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!