media. It could include public relations and advertising, affiliate sites, price promotion, and events. Of course, this includes social media, which is almost always essential to marketing.

It doesn’t take a lot of text to lay out your key marketing tactics. It takes thinking, yes—but the writing can be lists, tables, and bullet points.

What makes the marketing plan real is the budget, the milestones, the specific activities, and the projected sales that relate to marketing.

Your sales plan:

Some businesses need a specific sales plan more than others. For example, a business selling a mobile app that’s downloadable via app stores for $1 per unit will focus on the product-market fit and the marketing, without a specific sales transaction involved in the close. The product and the website close the sale. On the other hand, business-to-business sales of large-ticket items often require a complete sales force.

If you are forecasting sales of an actual physical product going through retail stores, then you should take into account reasonable expectations for distributors, retail chain stores, the number of stores carrying it over time, unit sales per store, etc. Make sure you have taken into account the management tasks related to getting into the channels, and keeping purchasers happy. You’d also want to have a good understanding of how margins work as you sell your product to distributors and they sell to retail stores, and you should be able to estimate the related expenses, such as stocking fees, co-promotion fees, and administration costs.

If you are forecasting sales with a direct sales organization selling to larger companies, you should understand a direct sales force, reasonable expectations of leads, presentations, and closes per month per sales person, pipeline dynamics related to decision time, and so on.

Do you have any questions about constructing your marketing and sales plan? Ask them in the comments below. 

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.