Copyright © 2005 Jeff Beckley, CPA,
All Rights Reserved Beckley, CPA
http://www.beckleycpa.com
You have always wanted to be your own boss. You are tired of
the
mindless meeting and the office politics. You've come up with
a
great idea for a new business that your friends say "can't
miss."
So, what's stopping you from leaving your job to start your own
company.
Like most budding entrepreneurs, you probably realize that you
need a plan. If you seek financing through a bank or an
investor, they require you to have a business plan. Even if you
will fund your new venture with your own money, you would be ill-
advised to proceed without some form of a plan.
But you have never written a business plan and you have no idea
where to start. You've come to the right place. I will cover my
recommended approach for starting your plan.
Business Concept
Your business concept is a brief description of the products
and
services you will be offering. It should answer these three
questions:
1. What products and services does my company offer?
2. What needs of the target market (intended customer) will your
products and services satisfy?
3. What competitive advantages will your products and services
have?
Write a draft of your business concept with these three questions
in mind. Don't fuss over writing a perfect business concept at
this point. You will probably make several revisions to your
concept in the course of preparing your plan. The goal here
should be to get your concept into written form.
Exit Strategy
It may seem counterintuitive to start your plan by devising your
exit strategy. But presumably, your company will be a going
concern—you expect it to continue beyond your retirement
from the
company. Therefore, you should write your plan with an exit
strategy in mind.
Examples:
* Selling a portion or all of the company
* Passing the company to a family member
* Passing the company to your employees
* Selling shares of the company in the public markets
Choose your exit strategy carefully; it has tax and financing
implications and will affect other important decisions, such as
choosing the right legal form of organization for your company.
Market Research
Before you launch into writing your business plan, you need to
gather data on your company's industry, market, and competition.
Start by identifying your company's industry. I suggest using
the <a href="http://www.census.gov/epcd/naics02/">North
American Industry Classification System (NAICS)</a> to
determine your industry. This will help you more clearly define
your industry. The NAICS code will also save you time gathering
research information.
Once you have determined your industry, you are ready to begin
gathering data on your industry and your market. Some of the
main questions to consider include:
* What the industry trends?
* Who is your competition?
* What market segments are being underserved?
* Who should you include in your target market?
* What impact will technology, legislation, and seasonality
have on this industry and market?
You should conclude your market research by evaluating your
competition. Performing a competitive analysis simply means
comparing your products and services to those of your
competitors. Doing this will help you align your strengths with
the opportunities in the target market. A competitive analysis
should help you answer questions such as these:
* How are your products and services superior to your
competitors'?
* How are your products and services inferior to your
competitors'?
* Why will customers abandon your competitors to buy from you?
* How can you reach new consumers (those being served neither
by you nor your competitors)?
SWOT Analysis
The SWOT Analysis is a straightforward assessment of internal
factors (Strengths and Weaknesses) and external factors
(Opportunities and Threats) that could affect your business.
Your SWOT analysis should help you answer question such as:
* What special skills does your company possess?
* Do any of your products or services have unique features that
make them more attractive to customers?
* Do you have a superior location?
* What crucial skills does your company lack?
* In what ways are your products or services inferior to your
competitors'?
* Are there any emerging technologies that could benefit your
industry?
* Are any markets in your industry underserved?
* Are there any opportunities to form key partnerships with
suppliers, buyers or competitors?
* How easily can new competitors emerge?
* What is the threat of a large competitor moving into your
target market?
* How tightly regulated is your industry?
* Do economic cycles severely affect your industry or target
market?
Keep in mind, this is not an exhaustive list of questions to
consider for your SWOT analysis. However, it should stimulate
other questions that lead you to identify more strengths,
weaknesses, opportunities, and threats.
Once you have completed your SWOT analysis, you are ready to
begin writing your business plan.
Preparing to write your business plan is no small task. Putting
your concept in writing, gathering research, and analyzing the
data can be intimidating.
But the preparation can be worth the effort.
It will help you refine your business concept. It will prevent
you from making some costly mistakes. It will force you to think
about your company more objectively and strategically. Most importantly,
the preparation will increase your chances of writing a successful
business plan.
